Inside the fierce debate over clean hydrogen, with $100 billion in federal subsidies on the line
However, debate has arisen over the implementation of tax credits to incentivize the production of hydrogen in a climate-conscious manner. On one side of the debate, energy providers argue that overly strict regulations could make producing green hydrogen economically unviable and hinder the industry’s growth. On the other side, environmental policy groups argue that lax rules could result in subsidies being granted to hydrogen producers that do not actually reduce carbon emissions.
The U.S. Treasury Department and IRS are currently determining how the tax credit will be executed, and there is disagreement over how to account for the CO2 emissions associated with hydrogen production. Some argue for annual renewable energy certificates (RECs), which would provide more flexibility and stimulate investment. Others advocate for hourly RECs, which would ensure that hydrogen producers are only eligible for credits when clean energy is being generated.
The debate also extends to the terms “additionality” and “deliverability.” Additionality refers to only counting credits for clean energy that would not have been generated otherwise, while deliverability means that credits can only be counted for clean energy being generated in a non-congested location.
More rigorous accounting, including hourly matching and additionality and deliverability requirements, is seen by some as necessary to ensure that grid-connected electrolysis meets the emissions reduction targets set out by the tax credit legislation. Without these measures, hydrogen producers could potentially claim credits for clean energy that they did not actually consume.
Overall, the outcome of the debate over tax credit implementation will have significant implications for the growth of the clean hydrogen industry and its potential to reduce carbon emissions.