• The IRS is weighing to what extent hydrogen made with grid-connected electricity should be equally eligible for the tax credit as hydrogen made exclusively from dedicated renewable power.
• The IRS will determine the regionality requirements, which will establish the geographical boundary within which both the clean energy project that the electrolyzers are relying on for clean energy attribute certificates (EACs) and the electrolyzers must be located.
• If the IRS does include hydrogen made from grid electricity, then it must consider whether emissions should be tallied on an hourly, monthly, quarterly, annual, or unrestricted temporal accounting method.

Last year, the Inflation Reduction Act (IRA) amended the Internal Revenue Code (Code) to include new provisions for a clean hydrogen production credit (under section 45V of the Code).

Furthermore, the IRA requires the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) to promulgate regulations describing how to measure a hydrogen producer’s lifecycle greenhouse gas (GHG) emissions for purposes of determining eligibility for the clean hydrogen production credits. The credit value follows a sliding scale: the lower the lifecycle emissions, i.e., the lower the lifecycle carbon intensity of the hydrogen produced by the taxpayer, the higher the credit value the taxpayer receives.

These agencies must determine the extent to which hydrogen made with grid-connected electricity should be equally eligible for the tax credit as hydrogen made exclusively from dedicated renewable power. The IRS is expected to release its draft guidance early this summer, with its final guidance due in mid-August. This guidance will present an accounting system for grid-connecting electrolyzers that leverage additionality, regionality, and temporal accounting for emissions impact, all critical components to an effective accounting system.