The Inflation Reduction Act of 2022 introduced two tax credits to encourage the development of a domestic clean hydrogen industry in the United States. These tax credits can potentially be worth billions of dollars and are based on a sliding scale, depending on how ‘clean’ the hydrogen production is. The less greenhouse gas emitted during production, the larger the tax credit.
However, measuring and accounting for the greenhouse gas emissions from a hydrogen production facility can be complicated, especially when the electrolyzer producing the hydrogen is in a different location on the power grid from the renewable power plant that powers it. So complicated that you pretty much have to be a grid power expert to even begin figuring these calculations out.
To address such sticky questions of hydrogen production tax credit eligibility, the US Internal Revenue Service (IRS) requested comments to shape how they will measure and account for related emissions. One of the respondents was the San Francisco-based clean energy think-tank Energy Innovation, which submitted a very thoughtful, 25-page response outlining some of the key issues the IRS should understand, the criteria it should consider, and some policy recommendations, as well suggestions for preventing attempts to game the tax credit system.
In this highly technical episode, we welcome back to the show Eric Gimon, one of the Energy Innovation authors, to review their response to the IRS. And this discussion reveals not just how to ensure that the billions of dollars of tax credits will go to projects that actually reduce emissions, but also important insights about everything from how we go about building new renewable power plants, to the varying carbon intensity of the power grid, to the business case for building electrolyzers to produce green hydrogen.
Geek rating: 10