Clean hydrogen projects hoping to qualify for the 45V production tax credit in the US must start construction by the end of December 2027, according to the final version of President Donald Trump’s tax and spend One Big Beautiful Bill Act, which was passed by Congress on 3 July after lengthy debate.

This means the credit—which offers up to $3/kg and is key to the viability of most if not all green hydrogen projects in the US—ends five years earlier than planned under the previous administration’s Inflation Reduction Act.

However, the new deadline for sunsetting 45V could have been tighter. In May, House Republicans had called for the credit to expire at the end of this year.

“Extension of the runway for the 45V tax credit opens the opportunity for developers, investors, and manufacturers to unite in advancing a significant wave of projects” Deane, Electric Hydrogen

The curtailing of 45V will skew the US’ clean hydrogen sector further towards blue projects, as the bill leaves the 45Q tax credits  for carbon sequestration largely intact, except for a tightening of the rules around credit transferability and access for certain prohibited foreign entities.

The US accounts for about 16% of the global clean hydrogen project pipeline, according to Gulf Energy Information’s GEI database. Of the US projects, about a third are green, with blue trailing at about 14% and grey around 38%.

Jump start

Some in the US hydrogen industry hailed the avoidance of the previously proposed 2025 deadline for 45V as a significant win.

“Extending the commencement of construction date to January 2028 for the hydrogen production credit gives the industry an opportunity to advance a significant round of projects that will jump start the US hydrogen market, including the crucial Regional Hydrogen Hubs,” said Frank Wolak, president & CEO of the Fuel Cell and Hydrogen Energy Association.

Massachusetts-based electrolyser manufacturer Electric Hydrogen also welcomed the clarity around 45V, and the end-2027 deadline, as opposed to the previously proposed end-2025 cut-off.

“Extension of the runway for the 45V tax credit opens the opportunity for developers, investors and manufacturers to unite in advancing a significant wave of projects that will accelerate the US clean hydrogen market, sending a strong signal that the country is committed to leading the global clean energy economy,” said Beth Deane, chief legal officer at Electric Hydrogen.

“In the short term, there are several US hydrogen projects ready to move forward; the 45V extension will increase the ability of those projects to win offtake agreements for the export of hydrogen,” she added.

Dash for cash

Clarity over the 45V deadline is likely to see some high-quality projects in the US accelerated through FID over the next two years. Earlier stage projects are likely to be shelved as the prospect of missing out on 45V will be too risky for developers and their financial backers. Developers will also scrutinize the bill's definitions of "in construction".

European electrolyser manufacturers that had planned to develop US production plants, must now make a call on those significant investments.

Despite the industry’s bullish response to the bill, there is no doubt the rolling back of the previous Inflation Reduction Act subsidy programme has dealt a blow to the US hydrogen sector, which has lost momentum since Trump’s election victory.  The previous administration’s commitment to the sector through 45V and capital grants to regional hubs had propelled the US into first place in the global race to develop clean hydrogen production at scale. This year, China has emerged as the new leader.

“You know what—I just came back from China. It is done. Hydrogen costs have come down. They have built the capability, the capacity. China is now dominating the supply chain for electrolyser manufacturing,” said Ivana Jemelkova, CEO of the Hydrogen Council, at the recent FT Hydrogen Summit 2025.

 

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Author: Stuart Penson