New Regulations for Section 45V Clean Hydrogen Production Credit in USA
Key Ideas
  • The Department of Treasury and the IRS finalized regulations for the Section 45V clean hydrogen production tax credit to boost domestic hydrogen production.
  • The credit covers qualified hydrogen from electricity and methane with low greenhouse gas emissions, offering $0.60 to $3 per kilogram of hydrogen.
  • Key aspects of the final regulations include three pillars: Incrementality/Additionality, Temporal Matching, and Geographic Matching or Deliverability, providing flexibility for hydrogen producers.
  • The regulations, effective 60 days after entering the Federal Register, aim to enhance certainty and support for hydrogen producers by extending transition periods and expanding pathways for meeting requirements.
The Department of Treasury and the Internal Revenue Service in the USA have issued final regulations regarding the Section 45V clean hydrogen production tax credit introduced by the Inflation Reduction Act of 2022. This tax credit aims to promote domestic hydrogen production by incentivizing qualified hydrogen production processes with low greenhouse gas emissions. The credit ranges from 60 cents to $3 per kilogram of qualified hydrogen and can be claimed up to 10 years after the eligible facility is in use, with a construction deadline before 2033. The final regulations, released on January 3, 2025, introduce key aspects to support hydrogen producers. These aspects include the three pillars of Incrementality/Additionality, Temporal Matching, and Geographic Matching or Deliverability. They expand pathways for meeting the incrementality requirement by allowing the use of certain electricity sources like that from nuclear plants at risk of retirement or states with green energy standards. Another significant aspect of the regulations is the requirement to use the 45VH2-GREET model for calculating greenhouse gas emissions, promoting consistency and accuracy in emissions modeling. Furthermore, the regulations provide flexibility by allowing producers to use the version of the model in effect during facility construction. In response to a large number of public comments, the final regulations aim to provide greater certainty and flexibility for hydrogen producers. These regulations will come into effect 60 days after being entered into the Federal Register, scheduled for January 10, 2025. The overall sentiment towards these regulations is positive, as they are expected to boost the hydrogen industry and support efforts to reduce greenhouse gas emissions.
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