Tuesday, December 26, 2023

Proposed Tax Credit 45V for clean hydrogen has been released and here’s what we now know!

Happy Tuesday! Welcome back to another week of ESC’s News Blog!  We hope you had a relaxing and long weekend!

Did anyone happen to read The Houston Chronicle’s Business Section on December 23, 2023, their article titled, “Rules on hydrogen projects released – White House is hoping for balance between environment and an untested new industry”?  The article was about the U. S. Department of Treasury and the Internal Revenue Service (IRS) have announced their proposed rules for the tax credit for clean hydrogen, and they will release it on December 26, 2023.  The tax credit may be worth up to $3 per kilogram for clean hydrogen for up to 10 years.  The federal government is in hopes this will jumpstart the clean hydrogen industry with their goal of it making 50 million metric tons annually by 2050.  The tax credit known as 45V will be for those who will make either blue or green hydrogen and the rules to qualify. 

There is a difference between green and blue hydrogen, even though there are several other kinds of hydrogen which are not included in the new rules.  Green hydrogen, the product is made from electricity generated by wind or solar plants no older than three years old with no fossil fuels used in its process.  Green hydrogen will split water to get hydrogen which is expected to be the wave of the future, but at this time it uses large amounts of energy to produce.  On the other hand, blue hydrogen is made from natural gas, but its emissions will need to use carbon capture to make it more environmentally friendly.  The extraction of natural gas from underground will hamper this tax credit because of the limits on its emissions, so most likely companies will claim the carbon capture or 45Q tax credit, which was released earlier this year, and may be worth up to $85 per ton of carbon dioxide captured and stored.  At this time, blue and green hydrogen are considered clean.

Green and blue hydrogen have pressure being placed on them due to the desire to reduce emissions to stop any further climate change.  The 45V tax credit is not the only help the new industry is getting from the federal government.  They have federal money being invested in it through the seven hydrogen hubs around the U.S. with one being here on the Gulf Coast, and they believe if they invest in clean hydrogen private industry will follow suit.  The new 45V proposed tax credit is only the beginning for its tax rules for this emerging industry, and the rules are expected to be refined as the industry develops.  If you would like to read more of The Houston Chronicle’s article, please click the link: Biden releases clean hydrogen rules, seeking balance on emissions(houstonchronicle.com).

If you would like to see the IRS’s Proposed Section 45V Credit for Production of Clean Hydrogen…, please click the link: Federal Register :: Section 45V Credit for Production of Clean Hydrogen; Section48(a)(15) Election To Treat Clean Hydrogen Production Facilities as EnergyProperty.

If you would like help in looking into how to update your terminal and pipelines to reduce your carbon footprint, contact us via email in the blog and check out our ESC's website for contact information!

We hope you have a wonderful evening!

**Disclaimer: You may be charged a fee to read The Houston Chronicle’s article. **