More than 50 companies and trade associations have signed an open letter written by the Fuel Cell and Hydrogen Association (FCHEA) to the US Treasury arguing against additionality requirements for green hydrogen projects to qualify for tax credits. The Treasury is mulling the inclusion of additionality and temporal correlation with renewable electricity generation in its guidance for the clean hydrogen production tax credit.

The FCHEA argues lifecycle emission calculations should use market-based mechanisms such as renewable energy credits, power-purchase agreements (PPAs), or energy attribute certificates (EACs) without any requirements for projects to be connected to new, purpose-built renewables.

“A megawatt-hour of electricity dedicated to electrolysis is no different than a megawatt of power dedicated for heat pumps or battery electric vehicle charging” FCHEA

Additionality is expected to add to the cost of green hydrogen production, which the FCHEA says would cancel out the benefit of receiving up to $3/kg in the clean hydrogen production tax credit. The US Department of Energy (DoE) has estimated in a recent report that green hydrogen currently costs $3–6/kg but could fall to $1.5–2/kg on average by 2035.

The same DoE report notes that hydrogen produced from purely grid-powered electrolysis would be both expensive—at $4.2/kg today—and ineligible for even the lowest band of the production tax credit, owing to the carbon intensity of the US grid. The FCHEA notes that “the current interconnection process is already a limiting factor to the number of new renewable projects that can come online”, adding that “limiting hydrogen producers to procure EACs/PPAs solely from new renewable projects will not alleviate the interconnect bottleneck”.

The FCHEA argues that additionality will also disadvantage green hydrogen over other energy transition technologies. “A megawatt-hour of electricity dedicated to electrolysis is no different than a megawatt of power dedicated for heat pumps or battery electric vehicle charging,” it says, adding the federal government incentivises these listed technologies.

The US could lose its leading position as a pole for hydrogen investment if it introduces additionality clauses, the open letter warns. “Unlike other interventions in the rest of the world, these investments are predicated on the premise that this credit would be simple to implement,” the FCHEA notes, adding that additionality requirements could “reverse some of these manufacturing initiatives, resulting in a significant loss of economic growth, clean manufacturing, and good-paying jobs, diminishing the impact of the IRA as intended”.

The FCHEA points to the EU, which introduced additionality requirements for hydrogen to qualify as ‘renewable’ and therefore eligible for support, having to roll back its initial stance, with the final draft still potentially harming market growth in the bloc.

---

Author: Polly Martin