Published December 2023
Clean hydrogen is gaining unprecedented political and business momentum due to its pivotal role in various industries such as chemicals, fertilizers, and oil refining processes. With a high energy content on a mass basis, hydrogen emerges as a potent source of carbon-free energy, especially when produced through renewable methods like water electrolysis, powered by solar or wind electricity.
On August 16, 2022, President Joe Biden signed the Inflation Reduction Act (IRA) into law. This legislation, coupled with other enacted policies, aims to provide affordable, reliable energy globally while addressing climate change. The overarching goal is to drive 2030 economy-wide greenhouse gas emissions 40% below 2005 levels and to position the US for significant progress toward the 2030 climate goals.
In this review, we delve into several key aspects focused on the new Rule 45V tax credit for low carbon hydrogen:
Tax credits under 45V:
- Introducing the new tax credit under 45V
- Stacking credits
- Discussion of additionality, deliverability, and time-matching for green hydrogen production
Sensitivity analysis for low carbon routes:
- Conducting sensitivity analyses with regard to natural gas price, electricity price, and electrolyzer stream factor, based on techno-economic results from PEP Report 32E Hydrogen by Electrolysis, PEP Review 2023-04 Green Ammonia via Electrolytic Hydrogen, and PEP Review 2020-15 Green Ammonia.
Impact assessment of IRS Rules 45Q and 45V:
- Concluding which rule provides the best tax credit: 45Q, based on carbon oxide capture and sequestration, utilization, or use for enhanced oil recovery (EOR); or 45V, based on hydrogen with carbon dioxide intensity.
- This review aims to provide an analysis of the current landscape, addressing critical elements in the clean hydrogen sector, from tax credits to low carbon routes considering the monetization of carbon dioxide under these new IRS rules.