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Without guidance, Inflation Reduction Act tax credit may do more harm than good
It's good to see the need for guidance in what qualifies as "green" hydrogen (for purposes of the tax credits dangled in the IRA) getting more attention.
The AAAS article linked above references "new research from Princeton’s ZERO Lab". It states, in part:
.. If the energy [for production of hydrogen from water] comes from fossil fuel or coal generators, widespread electrolysis could lead to more nationwide carbon pollution than today’s steam methane reforming.
"More" is correct, but is putting it mildly. Production of hydrogen by electrolysis is so energy intensive that, if powered from the grid at the current state of grid resources, the carbon emitted to power the electrolyzers would be more than double what it would be if the hydrogen had been produced from natural gas -- even with no effort made to capture and sequester the CO2 from its production.
According to the article, the researchers recently submitted comments to the U.S. Department of the Treasury and the Internal Revenue Service "to provide decision-making support on how to implement the hydrogen production tax credit created under section 45V of the Inflation Reduction Act." The guidelines are summarized in the article. I'd say they're are at least steps in the right direction. I'm not sure they go far enough, however.
The guidelines revolve around clean energy credits and energy accounting practices. However the type of credits that are actually needed don't currently exist. What's needed isn't merely a guarantee that a certain amount of clean energy was produced, and that somebody purchased the right to claim that energy as what they used for their operations. By itself, that means nothing. Not in terms of total carbon emissions, that is. For the hydrogen produced to qualify as truly green, the energy used to make it must be surplus. There must have be no competing load that had to be served by fossil-fueled generation. But to my knowledge, clean energy credits do not distinguish between energy delivered to serve general loads, and energy that would have been curtailed had it not been taken by the purchaser of the credit.
Maybe it's time we created a special clean energy credit for productive use of otherwise surplus renewable energy. That might be worthy of a tax credit.
Without guidance, Inflation Reduction Act tax credit may do more harm than good
Although the Inflation Reduction Act establishes a sizable tax credit to promote low-carbon hydrogen production, the tax credit could backfire, in some cases subsidizing processes that are worse than directly using fossil fuels to make hydrogen. Princeton
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