The final rules for the 45V Clean Hydrogen Production Tax Credit were released by the Treasury Department at the beginning of 2025, marking a pivotal moment for the clean hydrogen industry. This critical regulation, introduced under the Inflation Reduction Act (IRA), is designed to promote clean hydrogen production by offering financial incentives directly tied to the environmental performance of production facilities.
With a credit of up to $3 per kilogram of qualifying clean hydrogen, the regulations aim to standardize and accelerate the adoption of clean hydrogen technologies across the nation. The updates published earlier this month aim to provide clarity and flexibility for producers while aligning with the broader goals of the IRA to decarbonize hard-to-abate sectors. Below, we explore the significant changes, implications for the renewable energy market, and what they mean for stakeholders.
Key updates
The finalized regulations retain the proposed “three-pillar” approach—incrementality, deliverability, and temporal matching—to ensure clean hydrogen production aligns with stringent emissions standards. However, to address feedback from stakeholders, there were several notable modifications made:
The tax credit ranges from $0.12 to $3.00 per kilogram of hydrogen, depending on the lifecycle greenhouse gas (GHG) emissions intensity of the hydrogen produced and whether the project meets prevailing wage and apprenticeship requirements. Facilities that were in service before January 1, 2023 that were retrofitted to produce clean hydrogen after December 31, 2022, are considered newly placed in service, expanding eligibility.
Under the original proposed rule, hydrogen produced via electrolysis (aka “green” hydrogen) could match electricity used by the project with renewable energy as long as that renewable energy met three requirements (the so-called “three pillars”):
-
- Temporal matching
- Incrementality
- Deliverability
These three pillars are still in place, but there have been some significant changes to each that loosen their requirements a bit.
Temporal Matching
The timeline to match electricity generation with clean hydrogen production on an hourly basis has been delayed from 2028 to 2030. Until then, annual matching will suffice, allowing additional time for the development of energy attribute certificate (EAC) markets and tracking systems capable of supporting hourly matching. Some producers may attempt to meet the hourly temporal matching requirement by sourcing EACs that represent electricity discharged in the same hour from an energy storage system located in the same region.
The delayed hourly matching requirement and Greenhouse gases, Regulated Emissions and Energy use in Technologies (GREET) model flexibility are expected to encourage long-term investment. However, smaller producers may face challenges navigating complex compliance requirements and sourcing compliant EACs at reasonable costs.
On top of that, the emphasis on renewable energy sourcing, particularly with deliverability and temporal matching requirements, is likely to increase demand for EACs. Regional renewable energy certificate (REC) markets in areas with established hydrogen hubs, such as Texas and the Midwest, are expected to see upward pressure.
Incrementality
EACs from facilities with a commercial operations date (COD) within 36 months of the hydrogen production facility’s placed-in-service date will qualify as incremental. The final regulations also introduced new ways for renewable energy projects to meet the incrementality requirements:
- State Standards: EACs that are generated in states with “qualifying” GHG emission caps and electricity decarbonization standards (currently only California and Washington)
- Nuclear Energy: EACs representing up to 200MWh per operating hour from “qualifying” nuclear reactors
- Carbon Capture and Sequestration (CCS): EACs sourced from generators at existing plants with newly-added CCS systems
Deliverability
EACs generated in the same grid region as the hydrogen facility satisfy deliverability requirements. Grid regions are based on the Department of Energy’s National Transmission Needs Study and are determined by a facility’s interconnection with a specific balancing authority in that region. The final rule also allowed for electricity that is generated outside of the hydrogen facility’s grid region that is physically imported into that region to meet the deliverability requirement, as long as those interregional transfers are verified via a registry. Imports from Canada or Mexico require additional attestations to avoid double counting.
Under the final rule, EACs derived from natural gas alternatives like renewable natural gas (RNG) or coal mine methane will be recognized from 2027 onward, using a book-and-claim framework that is approved by the Treasury. The draft rule proposed a “first productive use” requirement, meaning the RNG from each facility previously could not have been used for a productive use like vehicle fueling or building heat. The final rule eliminated this requirement, enabling broader pathways for methane utilization. Geographic deliverability for gas EACs is satisfied if the hydrogen facility is connected to the contiguous U.S. pipeline system. Monthly reconciliation of gas pipeline injections with hydrogen production satisfies temporal matching requirements.
The 45V tax credit establishes a definitive framework for what the Treasury considers “clean hydrogen.” It relies on lifecycle GHG emissions calculations using a “well-to-gate” approach, assessing the environmental impact from the extraction and transportation of raw materials through to the hydrogen production process itself. To ensure accuracy and consistency, the regulations mandate the use of the GREET Model. This comprehensive methodology eliminates ambiguity and provides a clear baseline for clean hydrogen classification.
Most producers will use the most current GREET model, however the new regulations allow producers to elect to use the GREET model version that was in effect when their facility construction began, providing regulatory stability for the duration of that producer’s 10-year credit period.
The introduction of GREET flexibility and expanded incrementality pathways broadens eligibility for clean hydrogen projects. These changes enable producers to utilize nuclear energy and carbon capture systems while still qualifying for the 45V credit.
The 3Degrees Global Renewable Markets Report
Subscribe now to stay on top of market updates.
Other provisions
Renewable Integration
One of the most transformative aspects of the regulations is the requirement for renewable or zero-emission energy sources in hydrogen production. These measures include:
- Hourly renewable energy (RE) matching: While the timeline was delayed, producers must still align their electricity consumption with renewable energy generation on an hourly basis. This stringent standard ensures hydrogen production is synchronized with real-time renewable energy availability, reducing reliance on carbon-based grid power.
- Energy storage investments: Producers in regions with variable renewable energy supply may need to adopt advanced storage solutions to meet hourly matching requirements.
These provisions not only incentivize the integration of renewables but also drive broader investments in grid modernization and energy storage technologies, paving the way for a more sustainable energy ecosystem.
Innovation and Retrofits
The final regulations also encourage the adoption of cutting-edge hydrogen production technologies, such as solid oxide electrolyzers, biomass gasification, and methane pyrolysis. In addition, they make clean hydrogen economically competitive, including its allowance of existing hydrogen facilities, such as steam methane reforming (SMR) plants, to undergo retrofits – enabling a transition to cleaner operating methods. Leveraging existing infrastructure reduces costs and narrows the price gap between clean and conventional hydrogen.
To qualify for the tax credit, producers must undergo rigorous third-party verification, including detailed audits of production processes, emissions data, and renewable energy sourcing claims. Annual reporting adds another layer of transparency, ensuring only genuinely clean hydrogen benefits from financial incentives. This level of scrutiny eliminates greenwashing and builds confidence in the market.
The path forward
The final 45V Clean Hydrogen Production Tax Credit is poised to drive unprecedented growth in the hydrogen sector, unlocking billions of dollars in investments and fostering significant economic and environmental gains. This expanded renewable energy landscape could generate potential export opportunities and strengthen the U.S. position as a leader in the global hydrogen market.
The regulations set a clear, though complex, path forward for clean hydrogen development nationwide. And by addressing industry feedback and providing increased flexibility, the Treasury balanced its ambitious decarbonization goals with practical implementation measures, undoubtedly shaping the future of clean hydrogen production, driving demand for renewable energy and innovation in low-emission technologies.
It’s important for hydrogen producers to partner with experienced advisors who can streamline compliance, optimize renewable energy strategies, and maximize their eligibility for tax incentives. These partnerships can also help navigate the complexities of adopting emerging technologies and retrofitting existing infrastructure. As an expert in renewable markets, 3Degrees is here to help your organization secure geographically- and temporally-aligned EACs. If you’re ready to navigate these changes and explore what they mean for your organization, contact our team today.
Suggested insights
Download this guide to learn about clean fuels regulations and how to get started in these regional programs.
