The U.S. Treasury has officially released the final rules for Section 45V clean hydrogen production tax credits, a cornerstone of the Inflation Reduction Act of 2022. The rules will be published in the Federal Register on January 10, 2025, becoming effective immediately. This definitive guidance provides critical clarity and certainty to the domestic clean hydrogen industry, paving the way for significant investment, prevailing-wage job creation, enhanced energy security, resiliency, and meaningful pollution reduction across the industrial, transportation, and power sectors.
Key provisions of the final guidance regarding green or electrolytic hydrogen:
- Hourly matching of EACs (temporality pillar) starting in 2030, with a transition period through 2029 allowing annual matching.
Final Source-of-Truth Table for determining Deliverability maps balancing authorities to defined regions from the 2023 DOE National Transmission Needs Study. In order to comply with the Deliverability pillar, the hydrogen production facility and the power generation facility(ies) providing qualifying EACs must both be electrically connected to a balancing authority in the same region. In addition, rules regarding interregional delivery to count for the Deliverability pillar are provided. These updates remove ambiguity by formalizing all the different connections and boundaries between balancing authorities, enabling project developers and regulators to confirm compliance with the rules.
Alternate Pathways to Comply with the Incrementality Pillar
Allowing 200MW per nuclear reactor at risk of retirement to qualify as incremental
Incorporating CCS to an existing polluting generation source
Reactivating previously shut-down facilities
Supporting states with an RPS/CES and a cap and trade program (WA & CA) by removing the 36 month standard incrementality requirement between the COD of the power generation facility(ies) and the green hydrogen facility placed in service date
Several Clarifications that Bolster Financeability
(NovoHydrogen included all of these in our Q1 2024 comments to Treasury, following the proposed regulations released in December 2023.)Option to either lock in the 45VH2-GREET model at construction start for the entire 10-year PTC period or use the then current 45VH2-GREET model on January 1 of each year during the 10-year PTC period
Removing transmission & distribution loss considerations due to minimal impact and administrative complexity
Establishing alternate pathways to comply with the incrementality pillar (as listed above)
Excluding venting/flaring for safety purposes as triggering the anti-abuse rule
Authorizing hourly calculation of CI—and thus tax credit amount —for clean hydrogen produced starting in 2030 once hourly EACs are allowed, capped at an annual average of 4kgCO2/kgH2. This nuanced change is critical to enabling delivery of resilient hydrogen supply to key industrial customers without incentivizing any perverse behavior
NovoHydrogen’s Commitment
At NovoHydrogen, we have built our business to thrive in any policy environment. While we welcome the final guidance and commend Treasury (and the EPA and DOE) for this monumental effort, our focus has been and will always remain on delivering key customers a resilient supply of hydrogen with the best price and lowest pollution.
Our approach includes:
Structuring contracts to meet the highest incentive tiers
Designing operations to flex with diverse regulatory scenarios
Collaborating with state and local governments to maximize community benefits and pollution reduction
With these final rules now in place, the path forward for green hydrogen deployment has never been clearer. NovoHydrogen remains dedicated to advancing green hydrogen projects that deliver meaningful economic gains, bolster energy security, support domestic manufacturing, and significantly reduce pollution.
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