Navigating Tax Credits and Certification Rules for Clean Hydrogen in the US
Key Ideas
- Tax credits and certification rules are crucial for the success of clean hydrogen projects in the US, as highlighted by a report from Troutman Pepper.
- Challenges exist with the strictness of IRS regulations on clean hydrogen qualification for credits, leading to uncertainty and increased costs for developers and utilities.
- To drive demand and transition to clean energy sources, the Biden Administration has allocated funds for regional clean hydrogen hubs and encouraged businesses to adopt cleaner practices.
- Investments in infrastructure and manufacturing facilities, along with state-led commitments and potential exports, are key factors in establishing a robust domestic clean hydrogen market in the US.
A new industry report from US law firm Troutman Pepper emphasizes the importance of tax credits and certification rules in advancing clean hydrogen projects in the United States. The report, titled 'Fueling Up: How to Make U.S. Clean Hydrogen Projects Happen', underlines the necessity of clear regulations to translate clean hydrogen's potential into practical applications.
The report notes that tax credits designed to incentivize clean hydrogen production are facing challenges due to proposed IRS regulations on Section 45V. These regulations demand adherence to strict criteria such as additionality, time matching, and deliverability, causing uncertainty among developers and utilities and hindering project progress.
To boost demand and support the transition to cleaner energy sources, the Biden Administration has allocated $7 billion for regional clean hydrogen hubs and encouraged businesses to embrace cleaner practices. However, concerns persist regarding the lack of transparent certification standards for clean hydrogen, leading to hesitancy among potential off-takers.
State-level initiatives, like low-carbon fuel standards, are seen as pivotal in fostering a robust domestic market for clean hydrogen. Additionally, opportunities exist for the US to become a clean hydrogen exporter, particularly to Europe and Asia. Investments in infrastructure and manufacturing facilities are crucial in reducing project risks and establishing a competitive clean hydrogen market.
The report underscores the need for regulatory clarity and supportive investments to drive the growth of the clean hydrogen sector in the US. While acknowledging the vast potential of clean hydrogen, stakeholders are cautious about regulatory uncertainties that could impede progress. By addressing these challenges, the US can position itself as a leader in clean hydrogen production and contribute to global decarbonization efforts.
Topics
Policy
Clean Energy
Infrastructure
Investment
Regulations
Manufacturing
Export Potential
Market Demand
Tax Credits
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