US 45V update opens door to more H2 from natural gas

Spanish Market: Hydrogen
03/01/25

The US Treasury Department's updated requirements for hydrogen production tax credits amends the way upstream emissions are calculated, potentially making it easier for natural gas producers to qualify for the lucrative subsidy.

Previous guidelines used fixed assumptions about the rate of methane leaked from wells and pipelines rather than accepting data from individual projects. The industry argued that using uniform figures under the existing GREET model to calculate emissions would unfairly penalize companies that had taken steps to reduce methane leakage.

In final rules released Friday, the Treasury Department creates a pathway for companies to submit project-specific emissions data, an amendment that had been advocated for by ExxonMobil and the American Petroleum Institute, among others.

Without this change, some companies considering ammonia export projects along the US Gulf Coast said they would instead consider applying for 45Q tax credits for carbon sequestration, which cannot be used in conjunction with 45V.

Previous guidance only provided a pathway for renewable natural gas (RNG) produced from landfills to qualify for lucrative tax credits. The new rules include wastewater treatment, animal manure and coal mine methane.

By Jasmina Kelemen

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03/01/25

US relaxes rules for H2 production tax credits: Update

Adds information on state-specific additionality rules in paragraphs 6-8. Houston, 3 January (Argus) — The US Treasury Department has issued long-awaited tweaks to 45V hydrogen production tax credit (PTC) guidelines, relaxing rules in a bid to make it easier for producers to benefit from the subsidy. The final guidance released today retains the fundamental approach from the preliminary rules set out in December for the tax credits of up to $3/kg. The "three pillars" of additionality, temporal matching and regional deliverability remain in place for electrolytic hydrogen, but the Treasury has tweaked certain aspects. The additionality rule prescribes that hydrogen production facilities can only use electricity from clean power generation capacity that predated them by 36 months or less to encourage a further build-out of such capacity. But under the final rules, hydrogen made with power from existing nuclear plants can qualify for the credits under certain circumstances. Hydrogen producers can access the credits if nuclear power companies demonstrate that adding hydrogen production to their revenue stream extends the life of reactors otherwise slated for shutdown. Companies such as utility Constellation Energy have argued that using some of their nuclear capacity for hydrogen would provide a pathway for future relicensing of their reactors , but that this would hinge on access to the tax credits. The final guidelines now also consider existing fossil fuel-based power plants where carbon capture capabilities have been retrofitted within the 36-month window prior to starting up hydrogen production as additional capacity. This makes hydrogen output using electricity from these plants eligible for the tax credits. The guidelines also introduce a rule under which hydrogen production in certain states is eligible for the tax credit even if it is based on clean power generated from existing assets that do not meet the 36-month window. "Electricity generated in states with robust greenhouse gas emissions caps paired with clean electricity standards or renewable portfolio standards" that meet specific criteria will automatically be considered as additional, the Treasury said. This is because in these states "the new electricity load" from electrolysers "is highly unlikely to cause induced grid emissions," it said, adding that rules on temporal matching and regional deliverability still apply. For now, "California and Washington are qualifying states under these final regulations," but other states could qualify in the future, according to the Treasury. Hourly matching — which prescribes that hydrogen has to be made from clean power produced within the same hour to avoid increased grid emissions — will now be required only from the start of 2030 onwards rather than from 2028. Annual matching will continue to apply until the end of 2029. The new phase-in date for hourly matching at the start of 2030 brings it in line with EU rules , although the bloc requires monthly rather than annual matching before then. US industry participants have repeatedly argued that the hourly matching rules drive up production costs and stymie the nascent industry's development, while environmentalists have warned that strict rules are necessary to curb greenhouse gas (GHG) emissions. The regional deliverability rules require electrolysers to source clean power from within their operating region — as defined by the Department of Energy — to avoid grid congestions between regions resulting in use of emissions-intensive power for hydrogen production. But the final guidelines would allow for direct "cross-region delivery" of power for hydrogen production where this "can be tracked and verified… on an hour-to-hour or more frequent basis". Under certain circumstances, US hydrogen producers could now even be eligible for the tax credits if they use electricity generated in Canada or Mexico, the Treasury said. ‘Significant improvements' A lobbying group representing the interests of hydrogen producers called the updated guidance "significant improvements" and said it would allow the industry to move forward to the next planning stage. "After years of strategic engagement and persistent advocacy, the issuance of this final rule now affords project developers the basis for evaluating opportunities to scale clean hydrogen deployments," Fuel Cell and Hydrogen Energy Association chief executive Frank Wolak said. A raft of hydrogen projects were announced in the US after President Joe Biden announced billions of dollars in funding and tax credits for hydrogen with the 2022 Inflation Reduction Act. But much of that euphoria fizzled out during the long wait for clarity on the rules and concerns that the Treasury's guidelines would be too strict to allow competitive production. Many would-be producers paused or cancelled US plans in 2024 because of widespread uncertainty over which projects would qualify for PTC, leaving companies unable to make long-term investment decisions. By Jasmina Kelemen and Stefan Krumpelmann Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

US relaxes rules for H2 production tax credits

03/01/25

US relaxes rules for H2 production tax credits

Houston, 3 January (Argus) — The US Treasury Department has issued long-awaited tweaks to 45V hydrogen production tax credit (PTC) guidelines, relaxing rules in a bid to make it easier for producers to benefit from the subsidy. The final guidance released today retains the fundamental approach from the preliminary rules set out in December for the tax credits of up to $3/kg. The "three pillars" of additionality, temporal matching and regional deliverability remain in place for electrolytic hydrogen, but the Treasury has tweaked certain aspects. The additionality rule prescribes that hydrogen production facilities can only use electricity from clean power generation capacity that predated them by 36 months or less to encourage a further build-out of such capacity. But under the final rules, hydrogen made with power from existing nuclear plants can qualify for the credits under certain circumstances. Hydrogen producers can access the credits if nuclear power companies demonstrate that adding hydrogen production to their revenue stream extends the life of reactors otherwise slated for shutdown. Companies such as utility Constellation Energy have argued that using some of their nuclear capacity for hydrogen would provide a pathway for future relicensing of their reactors , but that this would hinge on access to the tax credits. The final guidelines now also consider existing fossil fuel-based power plants where carbon capture capabilities have been retrofitted within the 36-month window prior to starting up hydrogen production as additional capacity. This makes hydrogen output using electricity from these plants eligible for the tax credits. Hourly matching — which prescribes that hydrogen has to be made from clean power produced within the same hour to avoid increased grid emissions — will now be required only from the start of 2030 onwards rather than from 2028. Annual matching will continue to apply until the end of 2029. The new phase-in date for hourly matching at the start of 2030 brings it in line with EU rules , although the bloc requires monthly rather than annual matching before then. US industry participants have repeatedly argued that the hourly matching rules drive up production costs and stymie the nascent industry's development, while environmentalists have warned that strict rules are necessary to curb greenhouse gas (GHG) emissions. The regional deliverability rules require electrolysers to source clean power from within their operating region — as defined by the Department of Energy — to avoid grid congestions between regions resulting in use of emissions-intensive power for hydrogen production. But the final guidelines would allow for direct "cross-region delivery" of power for hydrogen production where this "can be tracked and verified… on an hour-to-hour or more frequent basis". Under certain circumstances, US hydrogen producers could now even be eligible for the tax credits if they use electricity generated in Canada or Mexico, the Treasury said. ‘Significant improvements' A lobbying group representing the interests of hydrogen producers called the updated guidance "significant improvements" and said it would allow the industry to move forward to the next planning stage. "After years of strategic engagement and persistent advocacy, the issuance of this final rule now affords project developers the basis for evaluating opportunities to scale clean hydrogen deployments," Fuel Cell and Hydrogen Energy Association (FCHEA) chief executive Frank Wolak said. A raft of hydrogen projects were announced in the US after President Joe Biden announced billions of dollars in funding and tax credits for hydrogen with the 2022 Inflation Reduction Act. But much of that euphoria fizzled out during the long wait for clarity on the rules and concerns that the Treasury's guidelines would be too strict to allow competitive production. Many would-be producers paused or cancelled US plans in 2024 because of widespread uncertainty over which projects would qualify for PTC, leaving companies unable to make long-term investment decisions. By Jasmina Kelemen and Stefan Krumpelmann Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Pure green steel costs almost double NW EU HRC price

02/01/25

Pure green steel costs almost double NW EU HRC price

London, 2 January (Argus) — Zero emission hydrogen-fed electric arc furnace-produced crude steel would currently cost almost double the price of northwest EU hot-rolled coil (HRC), according to data launched by Argus today. The opex cost of green hydrogen-fed direct reduced iron/electric arc furnace (EAF) route steel was €1,074/t at the end of December, compared to a northwest EU HRC price of €558.25/t ex-works. That is also €544/t more than the cost of blast furnace/basic oxygen furnace (BOF)- produced crude steel, showing genuinely green steel would require a much higher finished product price than current blast furnace-based output, assuming a similar cost structure to today. Most current green offerings from EU mills are still produced via the blast furnace, with emissions reductions achieved through mass balancing, offsetting, or by reductions achieved elsewhere in the supply chain. Buy-side desire to pay premiums for this material has been limited, particularly given the downturn in the European market in the second half of 2024. This has contributed to the market for premiums remaining immature, illiquid and opaque, and complicated by the lack of a commonly agreed definition for green steel. Automakers have shown the most interest in greener steel, given their need to reduce emissions from the wider supply chain, as well as vehicle tailpipe emissions. Some automotive sub-suppliers suggest certain mills have been willing to reduce their green premiums to move tonnes — one reported paying a €70/t premium for EAF-based cold-rolled coil for a 2025 contract, but this was not confirmed. Europe's largest steelmaker, ArcelorMittal, said over the second half of last year it would pause its direct reduced iron (DRI) investment decisions ahead of the European Commission's Steel and Metals Action Plan, and as it called for an effective carbon border adjustment mechanism and more robust trade defence measures. Market participants largely agree that natural-gas fed EAF-based production is the greenest form of output currently available to EU mills, substituted with imports of greener metallics and semi-finished steels from regions with plentiful and competitively priced energy. Argus ' new costs show BOF steel is currently just over €31/t more expensive than scrap-based EAF production fed with renewable energy. Europe's comparatively high cost of energy is one key issue for transitioning to DRI/EAF fed production. Last month, consultancy Mckinsey said mills could rely on "green iron" hubs going forward, with iron-making decoupled from production of crude steel, enabling DRI production to be located in regions with low-cost gas and ore, and raw steel production in regions with access to renewable energy. The range of production costs, launched today, include five crude steel making pathways and are calculated using consumption and emissions data provided by Steelstat , in combination with Argus price data, including hydrogen costs. By Colin Richardson Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

California H2 fueling deployment falls behind target

31/12/24

California H2 fueling deployment falls behind target

Houston, 31 December (Argus) — California this year fell even further behind ambitious goals set for fuel-cell electric vehicle (FCEV) deployment, beset by, among other factors, permitting delays, the loss of planned refueling locations and unreliable hydrogen supplies. Executive Order B-48-18 established in 2018 a goal of 200 hydrogen fueling stations by 2025. The network is now projected to reach 129 stations by 2030, a longer timeline than forecast last year, the California Air Resources Board (CARB) said in its 2024 annual hydrogen evaluation. As of July, hydrogen fueling stations fell by four from 2023 to 62. Four new stations opened, including two in Oakland, one in Orange County, and one in Riverside, but those gains were offset by the permanent closure of seven stations owned by Shell. Of the 62 stations, some were listed as temporarily out-of-order or available by reservation only. "Progress has proven slow and not kept pace with prior near-term projections," the report said. California has earmarked billions of dollars to spur the development of a zero-emissions vehicle network, mandating that 100pc of all new car and light truck sales by 2035 are electric. Most of the funding for building hydrogen infrastructure is administered through the Clean Transportation Program (CTP) and the Low Carbon Fuel Standard (LCFS) program. Assembly Bill 126 directs the state's energy commission to allocate at least 15pc of CTP base funds per year for hydrogen infrastructure, resulting in $15mn set aside for the year 2024-2025. While the development of stations has always faced challenges, the last year was more difficult than most, CARB said in its report. Stations, especially in Southern California, have experienced supply interruptions as the cost of producing hydrogen has risen. As station reliability has fallen, so too has demand for FCEV, with auto manufacturers reporting historically low sales in a CARB survey and a slower pace of growth going forward than previously expected. Updated on-road vehicle projections for 2030 is 20,500 FCEVs compared with a previously reported estimate of 62,600 on-road FCEVs for 2029. By Jasmina Kelemen Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: EU at crossroad on H2 rules, competitiveness

20/12/24

Viewpoint: EU at crossroad on H2 rules, competitiveness

London, 20 December (Argus) — The new team of EU commissioners will enter 2025 bent on reversing the bloc's economic stagnation and the flight of industry to cheaper parts of the globe, which have been salient themes in 2024. Hydrogen industry participants will keenly monitor Brussels' choice of interventions, which promise to restart the sector's engine, but must avoid undermining faith in rules. Pledges from re-elected president Ursula von der Leyen to tackle overcomplexity and "structurally high energy prices" both concern hydrogen, and her notion of a pivotal moment for the EU rings true for the hydrogen market because of its connection to industry and because stubborn costs and underwhelming growth in 2024 undermined confidence. Frequent vows for urgency, simplicity and speed have worn thin, and the European Commission's latest reformist push could flatter to deceive. But multiple warning shots fired last year — including from the European Court of Auditors and respected former Italian prime minister and president of the European Central Bank Mario Draghi — pile on pressure to tweak hydrogen policy in 2025. The auditors' report urged a "reality check" and strategy review, cautioning Europe could spectacularly miss its targets, while Draghi stressed cost-efficient decarbonisation to protect European industry — a view shared by member states and energy-intensive companies. Von der Leyen's "Clean Industrial Deal", promised inside 100 days of her new term, could set the tone. But some, like chemicals firm BASF, have already voted with their feet by relocating jobs outside Europe. For hydrogen, the commission's easiest reform might be setting realistic 2030 targets to replace the 20mn t/yr renewable hydrogen supply, since industry deems it impossible and the commission's own notes predict a 3mn-6mn t/yr market. But this is hardly the most pressing change and would not help morale. A more radical move would be to somehow relax the renewable hydrogen definition, which many market participants consider overly burdensome. The bloc's biggest economy, Germany, put its weight behind changes in September, saying "reality has now shown these requirements were still too high". Berlin's volte-face could hand Brussels an easier climb down. But reopening that can of worms would dent the investment climate and distract from the low carbon hydrogen rules coming in 2025. All this makes radical change risky, but postponing certain aspects might be slightly more palatable. Brussels must also decide to maintain or soften its 2030 mandates for renewable hydrogen. Several countries and companies want openness to hydrogen from other low-carbon production pathways, which are backed in the US, Canada, the UK and others. Some have more fundamentally urged freedom to find the cheapest route towards cutting CO2. The first interpretation of the industry mandates from the Netherlands highlights the difficulty balancing mandates with fair competition versus competitors inside and outside the bloc. But loosening rules would frustrate first movers that took pains to comply. Moreover, some firms champion the EU's forte of creating demand via rules over subsidies that cannot last forever nor compete with the US. "Don't blink, because people will invest money against 2030 mandates," Spanish integrated Moeve's director and chief executive Maarten Wetselaar urged Brussels recently. EU policymakers accept they must cut hydrogen costs and are weighing options with member states. "The market has changed, and we are probably more technology neutral and more colour friendly than we used to be... this is realism," commission deputy director general for energy Mechthild Worsdorfer said in November. But Worsdorfer opposed "changing anything right now" after the "intense" debates to settle definitions. Commission and members will "find the right balance", Worsdorfer said, but hydrogen participants need clarity sooner rather than later. By Aidan Lea Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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