Despite the two-year extension of the critical 45V tax credit for green hydrogen, more than three-quarters of U.S. projects in the pipeline are still expected to miss the eligibility window, according to new analysis by Wood Mackenzie.
The reprieve—granted under the final version of the “One Big Beautiful Bill Act” (OBBBA)—extends the deadline for beginning construction to 31 December 2027. But the majority of projects are unlikely to move quickly enough to qualify.
The $3/kg tax credit under Section 45V of the U.S. tax code is considered pivotal for the financial viability of green hydrogen, which is still two to three times more expensive than hydrogen derived from fossil fuels. Yet even with strong policy backing, structural challenges remain. According to WoodMac’s latest market intelligence, the U.S. green hydrogen pipeline now exceeds 30 million tonnes per annum (mtpa), but only a small subset—around 5–7 mtpa—is likely to break ground in time to secure the credit.
The bottlenecks are not primarily technical. Electrolyzer technology is improving, and renewable energy costs are falling. Instead, delays are concentrated in permitting, financing, power procurement, and interconnection. The U.S. renewable power queue is notoriously congested, with some grid interconnection timelines stretching beyond 2030. In addition, strict requirements tied to the tax credit—such as time-matching renewable energy use—have added further complexity to project design.
The final guidance from the U.S. Treasury on 45V includes three tiers of clean hydrogen production credits, scaling up to $3/kg for projects achieving lifecycle greenhouse gas emissions below 0.45 kg CO₂e/kg H₂. Projects must also meet prevailing wage and apprenticeship requirements to qualify for the full incentive. These conditions, while designed to promote high-quality jobs and low-emissions outcomes, increase both cost and planning burden.
The OBBBA’s extension was seen as a critical win after months of uncertainty, with many in the clean hydrogen sector fearing that the original 2025 deadline would effectively kill the investment case for new builds. That fear has been temporarily allayed, but the timeline remains aggressive. Unlike solar or wind, green hydrogen projects often span multi-year planning horizons and require alignment between renewable generation, electrolyzer capacity, and end-use infrastructure.
Beyond timing, access to affordable renewable electricity is a core challenge. To qualify for the highest 45V tier, projects must secure additionality (new renewables), deliverability (same grid region), and hourly time-matching. These constraints are likely to limit the number of eligible projects—particularly outside key renewable hubs like Texas or California.
Despite the limitations, the 45V credit continues to function as the linchpin of U.S. hydrogen policy. Without it, most green hydrogen projects would be commercially unviable, with levelized production costs hovering between $4–6/kg without subsidies, depending on location, electrolyzer efficiency, and electricity price. Even with the tax credit, breakeven economics hinge on off-take agreements with premium buyers or access to export markets.
The upshot is that while the policy lifeline has been extended, developers must act with urgency. With over 75% of the current pipeline expected to miss the 2027 start-of-construction deadline, the race to secure permitting, financing, and power contracts is more competitive than ever.
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