Leaked draft | US Treasury guidance for clean hydrogen producers even stricter than EU Delegated Acts on hourly matching
The rules also include additionality and geographical correlation, despite pushback from industry and politicians
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Emissions intensity (kgCO2e/kgH2) | Maximum tax credit ($/kgH2) |
0-0.45 | $3.00 |
0.45-1.5 | $1.00 |
1.5-2.5 | $0.75 |
2.5-4 | $0.60 |
However, while the EU allows matching of renewable power to electrolyser operation within a calendar month up to 2030, at which point the two must take place in a one-hour window, the Treasury has reportedly set annual matching up to 2027 and hourly matching from 2028 onwards — making the rules stricter than in Europe.
Environmental groups and analysts have argued that without these rules in place, a boom in green hydrogen projects drawing electricity from the grid will mean an indirect increase in emissions, as fossil fuel-fired power plants burn extra coal or gas to replace renewable energy being diverted to electrolysers.
He added: “Absent a meaningful number of first movers, a new industry will not develop. It is surprising and disappointing that the Administration would propose such a rigid approach that is at odds with decades of learning about new technology deployment.”
Proponents of nuclear hydrogen such as Constellation, which operates the largest fleet in the US, have also strongly criticised additionality, as it would cut out so-called “pink” hydrogen from accessing the top rate of the tax credit since new reactors can take years, if not decades, to build.
Some Democrat senators, including Joe Manchin and IRA co-author Tom Carper, have publicly argued that these restrictions were not contained in the IRA, and therefore represent legal overreach by unelected officials.
Additionality, time-matching and geographic correlation
“Additionality” means that the green hydrogen would have to produced from new renewables projects, so that they do not utilise existing clean electricity facilities that would otherwise help decarbonise the power grid.
“Time-matching", or "temporal correlation”, relates to how frequently producers would have to prove that their electrolysers have been powered by 100% renewable energy — usually hourly, weekly, monthly or annually — and therefore to what extent they can use grid electricity at times when the wind isn't blowing and the sun isn't shining, and then send the same anount of renewable energy back to the grid at a later date.
"Geographic correlation" refers to how close the hydrogen-producing electrolyser is to the source of renewable energy it uses. Distances can be set to ensure that an electrolyser in, say, Texas, is not powered by solar panels in California through renewable energy credits, which in practice could mean that green power is sent to a grid that doesn't need it, with the electricity actually used by the electrolyser coming from fossil-fuel power plants.
All three rules would prevent fossil-powered grid electricity being used directly or indirectly to produce "green hydrogen".