New government ruling ends uncertainty over major energy opportunity: 'Preferable to not having rules'

In early January, the U.S. government introduced a tiered system designed to hand out production tax credits to producers of hydrogen, which could prove a boon to the clean energy sector. However, the rules for guidance weren't finalized before Donald Trump's administration took over.

Recently, the government finally provided the final rules for what is known as 45V. Though an earlier version offered tax credits to only the cleanest hydrogen production forms, the finalized rules allow for more leeway.

Thus far, most hydrogen has been "grey" (made from gas-based steam methane) or "blue" (created from gas with carbon capture), but 45V should help increase the production of "green" hydrogen, which comes from renewable energy. Currently, the cost of green hydrogen is quite a bit higher than that of blue or grey, and these tax credits should help offset that cost.

Though this final guidance provides tax credits regardless of the production method used when creating hydrogen, the credits work on a sliding scale based on the amount of harmful carbon pollution associated with production. This means blue hydrogen producers, for example, can qualify if their pollution remains under a certain level, but green hydrogen producers should be eligible for higher credits.

Reuters reported that Sachin Nijhawan, CEO of thyssenkrupp nucera, an electrolyzer manufacturer, said that although green hydrogen "stands to benefit significantly under 45V ... the rules create a structured framework for clean hydrogen production, aimed at supporting developers across all pathways."

Though hydrogen energy has some drawbacks (such as its cost), using it as an alternative fuel source also comes with benefits. One significant benefit of hydrogen is its versatility, which could make it the perfect alternative fuel for heavy-duty vehicles, such as planes and large trucks, which are known for being difficult to power with electricity alone.

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Increased hydrogen production will also create more jobs, boosting local and national economies. Moving away from dirty energy will benefit people's health, too; as green hydrogen produces no heat-trapping pollution, air quality will improve, which could lead to a decrease in respiratory conditions and illnesses.

Because many developers had put projects on hold until the rules could be formalized, this new guidance gives them a chance to finally move forward with hydrogen energy production.

As Lee Beck, SVP of global policy and commercial strategy at HIF Global, stated to Reuters: "Having a regulatory framework in place is preferable to not having rules; in that state of uncertainty, a project cannot move forward."

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