Air Products has decided not to claim the U.S. hydrogen production tax credit for its $4.5 billion blue hydrogen plant in Louisiana. Instead, the company will seek a different tax credit focused on carbon capture and storage.
The Decision
A senior executive from Air Products explained that while they support the U.S. Treasury Department’s guidelines for the 45V clean hydrogen production tax credit, these rules have faced criticism from both green and blue hydrogen developers. Many argue that the guidelines are too strict and make projects financially unfeasible.
The Challenge with 45V Tax Credit
One major issue is that the 45V tax credit calculates upstream emissions from natural gas based on the U.S. average rather than considering each project individually. This approach would likely prevent many carbon-capture-based facilities, like the one Air Products is building, from qualifying for even the lowest level of the tax credit, let alone the full $3 per kilogram.
Moving Forward
By choosing a different tax credit focused on carbon capture and storage, Air Products aims to make their Louisiana project more financially viable while still contributing to reducing carbon emissions.
The Bigger Picture
Air Products’ decision highlights the challenges and complexities involved in financing and developing large-scale hydrogen projects under current U.S. tax guidelines. It also underscores the need for more flexible and supportive policies to encourage the growth of clean hydrogen technologies.
In conclusion, while Air Products is committed to advancing hydrogen energy, they have opted for a more practical financial route to ensure the success of their ambitious blue hydrogen project in Louisiana.