The importance of clean hydrogen production cannot be overstated in the current clean energy transition. The Section 45V Clean Hydrogen Production Tax Credit, established as part of the 2022 climate investment law, aims to incentivize the shift towards cleaner methods of hydrogen production. However, there are concerns about how this tax credit is being implemented and whether it will truly lead to reductions in carbon emissions.
One of the key issues with the current framework is ensuring that electrolytically produced hydrogen is truly clean. This involves verifying that the electricity used to power the electrolyzer is carbon-free and does not inadvertently lead to increased emissions elsewhere on the electric grid. The three-pillars framework proposed by the Treasury in December 2023 aims to address these concerns by requiring that the electricity used be additional, deliverable, and time-matched.
Despite the clear benefits of this approach, there are vested interests lobbying for exemptions that would allow existing carbon-free generation to be counted as eligible resources. However, this could have detrimental effects, such as increased reliance on gas and coal-fired power plants, higher electricity prices, and a slowdown in the transition to clean energy.
It is crucial that Treasury does not bow to these bad-faith attacks and maintains high-integrity standards in the implementation of the 45V tax credit. The future of our clean energy transition depends on getting these policies right from the start and driving investments in projects that align with our climate goals. By upholding the three-pillars framework and resisting pressure to weaken the rules, regulators can ensure that subsidized “clean hydrogen” truly lives up to its name and contributes to a sustainable future.
