Biden Administration's New Tax Credit Scheme Promoting Clean Hydrogen Production
Key Ideas
  • Biden administration finalizes a tax incentive promoting hydrogen production based on carbon intensity, favoring cleaner processes.
  • Established under the 2022 Inflation Reduction Act, the scheme offers credits of up to $3 per kilogram for 'qualified clean hydrogen'.
  • Producers must meet wage and apprenticeship requirements to claim the credit, with process emissions determining the credit amount.
  • Rules require consideration of direct and indirect emissions, with the Energy Department's model used to tier production processes for credit computation.
The Biden administration has finalized rules for a tax incentive aimed at promoting hydrogen production using renewable power. The Clean Hydrogen Production Credit is designed to incentivize cleaner processes, offering credits based on carbon intensity. Producers meeting specific wage and apprenticeship requirements can claim up to $3 per kilogram for 'qualified clean hydrogen'. The scheme considers emissions from the production process, with lower credits for processes generating higher lifecycle emissions. The Energy Department's GREET model will be used to tier production processes for credit computation. Producers are given flexibility to use the version of the GREET model that was most recent during their facility's construction. The scheme also necessitates the consideration of both direct and significant indirect emissions in the calculation of the tax credit's lifecycle GHG analysis. Electrolyzers covered by the scheme include those using renewables-derived electricity and nuclear power. The rules require Energy Attribute Certificates to meet temporal matching requirements, ensuring electricity generation and hydrogen production coincide. The transition to hourly matching is extended, with hourly matching becoming mandatory for all facilities by 2030.
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