Policy Update

Summary of section 45V of the IRA for clean hydrogen

Final rules for Clean Hydrogen Production Tax Credit published by the U.S. Department of the Treasury and Internal Revenue Service

Reference: "U.S. Department of the Treasury Releases Final Rules for Clean Hydrogen Production Tax Credit" 

Background

Section 45V of the US Inflation Reduction Act (IRA) provides an income tax credit for the production of qualified clean hydrogen. After considering over 30,000 comments and discussions across agencies and experts, the Department of Treasury has finalized the rules, providing clarity on eligibility requirements of various hydrogen production pathways, and the methodology for tax credit evaluation.

How much is the tax credit?

$0.60 X (Amount of clean H₂ in kg)  X (% based on lifecycle GHG emissions for H2 production)

For qualifying facilities which began construction before Jan 29, 2023, the credit is multiplied by 5.

Lifecycle emissions

Lifecycle emissions include those through the point of production (well-to-gate), to be determined using the “45VH2-GREET” model develolped by Argonne National Lab.

 

Well-to-gate emissions includes those associated with:

• Upstream steps associated with H2 production 
• Upstream methane slip is included.
• H2 production process
• Electricity used by the production facility, to be determined on an hourly basis after Jan 1, 2030.
• Carbon sequestration

An updated version of the “45VH2-GREET” model is available for download. 

 

Eligibility Requirements

• H₂ production must result in lifecycle GHG emissions < 4 kg-CO2 / kg-H₂
• H₂ must be produced in the US
• Provisions for CO2 sequestration, nuclear power plants at risk of retirement, and facilities which use carbon capture and storage.
• H2 production from natural gas also qualify.

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