Revised federal guidelines released last week for what will be billions of dollars worth of hydrogen production tax credits drew guarded approval from both industry and environmental groups.
Energy companies and associated lobbying groups hailed greater flexibility for nuclear and natural gas producers to access subsidies of as much as $3/kg of hydrogen, while climate groups cautiously cheered the administration for upholding a so-called "three-pillars" model of regulations intended to ensure hydrogen production does not increase emissions.
"This framework offers an opportunity for natural gas, when paired with carbon capture and storage, to compete more fairly in new markets," said the American Petroleum Institute.
Katie Ellet, chief executive of ETCH, a decarbonization technology company which aims to produce hydrogen from natural gas, called the updated guidelines "a significant step forward" and hailed new standards that adopt life-cycle emission assessments for projects using natural gas.
The updated guidelines also open more pathways for renewable natural gas (RNG) developers to access tax credits, which one lobbying group said could unlock thousands of potential projects.
"The final rules address key issues...including removing the first productive use penalty, which effectively treated existing sources of RNG like conventional natural gas," said the American Biogas Council.There are currently 2,400 biogas projects in operation in the US compared to a potential 24,000, said the council. "These new rules will support increased production.".
Electrolytic producers, which use nuclear or renewable power to split water into hydrogen, also responded positively to the changes.
"We are pleased that the US Treasure Department changed course and that the final rule allows a significant portion of the existing merchant nuclear fleet to earn credits for hydrogen production," said power utility Constellation Energy chief executive Joe Dominguez in a statement.
Constellation previously warned that it would be forced to cancel a proposed $900mn hydrogen plant in Illinois if the administration did not amend rules intended to prohibit new hydrogen projects from displacing other consumers of renewable power. A prior rule stipulating projects to draw power from energy assets built no more than 36 months in advance of the hydrogen start up effectively shut out nuclear producers from accessing the subsidies.
Constellation says it is still reviewing how the new rules will impact its project at the LaSalle Clean Energy Center, which is a partner at the federally funded Midwest Alliance for Clean Hydrogen (MachH2) hub.
Solid pillars
Environmental groups gave subdued praise to the Biden administration's decision to largely leave in place restrictions pertaining to the additionality, temporality and regionality of new renewable-power based projects.
"While the final rule includes several potentially concerning exemptions, it still broadly relies on the three pillars," said Sierra Club director of climate policy Patrick Drupp in a statement.
Similarly, Earthjustice nodded towards the survival of the three pillars framework but noted the tweaks still included "several significant loopholes for dirty hydrogen producers to enjoy the benefits of this important climate program."
The Union of Concerned Scientists noted that final 45V rules "firmly reject the most egregious" of the loopholes sought by industry players, but still leave room for some what they call heavily polluting hydrogen projects through ongoing questions of carbon accounting.
