IRA incentives expected to put green hydrogen in the black

byMaurice Smith

Generous incentives are set to give a jolt to the green hydrogen sector, though it could be a limited-time offer. The 2022 U.S. Inflation Reduction Act’s 45V PTC, a clean hydrogen production tax credit, meaningfully bolsters economics and drives positive returns for green hydrogen generation projects, Enverus Intelligence® | Research (EIR) concludes in its latest hydrogen report. But project operators will likely need to renegotiate cheaper renewable power purchase agreements, gain additional green hydrogen premiums or hope for an extension of the 45V PTC beyond its 10-year expiry date to remain economic in the long term.

“The Inflation Reduction Act provides a much-needed boost to green hydrogen production economics,” EIR Senior Associate Alex Nevokshonoff said. “Projects claiming the 45V PTC have the potential to yield favorable returns and even outpace gray hydrogen economics in certain situations. Nevertheless, developers and investors continue to wait on additional guidance surrounding the use of grid electricity paired with renewable energy credits to determine eligibility for the incentives.”

Based on current technology assumptions, EIR found that of the two most commonly used technologies, alkaline electrolyzers are more economical than proton exchange membrane electrolyzers. PEM projects tend to incorporate more expensive cell stacks and have lower electrical efficiency than alkaline, which increases power consumption. However, PEM technology is less mature and stands to achieve faster cost reductions by managing material and operational constraints to achieve faster capacity growth.

Since capex represents a small percentage of overall green hydrogen project costs, 48 ITC, the clean energy investment tax credit, offers a more limited incentive compared to the 45V PTC and fails to drive positive returns, according to EIR. Electricity accounts for an estimated 60-67% of the levelized costs of hydrogen, assuming a flat $40/MWh cost. This reinforces the need to secure competitive renewable power purchase agreements and maximize energy efficiency.

Enverus Intelligence® | Research explores green hydrogen production technology and incentives available in the U.S. and models the resulting project-level economics. Click here for the full report (available to EIR subscribers).

About Enverus Intelligence Publications
Enverus Intelligence Publications presents the news as it happens with impactful, concise articles, cutting through the clutter to deliver timely perspectives and insights on various topics from writers who provide deep context to the energy sector.

Picture of Maurice Smith

Maurice Smith

Maurice Smith is a senior editor at Enverus Intelligence® | Research and has been covering the energy industry for more than 20 years. He is a graduate of the Mount Royal College school of journalism.

Subscribe to the Enverus Blog

A weekly update on the latest “no-fluff” insight and analysis of the energy industry.

Related Content

Trading and Risk
ByChris Griggs

In the fast-paced world of energy commodity trading, staying ahead demands more than just raw data. Insightful, actionable intelligence allows you to forecast, plan and respond to global market shifts confidently.

Energy Transition
ByAshmal Dawoodani

This ETT covers EIRs recent report reviewing advanced nuclear technologies.

Trading and Risk
ByAl Salazar

Al Salazar of Enverus Intelligence® Research predicts rising crude oil and natural gas prices, driven by market dynamics, OPEC discipline, and seasonal demand. Learn more about the bullish outlook for Brent crude and Henry Hub natural gas prices.

Oilfield Services Operators
ByJose Neto

In the pursuit of capital efficiency, operators strive to continually improve drilling and completion performance, especially in the challenging landscapes of Canada's unconventional plays.

Energy Transition
BySmayan Sharma

The Inflation Reduction Act spurred a surge of project announcements and developments on the molecules side of the energy transition, creating numerous opportunities for capital deployment.

Enverus Blog - 6 reasons to attend Enverus’ 2023 EVOLVE Conference
Analyst Takes
ByAndrew Dittmar

In a significant move reshaping the U.S. shale landscape, ConocoPhillips has agreed to purchase Marathon Oil for $22.5 billion, marking a shift towards multi-basin operations and promising a robust future for shareholders with enhanced capital returns and increased operational scale.

ByMac Graham

The oil and gas industry is no stranger to uncertainty. Producers contend with a myriad of challenges – everything from supply chain uncertainty, geopolitical shocks, ROI demands from investors and an unpredictable policy environment – so it’s no wonder a...

Energy Transition
ByKevin Kang

The anticipated end of a two-year reprieve on solar panel tariffs from China coincided with unexpected tariffs on other energy transition-related sectors.

ByBryn Davies

Our twelve-member team embarked on the memorable Vltava Relay challenge, covering 360km in 35 hours, with 300 other competing teams.

Let’s get started!

We’ll follow up right away to show you a quick product tour.

Let’s get started!

We’ll follow up right away to show you a quick product tour.

Sign up for our Blog

Register Today

Sign Up

Power Your Insights

Connect with an Expert

Access Product Tour

Speak to an Expert