The IRA requires emissions from hydrogen production to be less than 0.45 kg CO2e/kg H2 in order to qualify for the full ($3.0/kg) 45V clean hydrogen production tax credit. This credit is extremely valuable and represents a substantial share of the economic proposition for clean hydrogen production. Electrolyzed hydrogen can potentially meet this standard, depending on the direct and indirect (i.e., grid-related) emissions produced by generating the input electricity. How to properly account for this electricity is the focus of this analysis, where we assess the impact of enforcing the following requirements on electricity supply:
New Clean Supply (or Additionality): Only newly developed clean electricty resources, not already serving the grid, are allowed to qualify as clean supply for electrolyzer loads.
Hourly Matching: Electrolyzer loads must match the clean electricity portfolio production in every hour.
Deliverability: Electrolyzer loads must be located in the same region as the clean electricity resources.
We find that enforcing these three pillars, compared to scenarios which impose only limited requirements (no new supply requirements; no hourly matching requirements; and no deliverability requirements) improves emissions outcomes and still allows for the rapid scaleup of clean hydrogen production in the U.S. While it does impose additional costs on clean hydrogen production, this incremental cost is from a subsidized cost close to zero in some regions by 2030, and this incremental cost goes towards facilitating the type of operations for electrolyzers that is desired in the long-term (flexible production that tracks variable renewable electricity generation).
The full report detailing these findings is available below: