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What should be done with 45V?

Updated: Feb 26

 I was recently asked about the comment period on the 45V tax credit in the IRA and what should be suggested to Treasury to make projects more desirable. The incentive is a production tax credit (PTC) of up to $3/kg of green hydrogen.  The PTC is designed to jumpstart green hydrogen production and make it more attractive compared to gray or blue hydrogen. 

The recently proposed rules will limit the impact of the incentive.  If Treasury can accept some short-term adverse effects, i.e. natural gas-produced electricity, and issue more favorable requirements, the PTC will have a greater effect and accelerate the growth of the green hydrogen industry. 

Treasury also should include excess hydroelectric and nuclear power, the two most abundant energy sources that do not create CO2, as part of the program.

During a LinkedIn webinar on the subject, one of the panelists compared the regulations to flying an airplane.  When an airplane takes off, it has specific settings for speed, flaps, etc.  Once the airplane reaches cruising altitude, the settings are different. The same can be true with the 45V guidelines.  The requirements should be more lenient in the beginning and adjust as the industry becomes established.

Given the length of time it takes to build renewable sources and hydrogen plants, the gestation period for the hydrogen economy to mature will be lengthy.  To expedite the development of the industry, Treasury should make adjustments to the current guidelines.  Some, such as deliverability, could be phased in early.  However, the more stringent guidelines, like additionality and hourly temporal matching, should be phased in gradually, perhaps over a ten-year period, which just happens to be the duration of the 45V tax credit. 

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