Inflation Reduction Act Incentives For Hydrogen Are Being Challenged And
Why It Matters
What is the Inflation Reduction Act (IRA)?
The IRA of 2022 was put into federal law with the intent of curbing inflation. One mechanism implemented to achieve this was to extend tax credits that promote domestic energy production and clean energy. These tax credits were rolled out in 2023.
What is Section 45V of the IRA?
Section 45V - Hydrogen Production Tax Credit of the IRA aims to incentivize clean hydrogen production. The amount of the incentive for the production is based on lifecycle greenhouse gas emissions, in other words carbon intensity of the production process.
Clean Hydrogen Production Tax Credit Structure
0.45 - 0 kg CO2
1.5 - 0.45 kg CO2
2.5 - 1.5 kg CO2
4 - 2.5 kg CO2
Tax Credit Value
$3.00 / kg of H2
$1.00 / kg of H2
$0.75 / kg of H2
$0.60 / kg of H2
Why does the hydrogen community want to see a change?
The hydrogen industry needs to be able to implement the most cost effective clean hydrogen hubs for America, in order to ensure our great nation has the most robust and resilient energy and transportation systems. For those reasons we believe the three pillars described below will significantly hinder this goal.
What does the U.S. Energy Secretary say about hydrogen?
Why does the industry think that the three pillars are dangerous to building out the U.S. hydrogen economy?
Ballard Power Systems
Dr. Joe Pratt
Zero Emission Industries
Image source: BuildSteel
Comparing Carbon Intensity in Hydrogen Production
Hydrogen Production and Carbon Emissions: While hydrogen is a clean fuel, its production and delivery involve carbon emissions. The carbon intensity varies based on factors like energy consumption and feedstock source.
Misconceptions About Color Labels: Hydrogen is often labeled by color, representing different production methods. However, these colors don't fully account for carbon intensity across the entire production and delivery process.
Factors Affecting Carbon Intensity: Electrolysis, often associated with "green hydrogen," can have a significant carbon impact depending on the electricity source.
Reducing Carbon Impact: BayoTech’s on-site hydrogen production technology, especially using biomethane from sources like landfill gas, can significantly lower carbon intensity, potentially leading to negative carbon emissions.