The finalized 45V clean hydrogen production tax credit provides clarity and incremental flexibility for electrolytic (green) and methane-derived (blue) hydrogen developers but may still fall short of revitalizing the industry. The latest rules allow electrolytic producers to utilize retiring nuclear power, although data centers and tech buyers are likely to outprice this option, in our opinion. Delaying the hourly electricity matching requirements to 2030 reduces the green hydrogen LCOH by $0.33/kg H2, lowering it to $3.57/kg H2 assuming operations begin in 2025 and when compared to lifetime hourly matching. These revised costs are still more than double the gray hydrogen benchmark and do not directly account for additional costs or bottlenecks in the interconnection process.
Similarly, the new rules suggest greater 45V eligibility for methane-derived hydrogen but fail to finalize critical details ahead of the incoming Trump administration. Project-specific methane leakage rates could enable low-carbon intensity (CI) gas producers to qualify for the PTC, although implementation timelines were not established. Additional methane sources such as coal mine methane, animal manure RNG and wastewater RNG were included in Friday’s update as viable hydrogen feedstocks without reference to CI values, which makes it challenging to determine project economics. Finally, blending feedstocks for hydrogen production is not permitted, preventing cost-effective combinations like manure RNG with fossil gas to achieve lower CIs at competitive prices.
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