In a significant move to bolster the hydrogen industry and promote cleaner energy alternatives, the Biden administration has unveiled a groundbreaking proposal for allocating substantial tax credits to hydrogen producers. Released as part of the Democrats’ Inflation Reduction Act, the proposal offers the most generous hydrogen production credits globally, marking a pivotal development in the push for sustainable energy.
Under the proposed tiered system, hydrogen producers will receive credits based on the environmental impact of their projects, with cleaner energy initiatives qualifying for higher incentives. Even those utilizing fossil fuels to produce hydrogen will receive meaningful credits, creating a balanced approach to incentivizing the industry’s growth.
Administration officials anticipate that these hydrogen production credits will generate $140 billion in revenue and contribute to the creation of 700,000 jobs by 2030. The ambitious plan aims to position the United States as a key player, producing 50 million metric tons of hydrogen by 2050—an amount equivalent to the combined energy consumption of all buses, planes, trains, and ships in the country.
While the proposal sets a promising trajectory for the hydrogen industry, challenges remain, particularly in establishing a delivery infrastructure for cleanly-produced hydrogen. Unlike liquid fuels with existing delivery systems, hydrogen lacks a widespread distribution network, posing hurdles for its integration into sectors crucial for addressing climate change, such as steel, cement, and plastics manufacturing.
The proposal introduces a credit system that ranges from $.60 to $3 per kilogram of hydrogen, factoring in the whole lifecycle emissions. Notably, firms producing cleaner hydrogen while meeting wage and apprenticeship requirements stand to benefit the most.
One contentious aspect addressed in the proposal involves the electricity usage of clean electrolyzer hydrogen production. To mitigate concerns about increased reliance on coal or natural gas-fired power plants, producers are required to document their electricity usage through “energy attribute certificates.” This documentation will play a crucial role in determining the credits eligible hydrogen producers receive.
The proposed guidance has received mixed reactions, with some industry experts lauding it as a win for climate initiatives and the emerging U.S. hydrogen industry. However, others, including the U.S. Chamber of Commerce, express concerns about potential restrictions hindering industry growth. The 60-day comment period now begins, offering stakeholders the opportunity to provide feedback on the proposal. Energy Secretary Jennifer M. Granholm emphasizes that the initiative aims to lead the global clean energy transition and stimulate unprecedented investments in an American-led industry.