The United States has introduced proposed rules on Friday outlining how energy companies can access tax credits worth billions of dollars for the production of low-carbon hydrogen using new clean energy sources. However, uncertainties persist, particularly regarding the role of nuclear power in benefiting from these credits.
The tax credit, ranging from 60 cents to $3 per kilogram, will be determined based on the life-cycle greenhouse gas emissions associated with the power source used in hydrogen production, as detailed in the 128-page proposal from the Treasury Department.
John Podesta, a White House climate adviser, underscored the importance of the proposed 45V clean energy hydrogen production tax credit, stating it is a crucial element in the strategy to attract private investment across sectors, build a clean energy economy, and address the climate crisis.
To qualify for the credit, hydrogen producers must demonstrate the use of clean electricity generated within three years of a hydrogen plant going into service. Seeking feedback from the nuclear industry and other low-carbon power generators, the Biden administration aims to clarify how existing plants could benefit over the next two months.
The lack of clarity has raised concerns among nuclear power producers looking to leverage their virtually emissions-free electricity for hydrogen production. Existing nuclear power features in three of the seven hydrogen hubs supported by the Energy Department with substantial public funding, but the challenges associated with building new nuclear power plants, including cost and delays, add complexity to the issue.
Senator Joe Manchin, a Democrat opposing the restrictions, criticized the administration, stating, “For an administration that wants to reduce emissions and fight climate change, it makes no sense to kneecap the hydrogen market before it can even begin.”
Business groups, including the Chamber of Commerce, have expressed discontent with the new clean energy requirements, asserting that it could impede the development of a hydrogen economy.
While renewable energy backers and environmental groups argue that strict limits are necessary to prevent hydrogen production from inadvertently promoting increased use of carbon-emitting fossil fuels, Rachel Fakhry, policy director for emerging technologies at the Natural Resources Defense Council, hailed the proposed rules as a win for the climate, U.S. consumers, and the budding U.S. hydrogen industry.
The Biden administration sees low-carbon hydrogen as a crucial tool in combating climate change, especially in fueling heavy industries such as aluminum, cement, and steel, as well as long-haul transportation. The tax credits were outlined last year in President Joe Biden's climate legislation and form part of the administration's plan to produce 50 million metric tons of low-carbon hydrogen by 2050.
While the vast majority of hydrogen is currently produced with fossil fuels and unabated emissions, the proposal suggests potential pathways for nuclear power to get the credit, including plant upgrades, relicensing, or demonstrating how hydrogen production would help avoid plant closures. The proposed rule will undergo a 60-day comment period and public hearings before being finalized.
Constellation, the largest U.S. nuclear power operator, criticized the proposal, expressing concerns that America may lose leadership in hydrogen and deep decarbonization to China and Europe, which utilize existing nuclear plants for hydrogen production. The proposal also explores ways to capture and use renewable natural gas from landfills and gas emitted from oil drilling for hydrogen production.