The Biden administration has unveiled its proposal for tax credits to support hydrogen production, aiming to foster a cleaner alternative to fossil fuels. The credits, estimated to generate $140 billion in revenue and 700,000 jobs by 2030, are part of the Inflation Reduction Act passed last year.

The proposal establishes a tiered system for credit allocation, with cleaner energy projects receiving higher credits and fossil fuel-based hydrogen production receiving smaller but still significant credits. The administration estimates that the credits will enable the US to produce 50 million metric tons of hydrogen by 2050.

Hydrogen is being developed as an energy source for sectors that are difficult to electrify, such as long-haul transportation and industrial manufacturing. It can be produced through electrolysis using renewable energy sources, but most hydrogen today is produced from natural gas, contributing to climate change.

The proposal addresses concerns about the electricity consumption of electrolyzer hydrogen production by requiring producers to document their usage through energy attribute certificates. This will determine the credits they qualify for.

Industry groups have expressed mixed reactions to the proposal. Some welcome the support for clean hydrogen production, while others argue that the guidance may hinder industry growth. A 60-day comment period is now open for public feedback.