In a recent development, the US government has initiated a public consultation regarding certain aspects of the proposed regulations for the US 45V hydrogen production tax credit. This announcement introduces an additional layer of complexity that could potentially delay the implementation of this crucial subsidy.
The Notice of Proposed Rulemaking (NPRM), unveiled on December 26 last year, contained a noteworthy paragraph titled “Provisional Emissions Rate” (PER). This provision allows taxpayers producing hydrogen without a determined lifecycle GHG emissions rate to petition the Treasury Secretary for a provisional emissions rate (PER). This rate is pivotal as it determines the tax credit bracket and the subsidy amount a project would receive.
The $433 billion Inflation Reduction Act of 2022 introduces a tax credit of up to $3 per kilogram for clean hydrogen producers. However, the size of these tax credits is contingent upon the lifecycle greenhouse gas (GHG) emissions of each project, measured in carbon dioxide-equivalent (CO2e).
Projects with lifecycle emissions of less than 0.45kg CO2e per kg of H2 qualify for 100% credit, with decreasing percentages for higher emissions levels. Verification of lifecycle emissions by an unrelated third party is a prerequisite, and only projects commencing construction before 2033 are eligible.
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The NPRM outlines that projects utilizing technologies not covered by the official emissions modelling tool, 45VH2-GREET, would need to apply for a provisional emissions rate (PER). This clause has prompted the Treasury Department to initiate a public consultation to solicit feedback on this process.
Developers and the public have until May 13 to submit comments on these new proposals. Given this timeline, finalizing the 45V regulations may extend until June or later, which could potentially further delay clean hydrogen production projects in the US.
It’s crucial to note that the GREET model’s annual updates or potential replacement by the Energy Secretary add an additional layer of uncertainty for developers, as qualifying for a specific tax credit bracket one year may not guarantee the same eligibility in subsequent years.
In summary, the public consultation on US hydrogen tax credits represents a critical juncture in shaping the regulatory landscape for clean hydrogen production. Stakeholders are encouraged to participate in this process to ensure transparency and clarity in the implementation of these important subsidies.
