The Treasury Department is weighing new requirements for “green” hydrogen producers, creating schisms among energy groups about how to ensure the fuel is a low-carbon resource.
Green hydrogen production involves extracting the fuel from water molecules using renewable electricity in a process that doesn’t emit carbon. The climate law sought to encourage that by offering tax credits to hydrogen producers that manage to zero out their carbon emissions, rather than just paring them back.
Yet some prospective producers of hydrogen want to bend the definition of “green,” say analysts. Instead of building their own wind or solar facilities and drawing power directly from those projects on-site, some producers hope to use grid electricity — including electricity from coal or gas — while buying renewable energy certificates or other offsets so hydrogen can qualify as clean under the law.
Now, Treasury is expected to release guidance that could set conditions for hydrogen developers hoping to use offsets while claiming clean hydrogen tax credits.
“It’s the most important question for how the [clean hydrogen] tax credit is implemented,” said Matt Bravante, an analyst at BloombergNEF. “What’s going to be allowed?”
The outcome could have deep implications for hydrogen’s credibility as a climate tool. It also could set an important baseline, as green hydrogen currently is rarely produced in the U.S. but is expected to grow rapidly in coming years.
Many hydrogen advocates, including...
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