Producers of Hydrogen caution against new guidance on 45V tax credit

Hydrogen energy producers are raising concerns over the new guidance released by the federal government regarding the implementation of the 45V tax credit. This credit, established in 2022 as part of the Inflation Reduction Act, aims to incentivize hydrogen production by reducing the tax burden on eligible producers. However, producers are warning that the new rules could hinder the credit’s effectiveness.

The U.S. Treasury and the IRS recently issued draft guidance on how the credit will be administered, setting strict criteria that some producers may not meet. The guidance includes requirements such as deliverability, temporal matching, and incrementality, which could exclude certain producers from benefiting from the credit.

One major source of hydrogen production that may be excluded under these new rules is “blue” hydrogen, which is produced from natural gas with carbon capture technology. Hydrogen hubs, funded by the Bipartisan Infrastructure and Jobs Act, rely on this production pathway.

The dispute highlights a broader trend in the Biden administration’s push for clean energy production and domestic industry support. While policies like the IRA and the CHIPS and Science Act seem to align with these goals, the implementation of new regulatory barriers has raised concerns among industry stakeholders.

Proponents of hydrogen production are urging the Biden administration to reconsider the guidance and ensure that the 45V tax credit can effectively support clean domestic energy production. The outcome of this debate will determine whether the administration stays true to its commitment to promoting clean energy and supporting American industry.