Clean hydrogen, i.e. the production of hydrogen with little or no greenhouse gas emissions, can be a key element in the decarbonisation of the industrial sector. Clean hydrogen has industrial applications in iron and steelmaking, refining, chemical production and provides a low carbon heat source for industrial processes. (Not to mention that clean hydrogen fuels also have potential applications in the electric power and transportation sectors.) However, current hydrogen production technologies release large carbon emissions and few economic incentives. exist today to encourage the use of hydrogen in new applications.
To help kick-start the production and use of clean hydrogen, the Infrastructure Investment and Jobs Act allocated $8 billion to the US Department of Energy to fund a set of hydrogen” (referred to as “H2Hubs” in agency terminology) where an H2Hub is defined as “a network of clean hydrogen producers, potential clean hydrogen consumers, and connecting infrastructure located nearby.” The Department of Energy recently issued a request for information on how to fund H2Hubs, which we discussed in a recent blog post. As noted, for H2Hubs to be successful, one or more policies must close the gap between the price of carbon-intensive hydrogen and the presumably higher price of low-carbon hydrogen. carbon.
The Inflation Reduction Act (IRA), which President Joe Biden recently signed into law, may be the missing ingredient that H2Hubs need. The IRA creates a hydrogen production tax credit (which is very similar to a provision of the Build Back Better Act passed by the House) and a provision that increases the value of the capture tax credit and carbon sequestration (CCS). In this blog post, we discuss the new hydrogen tax credit in the IRA, changes to the CCS tax credit in the IRA, the impact of these two changes on producers of hydrogen and implications for H2Hubs.