October 24, 2022
By: John F. Pierce, Steven R. Schneider, Vivian L. Prieto, Kara Altman
On October 5, 2022, the Internal Revenue Service (IRS) issued six Requests for Comments relating to (i) Credit for Clean Vehicles (Notice 2022-46); (ii) Energy Security Tax Credits for Manufacturing Under Sections 48C and 45X (Notice 2022-47); (iii) Incentive Provisions for Improving the Energy Efficiency of Residential and Commercial Buildings (Notice 2022-48); (iv) Certain Energy Generation Incentives (Notice 2022-49); (v) Elective Payment of Applicable Credits and Transfer of Certain Credits (Notice 2022-50); and (vi) Prevailing Wage, Apprenticeship, Domestic Content, and Energy Communities Requirements Under the Act Commonly Known as the Inflation Reduction Act of 2022 (Notice 2022-51).
In addition to the foregoing Notices, the Department of Energy (DOE) has issued draft guidance relating to a proposed Clean Hydrogen Production Standard (Guidance).
Specifically, the draft Guidance reflects the DOE’s initial proposal for a Clean Hydrogen Production Standard (CHPS) which the DOE developed pursuant to the requirements of the Infrastructure Investment and Jobs Act of 2021 (also known as the Bipartisan Infrastructure Law) (BIL). The CHPS is not a regulatory standard per se, and DOE may not require DOE funded activities to utilize the CHPS; however, where BIL funding is utilized to develop hydrogen hubs, such hubs must “demonstrably aid achievement” of the CHPS by substantially mitigating emissions across the hub’s supply chain (through carbon capture, using low-carbon electricity, or mitigating upstream methane emissions). It is expected that future DOE funding opportunity announcements will define the review criteria to be used in selection of projects subject to the CHPS. This Guidance can be viewed here.
More specifically, this draft Guidance seeks comment from stakeholders regarding the implementation of the CHPS that:
“(1) incorporates the definition of “clean hydrogen” provided in statute; and
(2) supports diverse feedstocks and allows for consideration of technological and economic feasibility of achieving overall emissions reductions by establishing a lifecycle greenhouse gas emissions target for clean hydrogen production.”
The lifecycle target proposed in the Guidance aligns or intersects with the IRA which has created a new ten (10) year production tax credit (45V Credit) for “qualified clean hydrogen” which is tied to the lifecycle greenhouse gas emissions rate of hydrogen production (with the value of the 45V being tied to the lifecycle emissions of a particular project) with lifecycle emissions rate not greater than four (4) kilograms of CO2e per kilogram of hydrogen.
We will update this summary with any further notices or guidance that the IRS publishes on these matters or otherwise concerning the IRA.
Click here to view our client alert regarding the summary of the energy and climate provisions in the The IRA of 2022.
October 24, 2022
By: John F. Pierce, Steven R. Schneider, Vivian L. Prieto, Kara Altman
On October 5, 2022, the Internal Revenue Service (IRS) issued six Requests for Comments relating to (i) Credit for Clean Vehicles (Notice 2022-46); (ii) Energy Security Tax Credits for Manufacturing Under Sections 48C and 45X (Notice 2022-47); (iii) Incentive Provisions for Improving the Energy Efficiency of Residential and Commercial Buildings (Notice 2022-48); (iv) Certain Energy Generation Incentives (Notice 2022-49); (v) Elective Payment of Applicable Credits and Transfer of Certain Credits (Notice 2022-50); and (vi) Prevailing Wage, Apprenticeship, Domestic Content, and Energy Communities Requirements Under the Act Commonly Known as the Inflation Reduction Act of 2022 (Notice 2022-51).
In addition to the foregoing Notices, the Department of Energy (DOE) has issued draft guidance relating to a proposed Clean Hydrogen Production Standard (Guidance).
Specifically, the draft Guidance reflects the DOE’s initial proposal for a Clean Hydrogen Production Standard (CHPS) which the DOE developed pursuant to the requirements of the Infrastructure Investment and Jobs Act of 2021 (also known as the Bipartisan Infrastructure Law) (BIL). The CHPS is not a regulatory standard per se, and DOE may not require DOE funded activities to utilize the CHPS; however, where BIL funding is utilized to develop hydrogen hubs, such hubs must “demonstrably aid achievement” of the CHPS by substantially mitigating emissions across the hub’s supply chain (through carbon capture, using low-carbon electricity, or mitigating upstream methane emissions). It is expected that future DOE funding opportunity announcements will define the review criteria to be used in selection of projects subject to the CHPS. This Guidance can be viewed here.
More specifically, this draft Guidance seeks comment from stakeholders regarding the implementation of the CHPS that:
“(1) incorporates the definition of “clean hydrogen” provided in statute; and
(2) supports diverse feedstocks and allows for consideration of technological and economic feasibility of achieving overall emissions reductions by establishing a lifecycle greenhouse gas emissions target for clean hydrogen production.”
The lifecycle target proposed in the Guidance aligns or intersects with the IRA which has created a new ten (10) year production tax credit (45V Credit) for “qualified clean hydrogen” which is tied to the lifecycle greenhouse gas emissions rate of hydrogen production (with the value of the 45V being tied to the lifecycle emissions of a particular project) with lifecycle emissions rate not greater than four (4) kilograms of CO2e per kilogram of hydrogen.
We will update this summary with any further notices or guidance that the IRS publishes on these matters or otherwise concerning the IRA.
Click here to view our client alert regarding the summary of the energy and climate provisions in the The IRA of 2022.
