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Treasury's proposed time-matching regulations could slow down the adoption of green hydrogen in the US

The proposed hourly matching regulations by the US Treasury, aiming to qualify green hydrogen for the highest rate of the $3/kg production tax credit (PTC), could lead to increased costs for the gas. Furthermore, this approach may inadvertently favor blue hydrogen, potentially raising the average carbon intensity of so-called "clean" hydrogen in the nation.

But in the same line, a recent study conducted by Wood Mackenzie and commissioned by the American Clean Power Association (ACP), reveals that the Administration's guidelines, mandating hourly matching beginning in 2028, will restrict the green hydrogen industry's ability to establish itself.

This impediment aligns with the concern that the US Treasury's hourly matching rules for green hydrogen could hinder the industry's growth, as highlighted in the study.

The Department of Energy (DoE) estimates low-carbon hydrogen can eliminate 10 percent of economy-wide emissions by 2050. While Treasury’s 45V tax credits are intended to catalyze the still-nascent low-carbon hydrogen industry in the U.S., the new study released today finds the Administration’s proposed guidelines will stifle green hydrogen deployment by making it too expensive.

Wood Mackenzie’s analysis finds that ACP’s proposal, issued in June 2023, leads to significantly more green hydrogen deployment by 2032 and puts the industry closer to the pathway required to achieve a net-zero emissions economy. Wood Mackenzie also concluded that the annual matching regime for first movers in ACP’s proposal would not lead to additional emissions. In fact, the Treasury proposal is expected to result in higher hydrogen emissions impacts due to the greater adoption of blue hydrogen that results from the lack of green hydrogen deployment.

“Green hydrogen is an important part of the U.S. decarbonization journey, but electrolyzer technology needs time to scale. Regardless of what time-matching guidelines are imposed, the market conditions for green hydrogen are challenging. It’s clear from our analysis that hydrogen will require support well into the 2030s, and that a more stringent temporal matching regime will result in reduced green hydrogen deployment,” said Wood Mackenzie’s Head of Global Hydrogen Consulting Melany Vargas.

Even under ACP’s proposed rules, the report stresses that more support is needed to achieve net-zero emissions economy-wide, or low-carbon hydrogen production targets such as those envisioned in DOE’s National Clean Hydrogen Strategy and Roadmap. The fledgling sector faces challenging market conditions.

“Getting this guidance right will determine whether a U.S. green hydrogen industry moves forward in the next decade. Green hydrogen is essential to addressing the climate crisis without harming American manufacturing. This study demonstrates that the current Treasury proposal will not achieve the economic or environmental goals articulated by Congress or the Administration,” said ACP CEO Jason Grumet. “If Treasury takes a close look at this data and the numerous analyses from companies hoping to invest billions of dollars in green hydrogen facilities, we believe they will make the changes necessary to get this industry off the ground.”


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