U.S. Hydrogen Developers Seek to Expand IRA Tax Credit Rules

Developers of hydrogen projects and industry associations are seeking expanded tax credits under the Inflation Reduction Act, saying in hearings this week that the rules on clean energy for hydrogen production need to be loosened to allow the industry to take off.

At the end of last year, the U.S. Department of the Treasury finally released the long-awaited proposed tax credits for clean hydrogen production under the Inflation Reduction Act (IRA), in a move welcomed by environmentalists but criticized by others as too narrow and unclear on whether nuclear power generators could benefit.

The proposed rules for the generous tax credits for hydrogen production say that clean power generators that began commercial operations within three years of a hydrogen facility being placed into service are considered new sources of clean power. Moreover, clean power must be sourced from the same region as the hydrogen producer under the guidance of the Treasury and the IRS.  

This limits the pool of available renewable energy capacity to power hydrogen projects and leaves out nuclear power from the low-carbon sources of power.

So, developers and industry associations told the hearings that some of these rules need to be eased so that their projects would be viable, Reuters reports.

Fortescue, an Australian company pursuing a project in the U.S., said, for example, that the so-called 45V tax credit, as-is, would not cover its project.

“This investment would not qualify for the tax credit, because we plan to use a mix of surplus hydropower and other renewables,” Fortescue North America CEO Andrew Vesey said at the hearing, as carried by Reuters.

Industry group Fuel Cell and Hydrogen Energy Association, for its part, is calling for projects that were launched before the guidance is finalized to be exempted from the currently proposed tax credit rules.   

In December, commenting on the proposal, the group’s president and CEO Frank Wolak said that “Congress intended the tax credit to spur domestic clean hydrogen production and allow the United States to maintain an international competitive advantage, not to be an inadvertent backdoor to regulate use of the electric utility grid.”

“The United States cannot achieve its climate goals without clean hydrogen and these proposed regulations and requirements will unnecessarily hold back our domestic industry, driving investment, manufacturing, and technology leadership overseas,” Wolak added.  

By Tsvetana Paraskova for Oilprice.com

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