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Hydrogen Tax Credits (HTC) outlined in the Inflation Reduction Act (IRA)

Gabe Olson explains the different tax credits offered through the IRA.

Hydrogen Tax Credits (HTC) outlined in the Inflation Reduction Act (IRA)

"Hello, my name is Gabriel Olson. I am the Director for Carbon Strategy and Policy for BayoTech. BayoTech Hydrogen is a hydrogen generation technology company based in Albuquerque, New Mexico, and with facilities across the United States. Our first commercial production facility is going online in September of 2023 in Wentzville, which is a town just outside of St. Louis, Missouri, so we're very excited about that. I'm here to talk to you a little bit today about the impact of the three pillars debate within the production tax credit for hydrogen under the Inflation Reduction Act. The question is, what is the actual impact of the three pillars on hydrogen production using renewable natural gas in the larger economy that's going to be built up around hydrogen production?

Let's set the stage. Hydrogen production or the growth of the hydrogen economy in the United States over the coming years is likely going to be built and founded upon the hydrogen production tax credit, which is, in fact, part of the Inflation Reduction Act of 2022. That provides up to $3 per kilogram for effective carbon-neutral hydrogen. In order to reach that carbon neutrality, many, if not most, project developers are planning to use some version of renewable energy credits, or RECs, in order to offset carbon intensity for their production process, which in many cases will be electrolytic hydrogen production. But because of the scope and complexity of this growing industry, there's been an ongoing debate about the so-called three pillars, which are specific to the concerns of environmental advocates around the potential risks associated with electrolytic hydrogen production using renewable electricity from wind and solar. These renewable power suppliers that are producing this wind and solar electricity may, in fact, be located anywhere across the United States and provide electricity for hydrogen production regardless of that facility's location. That's using something called book and claim accounting, which is a well-established means of buying, selling, and trading renewable energy credits across a very large area.

Now, other hydrogen production pathways such as renewable natural gas have been somewhat of a footnote in this larger conversation around the three pillars. It turns out that renewable natural gas, or RNG, is a valuable means of producing low and zero-carbon hydrogen and is utilizing what is otherwise essentially a waste product. I won't get into the technical details around steam methane reformation, which is the basis of most hydrogen production today and that's able to use RNG as a feedstock, but it is a very well-established and cost-effective way of producing hydrogen that uses methane as the feedstock, which is, in fact, the primary ingredient in renewable natural gas.

Why does this matter? Fundamentally, it's important to recognize that there are different pathways for producing hydrogen. It's not just about electrolysis and renewable electricity from solar and wind. In fact, these different pathways utilize different feedstocks. When we talk about renewable natural gas, it's not at all the same as electrons in the grid. A unit of energy stored as electrons does not function at all the same way that a unit of energy stored as molecules of gas in the gas utility pipeline. There's a fundamental difference, and I'm going to talk about that in the context of the three pillars.

Bottom line, I would leave you with this: RNG is an incredible and largely untapped resource at this point. It's literally all around us and is produced from agricultural waste, dairy farms, wastewater treatment plants, municipal waste, food waste composting, landfills, other sources of organic waste materials. The point here is to utilize these resources that would otherwise potentially escape to the atmosphere and contribute to greenhouse gas impacts. We see so much potential to expand the use of RNG and to put it to good use for something like hydrogen that is then able to be utilized in a multitude of different clean, zero-emission end uses as that market sector grows. Thank you."

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