Editorial: IRS rules all but nix hydrogen hub

Published 7:00 am Thursday, March 21, 2024

Hydrogen is a fuel that could save the internal combustion engine in the face of climate regulations that will curtail the use of gasoline and diesel, and the IRS has a rule that could kill it.

As policymakers push the United States to phase out fossil fuels in favor of “green” energy sources, they run into the nettlesome problem of how to power hard-to-decarbonize things, such as freight trucks, buses, ships, airplanes and farm tractors.

Because of their weight and the limits of physics, battery power isn’t very practical for many of these applications.

Turning the country’s motor fleet to electric power would also require vast amounts of electricity. Many experts say that it is unlikely the United States will ramp up solar and wind electricity production to both replace existing coal and gas power plants and increase capacity to meet expanded energy demands over the next 20 years.

Many advocates have turned to hydrogen, the most plentiful element in the universe. When burned, hydrogen produces water vapor, making it seemingly the perfect fuel to help the U.S. meet its climate goals while not hobbling the economy.

The U.S. government supports developing hydrogen. The Infrastructure Investment and Jobs Act allocated $7 billion to subsidize projects at seven “hydrogen hubs” around the U.S., including in the Pacific Northwest.

Hydrogen takes a lot of electricity and water to produce.

On average, 50 kilowatt-hours of electricity and 14 to 20 liters of water can produce enough hydrogen to store 39 kilowatt-hours of energy, according to a Washington Department of Commerce report.

In itself, that’s not a problem. The production of any fuel source requires the expenditure of energy.

But, in order to get the tax credits that would fund the subsidies, producers will have to comply with IRS rules regarding the sourcing of their electricity that they say are all but impossible to follow.

First, to be considered “clean,” the hydrogen must be made from a renewable energy source, such as a wind or solar project, that went into operation within the past three years.

The rule shuts out existing green energy sources, such as nuclear plants and renewable natural gas from dairies. Power from hydroelectric dams in the Northwest wouldn’t qualify.

Second, the renewable energy will have to be used the same hour it’s generated. When the sun sets and the wind stops, the tax credit vanishes. Hydrogen plants dependent on tax credits couldn’t run nonstop.

Third, the renewable energy has to be generated regionally. The Northwest region is Washington, Oregon, Idaho and the western edge of Montana. Washington expects in the future to get power from Wyoming wind projects.

So, the government wants to promote hydrogen production, but makes it impossible to produce. As the Wall Street Journal observed recently, sometimes the government’s left hand doesn’t know what its other left hand is doing.

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