Regional US clean hydrogen hubs say 'three pillars' exclude nuclear, gas-fed hydrogen projects

Officials at regional hubs planning to use natural gas or nuclear power for low-carbon hydrogen production say the Treasury Department's 45V tax credit rules are not compatible with so-called blue and pink hydrogen production.

In October, the Biden administration announced $7 billion to be divided among seven regional clean hydrogen hubs: Pacific Northwest Hydrogen Association (PNWH2); Alliance for Renewable Clean Hydrogen Energy Systems (ARCHES); Heartland Hydrogen Hub (HH2H); HyVelocity Hub; Midwest Alliance for Clean Hydrogen (MACHH2); Mid-Atlantic Clean Hydrogen Hub (MACH2); and Appalachian Regional Clean Hydrogen Hub (ARCH2).

Each hub submitted comments to the US Treasury Department on its draft 45V hydrogen production tax credit, requesting changes specific to their respective regions, public comments viewed by S&P Global Commodity Insights show.

For example, hubs from regions with abundant natural gas plan to use it as a feedstock for hydrogen production, creating blue hydrogen when combined with carbon capture and storage systems. Incrementality and hourly matching requirements prevent these hubs from seeing any incentives for clean hydrogen production, comments say.

ARCH2's comments say the region is the country's "largest, lowest carbon-intensive and cheapest natural gas region."

"It is imperative to incentivize the build-out to prepare ourselves for the hydrogen future and not limit our ability based upon preferred fuel choices that may not be applicable to achieving liftoff in select regions of the country," the ARCH2 letter reads.

Issues 'are not relevant'

HyVelocity's letter requests the "three pillars" of clean hydrogen production to not apply to the natural gas market, saying renewable natural gas infrastructure is not comparable to electricity.

"As the pipelines used by RNG are national and production continuous, the deliverability and time matching issues described for electricity are not relevant," the letter reads.

HH2H comments say strict incrementality would incentivize RNG developments to commit their gas to other offtakes besides hydrogen production or "simply not execute on the RNG project."

Some regions highlighted an already existing abundance of clean or low-carbon energy generation. Comments say the requirement to create new clean energy sources to qualify for the tax credit will effectively delay hydrogen development where opportunities already exist.

For example, PNWH2 comments highlighted the region's "abundant supply" of hydropower power generation, which supplies about two thirds of the region's power. The letter from the PNWH2 board chair says incrementality and time-matching requirements do not recognize the existing abundance of clean power generation and will require an "overbuild" of renewable energy infrastructure.

The PNWH2 letter estimates an added 45%-300% additional cost to hub projects due to incrementality and time-matching requirements. A study indicates production in the mid-Atlantic region could become up to 60% more expensive due to hourly matching, MACH2 comments say.

Comments from HH2H, another region with "abundant natural resources for producing clean hydrogen," say the commercial operations date for its facilities intended for hydrogen production would fall outside Treasury's proposed three-year requirement. This would preclude the use of renewable and nuclear resources in the region for clean hydrogen production, comments say.

Nuclear power

Letters from the three hubs intending to use nuclear power for pink hydrogen production, which are MACHH2, MACH2 and HH2H, say incrementality excludes nuclear projects from qualifying for the tax credit altogether.

MACH2's comments point out only one new nuclear power plant reactor was started in the US in the past 40 years. In the Midwest, MACHH2's comments say the as-written tax credit guidance would result in the cancellation of its nuclear hydrogen production project.

The hubs' comments point out nuclear provides consistent, around-the-clock clean energy, which would synergize with hourly matching requirements for electrolytically produced hydrogen. Electrolyzers that must rely on various energy sources would need to be more flexible to adapt to stringent hourly matching, experts say.

"... The existing incrementality requirements prevent the use of existing nuclear generation from earning the 45V tax credit, in conflict with the policy framework established by the [Bipartisan Infrastructure Law] that directs [The US Department of Energy] to support the use of nuclear generation in hydrogen production," HH2H comments say.