ACP’s Green Hydrogen Framework Incentivizes “First Movers” While Bolstering Environmental Requirements

The Inflation Reduction Act provides significant incentives to make green hydrogen cost competitive with more carbon-intensive forms of hydrogen production. There is active debate over the appropriate structure of the hydrogen tax incentives in the early years for this new industry.

After significant internal deliberation and engagement with external stakeholders and members, ACP is proposing an implementation roadmap that will create a viable green hydrogen industry while accelerating clean power deployment and reducing emissions. The new proposal includes recommendations on several emissions safeguards advanced by environmental leaders.

ACP proposes the government limit green hydrogen production incentives to companies demonstrating they are relying on new, additional sources of clean electricity to power hydrogen production. Green hydrogen facilities must also ensure that there is a degree of alignment in time between when clean energy is generated and the time when a green hydrogen facility is operated. To ensure these environmental safeguards, ACP proposes that companies must embrace rigorous constraints on where and when clean energy credits can be produced. These constraints will ensure the emissions integrity of the increased power demand on the grid from green hydrogen production. The strict timing requirements under our proposal, which align with the EU’s green hydrogen standards, will take effect after a limited phase-in period. Under ACP’s approach, “firstmover” projects that start construction before the end of 2028 receive greater flexibility on the timing of when clean energy credits can be produced. This early flexibility will ensure the green hydrogen industry reaches commercial viability and can support decarbonization.

“ACP’s aim is to strike a balance that inspires a new clean domestic industry while ensuring near- and long-term climate benefits. It is essential that public funds are used to develop and deploy technology that supports climate goals. But, if government requirements are too burdensome at the outset, we will never build a green hydrogen industry. The stakes are high to get this right,” said Jason Grumet, CEO of ACP.

“Green hydrogen is key to reaching America’s net zero goals by aggressively reducing emissions from difficult to decarbonize sectors. I am proud that ACP has reconciled divergent viewpoints amongst its members and developed a compromise policy framework that supports both early market deployment and a rigorous standard for green hydrogen production over time,” said ACP Chair-Elect Susan Nickey, Executive Vice President & Chief Client Officer of HASI.