The hydrogen tax legislation provides a starting point while expanding nuclear and carbon capture

The introduction of hydrogen is seen as a promising alternative to fossil fuels for heavy industry and long-haul transport. But they have been holding out for the past few years, waiting for guidance from the US Treasury on the benefits tax.

The wait is over today, with the Treasury to announce final rules for hydrogen producers to qualify for tax credits under section 45V of Inflation Reduction Act.

“We are pleased to have a final order,” said Beth Deane, chief legal officer at Hydrogen powerhe told TechCrunch. “Without that, the business is just dead.”

The rules, which have been two years in the making, relax some aspects of the policy, and allow for the reduction of nuclear power plants and fossil fuels.

Because hydrogen can be produced in a variety of ways, the regulations that come with it are a very complex process to ensure that hydrogen producers receiving the credit do not cause significant damage.

There are two main sources of hydrogen: those produced by electrolyzers, which use electricity to split water molecules into hydrogen and gas, and those produced by steam reforming, which use steam and heat to break down methane molecules, producing hydrogen and carbon. dioxide.

But all of these have many differences. Evaporation can either remove carbon dioxide from the atmosphere (releasing what is called gray hydrogen in the process) or it can capture and store it (blue hydrogen). Electrolyzers can be either radioactive (green hydrogen) or nuclear (pink hydrogen). If you really want to dig deeper, there are many flavors of hydrogen that people often call all of them hydrogen rainbow.

At its core, the 45V regulations seek to ensure that new hydrogen production does not result in additional greenhouse gas emissions from the grid. To that end, the Treasury Department requires manufacturers to track the emissions produced by each kilogram of hydrogen over its lifetime. This means that, for example, blue hydrogen producers have to account for global warming due to methane emissions from gas pipelines.

Hydrogen producers must purchase renewable or clean energy from the region they are located in. By 2030, they will also demonstrate that energy was used to produce hydrogen within an hour.

In general, hydrogen production that emits the least amount of greenhouse gases over its lifetime receives a large tax credit, up to $3 per kilogram. Green hydrogen typically costs $4.50 to $12 per kilogram, according to to BloombergNEF, so a large loan could make the project competitive with fossil-based hydrogen in other areas.

Nuclear power plants and fossil fuels also benefit from the revised guidance. Previously, hydrogen producers would have had to generate power from new nuclear power plants to qualify. Now, existing nuclear power plants can provide up to 200 megawatts of electricity. Also, some old fossil fuel power plants that have just installed carbon sequestration equipment are now eligible.

Laws, although accepted, are still insufficient. Considering the number of interested parties, it is not surprising. From Hydrogen powerIn theory, Deane wants to see more flexibility in how much electricity producers are allowed to buy and how much additional or renewable energy they need to buy.

But, Deane said, what the industry wants most is certainty. “We want one that stays in place and then can be replaced,” he said. “We strongly encourage the incoming administration to let this law stand.”