New Study Finds Treasury’s Proposed Time-Matching Rules Would Stifle Adoption of Green Hydrogen

Delay of Imposition of Hourly Matching Requirements Would Speed Uptake of Green Hydrogen, Contribute to Decarbonization Efforts, Research Finds

WASHINGTON, D.C., February 26, 2024 — As the comments period comes to a close on the U.S. Treasury Department’s proposed guidance on clean energy investment and production tax credits for green hydrogen projects, a new study conducted by global energy and natural resources research and consulting firm Wood Mackenzie and commissioned by the American Clean Power Association (ACP) shows the Administration’s guidelines requiring hourly matching starting in 2028 will limit the ability of the green hydrogen industry to get off the ground.

Green hydrogen, produced using renewable electricity, is critical to decarbonizing the U.S. economy. The Department of Energy 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.

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.

“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.

“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.”

Wood Mackenzie’s study can be found here: https://cleanpower.org/resources/45v-implications-on-green-hydrogen-industry