Ten Senate Democrats have expressed their concerns to the Biden administration regarding the forthcoming Treasury Department rules on the use of clean hydrogen tax credits. According to a draft letter viewed by Reuters on Wednesday, these lawmakers are advocating for flexibility in the Treasury’s guidance, allowing projects driven by existing energy sources, such as gas, hydroelectricity, and nuclear, to qualify for these crucial tax credits.
Led by Washington Senator Maria Cantwell, this group of senators emphasizes the importance of avoiding overly complex eligibility criteria, a stance that differs from that of some of their Democratic colleagues and environmental organizations. The opposing faction is pushing for strict criteria, confining tax credits, which could be valued at up to $100 billion, to hydrogen producers using exclusively new sources of clean electricity, rather than tapping into power already available on the grid.
The letter from the ten Senate Democrats warns against the potential hindrance to the growth of the emerging clean hydrogen industry and the hydrogen hubs that have recently secured $7 billion in federal funding across 16 states. They argue that stringent eligibility criteria could undermine the development of a robust clean hydrogen market and impede progress towards production and price parity goals. Moreover, they believe it may obstruct the scaling up of electrolyzer investments and limit the role of clean hydrogen in hard-to-decarbonize sectors, aligning with the broader decarbonization efforts of the Biden administration.
Notable signatories to this letter include West Virginia’s Joe Manchin, Pennsylvania’s John Fetterman, and Illinois’ Dick Durbin, whose states have received funding for hydrogen hubs aimed at decarbonizing heavy industries like steel, heavy vehicles, and cement plants.
This internal disagreement among Senate Democrats is further compounded by a group of eight Democratic senators, led by Rhode Island’s Sheldon Whitehouse and Oregon’s Jeff Merkley, who penned a separate letter addressed to Treasury Secretary Janet Yellen. They advocate for strict tax credit usage exclusively for projects using new clean energy sources, as well as locally sourced clean energy. Additionally, they call for “time-matching” measures to ensure that electrolyzers producing hydrogen align with renewable energy sources and do not inadvertently rely on fossil fuels.
This division within the Democratic party highlights the complexity and importance of setting the rules for clean hydrogen tax credits, a decision that will significantly impact the future of the clean energy sector. The battle over eligibility criteria and the proper utilization of these credits promises to be a pivotal issue as the Biden administration continues its efforts to address climate change and decarbonize the nation’s energy infrastructure.
