45V Hydrogen Tax Credit in the Inflation Reduction Act: The Role of New Clean Electricity

The central question in determining the emissions effect of new load on the electrical grid is whether the new generation is clean. In previous installments of this series, I reviewed studies that directly address this question, using optimizing models to look at the effect of the demand for electricity from electrolysis, the process of producing hydrogen by using electricity to split water. In this issue brief, I consider two studies that instead assume all the new generation built in response to the new demand from an electrolyzer is clean. The study from Energy + Environmental Economics (E3) was sponsored by the American Council on Renewable Energy, and the Boston Consulting Group (BCG) study was sponsored by NextEra Energy.As I argued in the opening blog post of this series, not assuming that new generation is clean is the more defensible approach. Nonetheless, one can still obtain valuable insight from studies that assume the contrary. In this issue brief, I will discuss the findings from these studies and how I believe they should be interpreted.