Study: Incentives for Clean Hydrogen Production in the Inflation Reduction Act (IRA)

The research institution Resources for the Future has publish a report that analyses the potential effects of the incentives for clean hydrogen in the Inflation Reduction Act (IRA) that was adopted in the USA a couple of months ago.

The IRA contains two options for subsidizing clean H2 production: a new #tax credit (45V tax credit); and the existing tax credit for carbon sequestration (45Q tax credit). The report analysis the following methods of H2 production: steam methane reforming (SMR); autothermal reforming (ATR); proton exchange membrane (PEM) electrolysis.

Main takeaways from this report:

• each of these tax credits can reduce the price difference between clean H2 and more carbon-intensive alternatives. 
• the goals of these tax credits - to correct for the lack of a price on carbon and to aid the deployment of nascent hydrogen technologies;
• the 45Q tax credit is sufficient to make some forms of fossil fuel–based hydrogen production competitive with current high-emission production on a levelized cost basis;
• the high cost of grid electricity and the associated emissions make it hard for electrolysis to compete. However, electrolyzers that source cleaner and cheaper electricity can qualify for high levels of the 45V tax credit and compete with fossil-fuel based hydrogen production.
• In the long run, costs for electrolyzers are expected to decrease, and the grid should be less carbon intensive, making electrolyzers competitive more broadly.

You can read the study here.