Clean Energy Group Statement on Treasury Department Final 45V Clean Hydrogen Production Tax Credit Guidance
On Friday, January 10, 2025, the US Department of the Treasury officially published final guidance regarding the 45V Clean Hydrogen Production Tax Credit.
Clean Energy Group applauds the Treasury for not bowing to industry pressure to relax the core principles of its initial draft guidance, ensuring that 45V will primarily incentivize green hydrogen, which (as long as stringent guardrails are in place) is the only form of hydrogen production that will not lead to a dangerous increase in greenhouse gas emissions. However, some concessions in the final guidance, in combination with other federal funding and tax credits for fossil fuel powered hydrogen, leaves experts concerned.
“Treasury’s 45V final guidance is a step in the right direction, but it does not go far enough,” says Abbe Ramanan, Clean Energy Group Project Director. “Without stricter guardrails in place, increased hydrogen production will perpetuate fossil fuel dependence and exacerbate climate change and local pollution.”
The final rules maintain the “three pillars” approach of the draft guidance, requiring that hydrogen production facilities must meet the following standards to be eligible for the 45V tax credit:
- Hydrogen facilities must be paired with new clean energy generation (“incrementality”)
- Hydrogen production must be matched with clean energy generation (“temporal matching”)
- Clean energy resources must be located within the same transmission region as the hydrogen production facility (“deliverability”)
While the final guidance maintains these core principles, it does contain several concessions to industry lobbying that have the potential to jeopardize emissions reductions. These include loosened restrictions on what energy generation is eligible to meet the incrementality requirement, opening three pathways for using existing energy generation:
- Clean energy procured from states that have set goals requiring that 100% of retail energy sales be carbon-free by 2050 (currently, only California and Washington)
- Energy produced from formerly retired nuclear facilities (“pink hydrogen”)
- Energy from fossil fuel power plants retrofitted with carbon capture and storage (CCS) (“blue hydrogen”)
In another capitulation to the fossil fuel industry, fossil fuel alternatives like biomethane, which has a similar emissions intensity to natural gas, can be used as a feedstock for qualifying hydrogen production, although some stipulations have been put in place to limit undercounting the emissions intensity of those fuels.
The final guidance for 45V comes as the US Department of Energy’s Regional Hydrogen Hubs Initiative has continued to move forward despite significant pushback from climate scientists, environmental justice advocates, and members of communities likely to be impacted by the Hubs. The seven Hubs are supported by $7 billion in federal funding, and many of them plan to produce hydrogen at least partially with fossil fuels. While the final guidance for 45V means that some of the Hubs may not be eligible for the highest tier of the tax credit, other federal tax credits are available to subsidize fossil fuel powered hydrogen, including the 45Q tax credit for carbon capture, for which blue hydrogen projects could qualify.
Clean Energy Group |. www.cleanegroup.org