Some 100 businesses and organizations, coordinated by the Fuel Cell & Hydrogen Energy Association (FCHEA), have sent a letter to Speaker of the House Mike Johnson and Chairman of the Ways and Means Committee Jason Smith, urging the preservation the Section 45V Credit for Production of Clean Hydrogen as the House of Representatives processes its reconciliation legislation.

The Section 45V Clean Hydrogen Production Tax Credit, enacted under the Biden Administration’s Inflation Reduction Act (IRA) of 2022, is a US federal tax incentive designed to promote the production of clean hydrogen as a low-carbon energy source to decarbonize hard-to-abate sectors such as heavy industry and transportation.

The credit aims to:

• Encourage clean hydrogen production by providing financial incentives to producers, making clean hydrogen cost-competitive with conventional hydrogen (often produced from natural gas with higher emissions).

• Reduce greenhouse gas (GHG) emissions by supporting hydrogen production with low lifecycle emissions, aligning with US climate goals (e.g., net-zero emissions by 2050).

• Support the growth of a domestic clean hydrogen industry, including projects like the Department of Energy’s Regional Clean Hydrogen Hubs, which are expected to drive significant investment.

The Section 45V credit is a production tax credit (PTC) that provides a per-kilogram incentive for producing qualified clean hydrogen at a qualified clean hydrogen production facility over a 10-year period starting when the facility is placed in service. Alternatively, taxpayers can opt for a one-time investment tax credit (ITC) under Section 48 based on the facility’s cost, but this alert focuses on the PTC.

• Credit Amount: Up to $3 per kilogram of clean hydrogen produced, depending on the carbon intensity of the production process and compliance with prevailing wage and apprenticeship requirements.

• Technology-Neutral: The credit applies to any hydrogen production method (e.g., electrolysis, steam methane reforming with carbon capture, biomass gasification) as long as emissions meet the threshold.

Qualified clean hydrogen must have a lifecycle GHG emissions rate of less than 4 kg CO₂-equivalent (CO₂e) per kg of hydrogen produced, measured on a well-to-gate basis (from feedstock extraction to production, excluding downstream use).

Emissions are calculated using the 45VH2-GREET model, a specialized version of the DOE’s GREET model, or a provisional emissions rate (PER) if the production pathway isn’t covered by the model.

Hydrogen must be produced in the ordinary course of a trade or business for sale or productive use (not for wasteful purposes like venting or flaring to exploit the credit).

The Section 45V credit—and the industrial development and manufacturing capacity this incentive will spur—is poised to deliver major advantages to global competitiveness, national security, and economic impact to the United States, according to the signatories.

An estimated 9.8 million metric tons per annum (mmtpa) of natural gas-based hydrogen capacity is in development across the US, which would nearly double America’s existing hydrogen production volume. According to a recent analysis by Citizens for Responsible Energy Solutions (CRES), these projects could support around 60,000 jobs per year between 2025 and 2035 and generate more than $12 billion in annual GDP.

A McKinsey report determined that, with supply chain and original equipment manufacturers (OEMs) located across the country, and with the right policies in place such as the 45V credit, the hydrogen industry could generate 700,000 jobs by 2030 and generate $140 billion in revenue.

There is growing global demand for hydrogen and hydrogen derivatives, and China is rapidly expanding its investments to meet that demand and dominate the global hydrogen supply chain. The United States cannot afford to fall behind, the authors argue. In 2020, China accounted for less than 10% of global manufacturing capacity but has now grown to more than 60% of global capacity of these hydrogen technologies.