Written byMa Xiaolei.
EditWindsor.
DesignZhao Haoran.
The New York Times, The Verge by Brad Plumer
On December 22, local time, Biden issued guidelines for obtaining tax credits for hydrogen production, hoping that greenhouse gas emissions will not be increased in the process of developing the hydrogen energy chain.
In 2022, Biden signed the Inflation Reduction Act, which provides $100 billion in subsidies for hydrogen production, encouraging companies to produce more hydrogen using renewable energy and other carbon-free**.
The focus is on who can claim this part of the tax credit.
Electrolyzer at a future hydrogen production facility in Germany.
The U.S. Treasury Department has adopted stricter limits in the newly released guidance, which in the 128-page guideline stipulates that the amount of tax credits available to U.S. clean hydrogen producers depends on the amount of greenhouse gas emissions over the life of each project, with subsidies ranging from 60 cents to $3 per kilogram of "clean" hydrogen produced for 10 years.
But what counts as "clean" is debatable.
Currently, most of the electricity in the U.S. still comes from coal and natural gas power plants, so if a company simply plugs a bunch of electrolyzers into the existing grid to produce hydrogen, greenhouse gas emissions are likely to increase. Similarly, if a hydrogen company tries to use electricity from an existing wind or solar power plant, other coal- or gas-fired power plants will run more frequently to compensate for that power.
Some studies have shown that tax credits can inadvertently lead to hundreds of millions of tons of additional CO2 emissions without adequate safeguards.
To avoid this outcome, the Ministry of Finance has proposed several restrictions. To qualify for the full tax credit, hydrogen producers must take advantage of new clean electricity built within the last three years**. These plants must be located in the same grid area as the hydrogen plant. And, starting in 2028, producers will have to prove every hour that the electricity used by their electrolysers comes from new renewable energy projects, meaning that electrolyzers can only run in the same hour that clean electricity is available.
The Escalante Power Plant, located just outside of Pruitt, New Mexico, is a shut down coal-fired power plant that could be converted into a facility to produce hydrogen from natural gas.
The response from the industry has been overwhelming. Some celebrate, some are angry.
Some experts say new rules are needed to ensure that pollution does not increase in the development of hydrogen chains. At the same time, clean energy groups argue that tax credits are too restrictive and could stifle the hydrogen industry.
Eric Guter, vice president of hydrogen at Air Products & Chemicals, the world's largest hydrogen producer, said: "The U.S. has the highest tax subsidy for hydrogen in the world, so we think it should adopt the strictest rules on clean standards. The company is working with AES to develop a $4 billion project in North Texas that will use wind and solar energy to produce hydrogen.
Tech companies such as Microsoft and Google have set targets to source locally renewable electricity and match purchases by the hour to encourage clean energy growth in a similar way.
The U.S. Clean Energy Association, which represents major wind, solar and transmission companies, says the requirement for companies to prove hourly that the electricity used by electrolysers comes from new renewable energy projects starting in 2028 is too stringent.
Jason Grumet, the group's chief executive, said in a statement that the rule "will discourage the vast majority of clean energy companies from investing in green hydrogen manufacturing and facilities".
Currently, producers only need to prove that electricity is from clean energy sources on an annual basis, but this could lead to electrolysis facilities potentially being powered by fossil fuels when no additional clean energy is available in the region.
Testing an electrolyser at a green hydrogen project in Sheffield, UK.
Cost is the biggest obstacle to producing clean hydrogen.
Currently, most hydrogen is made from natural gas, emitting carbon dioxide in the process. The cost of making hydrogen from renewable energy is as high as $12 per kilogram, while the cost of making hydrogen from natural gas is less than $3 per kilogram. Biden** introduced the hydrogen tax credit to close that gap and kickstart a new industry.
The Inflation Reduction Act also allocates $7 billion to establish hydrogen production "hubs" across the United States. Clearly, Biden sees hydrogen as a key part of America's clean energy future.
Despite this, many grassroots groups remain concerned about the potential impact of the hydrogen industry on local communities and the environment. They don't want air pollution from facilities that use methane to produce hydrogen, and they don't believe in emerging carbon capture technologies.
The strict rules in the guidelines could also shatter the dreams of some older nuclear power plants that thought they could make a new career in the hydrogen production business. According to the Huffington Post, Conconstellation, the largest operator of nuclear power plants in the United States, could file a lawsuit to prevent the guidelines from taking effect.
The company announced plans in 2023 to build a $900 million nuclear-powered clean hydrogen production facility in Illinois with funding from the Biden** Hydrogen Center program. But if nuclear energy doesn't come from new power plants or recent capacity additions at existing plants, it could lose the hydrogen tax credit.
The construction of a new nuclear reactor is an extremely difficult task. The first new-build reactor in decades in the United States is finally operational in 2023. It was seven years behind schedule and more than $16 billion over budget.
The Treasury Department will accept public comments within 60 days and may make changes before finalizing the plan.
Guests and partners gathered at the opening ceremony of the new hydrogen refueling station in Hofelding, Germany. The station will supply up to 300 kilograms of hydrogen per day to 10 buses and trucks in the initial phase of operation.
Some hydrogen companies say the proposed rules could be difficult to follow. Wind and solar won't run all the time, and matching hydrogen production with hourly fluctuations in renewables increases costs, they said.
This policy will make it more difficult for everyone. Jacob Susman, chief executive of clean hydrogen developer Ambient Fuels, said the company had been planning to invest about $700 million in new projects.
Rachel Fakhry, director of emerging technology policy at the Natural Resources Defense Council, an environmental group, said: "There will be a lobbying frenzy around the final rule. We are keeping a close eye to ensure that there are no new vulnerabilities that are harmful to emissions or consumers. ”
It is unclear how much clean hydrogen the U.S. will actually produce in the coming years. Biden has set a strategy to produce 50 million tonnes of clean hydrogen by 2050, more than 50 times what is currently produced. However, there are still huge obstacles to building a hydrogen transportation system and finding fuel buyers.