Investment tax credits for hydrogen storage in the US will no longer be restricted to sites that store supply for energy production, based on updated guidance from the Treasury.
The Treasury on 4 December published its final updated guidance on the section 48 energy credit, which is primarily focused on projects for clean power production but will also provide investment tax credits for hydrogen storage.
Previous guidance from November 2023 had foreseen that hydrogen storage projects could only make use of the tax credits — which in most cases amount to 30pc of project costs — if they store hydrogen that is eventually used for energy production, such as electricity generation.
But the revised guidance removes this requirement, meaning that storage sites could also be eligible for the credits if they store hydrogen for other uses, including as feedstocks for fertiliser production or other chemicals.
Several respondents to the initial guidelines suggested that restricting the "end use" to energy purposes "is not in accord with legislative intent, would cause delays, is unworkable, and misaligns" with the US' hydrogen strategy, the Treasury said. The Treasury noted that one commenter said that the restriction would make the credit "largely useless" for supporting the deployment of storage in ramping up a hydrogen ecosystem in the US.
Industry bodies and other associations had lobbied for the access to tax credits to be expanded. Climate think-tank the Clean Air Task Force had said that the restrictions would be "difficult to administer, because hydrogen storage operators have limited mechanisms to track hydrogen after it exits their facility".
Industry body the Fuel Cell and Hydrogen Energy Association (FCHEA) said the changed rules are "a huge victory for the hydrogen industry" ensuring that the tax credits "will be utilised as intended".
FCHEA welcomed some other changes in the final guidelines, such as an extension of the equipment covered by the tax credits, which will now under some circumstances include pipelines connected to storage facilities and liquefaction equipment.
But the Treasury did not accommodate requests from some respondents to include equipment for storing hydrogen carriers such as ammonia or methanol under the investment tax credit rules, stressing that the relevant legislation "specifically references only hydrogen, not compounds containing hydrogen".
The Treasury clarified that storage facilities or equipment co-located with hydrogen production sites could receive the tax credits even if developers also make use of 45V production tax credits for the hydrogen output.
