Standards requiring renewable clean hydrogen to be truly clean will drive economic growth 

Soon, the U.S. Treasury is expected to announce crucial guidance around the definition of “Clean Hydrogen” that will govern qualification for the Internal Revenue Code Section 45V production tax credit, an incentive intended to encourage production and use of hydrogen introduced in the Inflation Reduction Act (IRA) of 2022. 

This guidance must acknowledge that not all hydrogen projects are the same when it comes to emissions intensity and give priority to those that truly reduce emissions. By incentivizing projects with low or no-emissions through the maximum credit available, the U.S. can lead with affordable, scalable solutions and pass the benefits on to partners and customers in hard-to-decarbonize sectors. 

Critics of the 45V PTC believe that incentivizing new clean hydrogen production capacity will threaten job security in communities that rely on legacy generation sources like coal and natural gas. These critics are pushing for the full value of tax credits available to be given to hydrogen production technologies that depend on fossil fuels and produce greenhouse gas (GHG) emissions.  

On the other side, private companies and groups like the Green Hydrogen Catapult (GHC), a member-led organization of 10+ global companies spanning hydrogen production and heavy industry, assert that a tax credit and incentive structure based on emissions intensity will create opportunities to invest in national energy security, job growth and industrial decarbonization. Bolstering affordable, renewable hydrogen production will establish the U.S. as a key exporter and global trading partner at a time when many nations are turning to hydrogen to meet emissions reduction goals and decrease dependence on foreign energy sources. 

What’s At Stake  

Progress toward net zero goals  

The world has reached a crossroads for decarbonizing and modernizing infrastructure. Rather than rely solely on short-term solutions that appear economically attractive but enable continued reliance on fossil fuels, it’s time to invest in cleaner energy sources. Technologies are being developed that would allow markets to swiftly transition to hydrogen as a cleaner, more stable energy source. Producing hydrogen without GHG emissions will be essential if the world is to succeed in addressing the threat of climate change. 

Offering maximum tax credits under 45V to producers of truly clean hydrogen will encourage the development of low- and zero-emissions hydrogen production capacity. Technologies that do not eliminate GHG emissions should receive less generous credits, in recognition of the additional emissions, environmental burdens, and adverse community impacts they will produce.  

Global industries and economies 

Assets that rely on fossil fuels to meet decarbonization deadlines run the risk of becoming stranded as renewable hydrogen production becomes available and economically viable. Allowing this to happen would be more detrimental to communities and industries than shifting to incorporate clean hydrogen and other sources into their operations. Tax credits should be structured to push industry to adopt the cleanest available methods of producing hydrogen as quickly as possible. 

Incentivizing low- and zero-emissions hydrogen production and storage projects will open up new economic opportunities for industries and entire communities. Companies in transportation, steel and plastics production, and shipping can co-locate operations with hydrogen production sites, lowering costs and allowing these industries, their employees, and communities to benefit from well paid jobs, improved infrastructure, and tax revenue without trading clean air. New renewable hydrogen production and storage sites will also create high-paying, long-lasting, and family sustaining jobs both directly at these new sites and in the industries they support.  

International energy security 

The imperative of reducing carbon emissions and the high and volatile prices of coal, crude oil, and natural gas have pushed many governments and corporations to consider hydrogen as a more reliable, clean, secure and less volatile energy source. Adoption of clean hydrogen, produced from locally available renewable resources like solar and wind, can usher in industrial decarbonization while keeping energy commodity costs predictable and the required inputs secure, since they will rely on a sustainable supply chain.  

We must also look outside U.S. borders when we establish standards and protocols for clean hydrogen production, storage, and transportation. The EU, which has put forth strict standards and emissions reduction goals, would benefit from trade agreements and partnerships that enable the importation of U.S.-made clean hydrogen and associated manufacturing products. Many EU member states lack the resources, funding, or acreage to pursue hydrogen production projects, making it challenging to shift from dependance on foreign fossil fuel sources. By working together now to align on standards and trading agreements that match suppliers with end-users, we can set our sights on true global energy security and diversity of supply for all nations. It is critical that the U.S. harmonize clean hydrogen standards with those imposed by our trading partners to avoid trade imbalances. 

Incentivizing the production of low- and zero emissions hydrogen will reduce the impacts of GHG emissions on burdened communities, enhance energy security and secure for the U.S. a leadership position in the energy transition. The U.S. must choose the cleaner path and structure its Section 45V tax incentives to promote the quickest and most efficient route to decarbonization. Renewable hydrogen producers and industrial end-users are ready to act now, with projects in development on track to be operational prior to 2030. Strict guidance is essential to support this swift and scalable deployment of low- and no-emissions production capacity, mitigate the impacts of climate change, and secure a stable, reliable clean energy future for all, now. 

Laura L. Luce is CEO of Hy Stor Energy, a company pioneering renewably produced green hydrogen and energy storage at scale.