As the Biden administration gears up to provide guidance on how hydrogen producers can benefit from significant tax credits under the Inflation Reduction Act, energy companies and environmental advocates find themselves in a tense lobbying standoff.
The administration’s ambitious bet on “green” hydrogen, a potentially emissions-free fuel for industries and ships, has prompted extensive debate. Major global energy firms aim to secure these credits for hydrogen production processes that utilize fossil fuels. Environmental advocates, however, caution that this would set off a dangerous cycle where fossil-fuel-based power plants contribute to the production of “dirty” hydrogen. This could inadvertently promote more activity by carbon-emitting power plants, thereby undermining the proposed carbon pollution limitations by the Environmental Protection Agency (EPA).
If such a cycle takes hold, this could result in the release of hundreds of millions of metric tons of carbon emissions, ironically in the name of implementing President Biden’s hallmark climate policies.
From the industrial viewpoint, modern green hydrogen production relies on electrolyzers—devices that use electricity to split water into hydrogen and oxygen. This process demands a massive quantity of electricity. The upcoming guidance from the Treasury Department and Internal Revenue Service will determine how clean this electricity must be for hydrogen to qualify for tax breaks.
Industry groups, including the U.S. Chamber of Commerce’s Global Energy Institute, caution against excessively stringent rules that might stifle the budding hydrogen industry. They argue for flexibility, emphasizing the need to build a robust hydrogen economy.
Meanwhile, environmental advocates advocate for rigorous regulations defining “green” hydrogen. Their demands focus on three central concepts or “pillars”: additionality, deliverability, and hourly matching.
Additionality stipulates that hydrogen producers must draw power from new clean electricity sources directly linked to the operation of the electrolyzer. Deliverability requires the use of locally sourced clean electricity physically deliverable to the electrolyzer. The final, and most controversial, pillar—hourly matching—mandates hydrogen producers match their hourly consumption of grid power with the hourly power generation from a new renewable facility.
The American Clean Power Association recently proposed recommendations as a “compromise” between environmentalist demands and industry interests. However, the recommendation deviates from environmentalists’ stance by opposing the implementation of hourly matching for most of the decade.
Critics, such as Rachel Fakhry from the Natural Resources Defense Council, warned against loose guidelines, suggesting they could undermine the success of the EPA power plant rules—Biden’s key climate regulations—before their finalization. The crux of the debate lies in defining the delicate balance between facilitating a burgeoning green hydrogen industry and ensuring strict emissions standards.
