Under the $433bn Inflation Reduction Act of 2022described by US President Joe Biden as the ‘most significant legislation in history to tackle the climate crisis’ – qualified clean hydrogen producers look set to receive a tax credit for up to $3 per kg of hydrogen, effectively taking $3 per kg off the cost of production.

At current prices, the tax credit would see production costs of green hydrogen in the Rockies, Southern California, Mid-continent and Northwest of the US the cheapest in the world.

Set at a basic tax credit rate of $0.60/kg, H2 View understands the Bill incorporates a scale of credit available, dependent on ‘lifecycle emissions’ (measured in carbon dioxide-equivalent) of the clean hydrogen generated.

This means, hydrogen manufactured with 0.45-1.5kg of ‘lifecycle emissions’ will only collect 33.4% of the credit, and 25% and 20% for 1.5-2.5kg and 2.5kg respectively, with verification of carbon dioxide levels set to be verified by an ‘unrelated third party’.

Additionally, the legislation sees the revision of the electric vehicle tac credit which will now include an additional $2bn available through 2030 for the production of hydrogen fuel cell-electric vehicles, hybrid, plug-in hybrid, and battery electric. New vehicles are eligible for $7,500, while used vehicles can received $4,500.

In a White House statement on the landmark Act, President Biden, said, “It [the Bill] invests $369bn to secure our energy future and to address the climate crisis.

“It also gives consumers a tax credit to buy any electric vehicle or fuel cell vehicle, new or used, and a tax credit for up to $7,500 if those vehicles were made in America.

“This investment in environmental justice is real. It also provides tax credits that will create thousands of good-paying jobs – manufacturing jobs on clean energy construction projects, solar projects, wind projects, clean hydrogen projects, carbon capture projects, and more — by giving tax credits for those who build these projects here in America.”

A lead instigator in the Bill, West Virginian Democratic Senator, Joe Manchin, said, “The Inflation Reduction Act of 2022 invests in the technologies needed for all fuel types – from hydrogen, nuclear, renewables, fossil fuels and energy storage – to be produced and used in the cleanest way possible.

“It is truly all of the above, which means this bill does not arbitrarily shut-off our abundant fossil fuels. It invests heavily in technologies to help us reduce our domestic methane and carbon emissions and also helps decarbonise around the world as we displace dirtier products.”

North America’s role in hydrogen’s road to reach Paris goal

Not all regions have comprehensive policy frameworks in place to implement hydrogen ambitions. While some are galvanising policy, strategy and technologies, others are far less mature. Figure 1 shows the renewable and low-carbon production goals of ten regions by 2030.

Figure 1: Regional production targets and policy comprehensiveness

The uptake of hydrogen will differ significantly by region and will be heavily influenced by policy packages that focus on the hydrogen value chain from production to usage. Europe is leading the race to embrace hydrogen and is set to take 11% of the energy mix by 2050, followed by OECD Pacific (8%) and North America (7%) where strategies, targets, and funding is pushing the supply-side.

In 2021, the hydrogen market in North America had a current active capacity of 0.53 million tonnes per annum, with an upcoming capacity of 1.7 million tonnes a year by 2030 and is widely considered a global leader in blue hydrogen production but lags in green hydrogen (1).

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