Illustration: Tiffany Herring/Axios
The Biden administration's focus on natural gas and nuclear power in final rules for the hydrogen tax credit could blunt industry opposition as the incoming Trump administration targets IRA credits.
Why it matters: The guidance may be just good enough for hydrogen developers to accept it rather than risk a Trump rewrite and further uncertainty and delays.
The big picture: For the most part, the reaction to Friday's Treasury Department 45V guidance from industry associations and environmental groups was: It's not terrible.
- "Our membership generally is accepting that the final rules, while imperfect, offer a degree of certainty," Frank Wolak, head of FCHEA, a hydrogen industry trade group, told Axios.
- "While we will work with the new administration as they seek to implement the rules and we may suggest improvements, we do not see industry inclined to press for a wholesale rewrite and risk further uncertainty," Wolak said.
Between the lines: That's a step back in tone from the two-year lobbying battle between developers, who argued that hydrogen is crucial to cleaning up carbon-intensive industries, and environmental groups, who sounded alarms about industry's emissions footprint.
- Nathan Iyer of RMI called it a "comprehensive solution for the climate and developers" and said it was "pretty amazing that, despite all the pressure and lobbying, they were able to come up with a balanced approach."
Zoom in: The rules lowered some barriers and broadened what counts as "blue" hydrogen, or natural gas-sourced production with carbon capture and storage.
- The guidance promised an update to the government model for upstream emissions (called the GREET model) that enables project-specific emissions accounting instead of defaulting to national averages.
- Barbara De Marigny, partner at Baker Botts in Houston, said that's a relief to developers.
- In today's GREET model, "you go to adjust it and you can't — the numbers are locked in," she said. "That's enormously frustrating."
Nuclear, a bipartisan darling, also notched a win in being able to qualify reactors that would otherwise shut down.
- Though nuclear is doing so well supplying AI-driven data centers, it's unclear how many at-risk reactors would seek eligibility.
Yes, but: The guidance locked in requirements for electricity-sourced hydrogen producers to draw from recently built low-carbon power plants and match their output on an hourly basis.
- Jason Grumet, CEO of American Clean Power, called the rules "at odds with the innovation needed in this nascent sector" and said they "will prevent the U.S. from realizing global leadership in clean hydrogen production, as Congress intended."
- The renewable natural gas industry is also unhappy, arguing that the guidance underestimates renewable natural gas carbon benefits and makes it difficult to account for its value when blending gas feedstocks.
- The guidance includes "some very modest positive outcomes alongside very concerning provisions that potentially jeopardize the very viability of RNG to clean hydrogen production pathways," said Geoff Dietz, director of federal government affairs for the RNG Coalition.
What's next: Watch for a CRA resolution, a Trump redo of the rules, or a post-Chevron legal challenge, TD Cowen analysts said.
- The Trump transition team didn't respond to requests for comment.
- All eyes will be on the new EPW chair, Sen. Shelley Moore Capito, who criticized the proposed rules last year.
