The U.S. Department of the Treasury and the Internal Revenue Service have released final rules for the section 45V Clean Hydrogen Production Tax Credit, a provision established by the Inflation Reduction Act. These rules introduce changes and flexibilities to support investment certainty and advance clean hydrogen projects while adhering to emissions requirements.

The new regulations clarify eligibility criteria for hydrogen producers using various energy sources, including electricity, natural gas with carbon capture, renewable natural gas (RNG), and coal mine methane. Projects must meet prevailing wage and apprenticeship standards to qualify for the full credit.

U.S. Deputy Secretary of the Treasury Wally Adeyemo stated, "These rules incorporate helpful feedback from companies planning investments which will drive significant deployment of clean hydrogen to power heavy industry and help create good-paying jobs." He emphasized that scaling low-carbon fuels like hydrogen is crucial for transitioning sectors such as heavy industry.

U.S. Deputy Energy Secretary David M. Turk highlighted the potential of clean hydrogen in decarbonizing multiple economic sectors: "The final rules announced today set us on a path to accelerate deployment of clean hydrogen, including at the Department of Energy’s clean Hydrogen Hubs."

John Podesta, Senior Advisor to the President for International Climate Policy, noted that stakeholder feedback influenced extensive revisions in the final rule: "The extensive revisions we've made in this final rule provide the certainty that hydrogen producers need to keep their projects moving forward."

After reviewing approximately 30,000 public comments and collaborating with expert agencies like the Department of Energy and Environmental Protection Agency, Treasury and IRS finalized these rules. The Department of Energy plans to release an updated version of the 45VH2-GREET model soon.

Under these regulations, pathways are established for producing hydrogen using both electricity and methane while ensuring compliance with lifecycle emissions standards. The tax credit's value depends on greenhouse gas emissions during production, with lower emissions receiving higher credits.

For electrolytic hydrogen production using electricity—such as green or pink hydrogen—the rules include safeguards like temporal matching and deliverability criteria when using Energy Attribute Certificates (EACs). This ensures compliance with statutory lifecycle GHG emissions standards.

Changes from proposed rules include defining incremental electricity generation within 36 months of a facility's service start or increased capacity within that period. Additional pathways are provided for demonstrating incrementality based on nuclear retirement risk or state policies meeting specific criteria.

For methane-based hydrogen production technologies—including blue hydrogen—the regulations detail eligibility criteria considering upstream methane leakage rates based on national values in forthcoming updates to 45VH2-GREET models.

In summary, these final rules aim to facilitate investment certainty across all types of hydrogen producers by allowing them options regarding model versions used throughout credit duration while supporting development efforts through enhanced clarity around lifecycle GHG emissions determination processes.