Companies Pressure Biden Admin To Allow Tax Credits For “Green” Hydrogen Produced With Natural Gas

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Companies are pushing the Biden administration to allow tax credits for “green” hydrogen produced with natural gas, according to The Wall Street Journal.

Renewable energy companies are seeking tax credits for “green” hydrogen, despite “non-green” hydrogen costing $3.50 less per kilogram to produce, according to the WSJ. Currently, the Internal Revenue Service (IRS) and Treasury Department have not decided standards for designating hydrogen as “green,” but have proposed a $3.00 tax credit to qualifying producers.

“The decisions the IRS and Treasury make on this will absolutely shift billions of dollars moving forward,” Policy Director at nonprofit CarbonPlan Danny Cullenward told the WSJ. “The big risk is throwing out massive subsidies that don’t do anything.”

Cullenward told the WSJ that his main concern is that the decision could spark interest in tax credits without fortifying core technology for hydrogen production.

On average, the cheapest hydrogen production from natural gas is $1.50 per kilogram, while the proposed “green” hydrogen costs roughly $5.00 or more per kilogram, according to the WSJ. The IRS and the Treasury Department have proposed up to $3.00 per kilogram for “green” hydrogen, depending on the amount of carbon emissions associated with production.

The Treasury Department is working with the Energy Department to finalize the standards in the next few months, and will work to make sure the decision supports energy security and fights climate change, a Treasury Department spokeswoman told the WSJ.

A “green hydrogen” power plant is essentially an energy wasting machine placed between a renewable energy source and an energy consumer.

— Daniel Bleakley (@DanielBleakley) February 11, 2023

One main issue “green” hydrogen producers are facing is the amount of energy required to split water into hydrogen and oxygen, forcing companies to use huge amounts of energy to make a small amount of hydrogen, according to the WSJ. Some companies have suggested using the electric grid as a power source, but may be forced to buy renewable-energy certificates (RECs) to offset some of the carbon emissions generated from fossil fuels.

Clean energy groups, such as Vestas and Intersect, have argued that the companies that use the electric grid to produce “green” hydrogen should be regulated to ensure they are balancing their electricity consumption to their renewable-power generation on an hourly basis, further saying that the “green” projects need to located in the same region, according to the WSJ.

“There’s a lot of self-serving behavior being driven by the availability of a really juicy subsidy,” Chief Executive of Electric Hydrogen Raffi Garabedian told the WSJ.

Electric Hydrogen, alongside Vestas and Intersect, have pushed for tighter rules for hydrogen production, according to the WSJ. The rules may lead to hydrogen facilities shutting down intermittently while solar or wind energy collection is low, leading to projects becoming less feasible.

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