Biden’s Strict Hydrogen Tax Rules to ‘Loosen,’ Plug Power CEO Expects
Plug Power Inc. dubbed the new US rules on how hydrogen projects can qualify for a lucrative tax credit “disappointing,” but also expects restrictions around a key measure of President Joe Biden’s signature climate law to get looser once they are finalized by the Treasury Department.
Andy Marsh, president and chief executive officer of the Latham, New York-based hydrogen producer, said:
We do expect the regulations to loosen up.
Andy Marsh, president and chief executive officer of the Latham, New York-based hydrogen producer, said in an interview on Bloomberg Television. “I’ve talked to many senators who tell me it will get easier — not harder.”
Under the draft proposal issued by the Treasury Department, hydrogen projects would need to adhere to strict environmental requirements to ensure the energy-intensive production of the fuel doesn’t end up causing a influx of climate warming greenhouse gas emissions.
In order to qualify for the tax credit worth as much as $3 per kilogram, hydrogen projects would need to use electricity from newly built clean energy sources and, starting in 2028, ensure that production occurs during the same hours as those clean sources were operating. The Biden administration is taking public comment on the requirements, which are subject to change before being finalized.
It remains to be seen if Plug Power’s hydrogen plant that’s under development in Georgia will qualify for any of the tax credit, let alone the maximum amount, Citigroup Inc. analyst Vikram Bagri wrote in a research note following Treasury’s publication of the rules. The hourly-matching requirement dealt Plug a “weak hand” that provided “narrow pathways” for its Georgia plant, the note said.
Marsh, in his interview, said the company’s modeling showed the regulations as written would reduce US hydrogen output 70% by 2030. Plug and other hydrogen producers are planning an aggressive effort to “help straighten the regulations out,” he said.
“We are confident there will be changes once there is a comment period for the regulation,” Marsh said.
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Biden’s Strict Hydrogen Tax Rules to ‘Loosen,’ Plug Power CEO Expects, December 26, 2023
By: Salman Khan
Published: December 26, 2023
Plug Power Inc.’s CEO, Andy Marsh, has expressed his discontent towards the newly imposed U.S. rules determining the qualification of hydrogen projects for significant tax credits. Despite voicing his disapproval, Marsh is hopeful for the future, anticipating a relaxation of the regulations once they are officially finalized by the Treasury Department.
Marsh’s Outlook on the New Regulations
In a recent interview with Bloomberg Television, Marsh expressed his disappointment with the new rules, viewing them as potential hindrances to the company’s plans. The new regulations pose challenges such as negative gross margins, liquidity concerns, delays in hydrogen plant projects, and regulatory hurdles. These challenges are significant for Plug Power, a hydrogen producer based in Latham, New York, as they directly impact the company’s operations and potential tax incentives.
Financial Struggles Amid Regulatory Challenges
Regardless of Marsh’s optimistic outlook, the company faces financial struggles. Plug Power’s stock has plummeted over 62% year-to-date, and the company is embroiled in a battle against cash burn and poor financial performance. Investors are maintaining a watchful eye on the company’s long-term prospects, as skepticism looms over its ambitious revenue and gross margin targets set for 2027.
Analysts’ Take on Plug Power
Analysts have reacted to the company’s performance by downgrading the stock, underscoring concerns about high capex, inflation, and reliance on subsidies. The new hydrogen tax credit rules have only added to these worries, further compounding the company’s financial challenges. While Marsh has expressed his concerns about the regulations, he remains steadfast in his optimism, believing that the Treasury Department will loosen the reins on the final regulations.
Proposed rules would make it much more difficult to claim hydrogen tax credit than industry had hoped
COLONIE — The CEO of hydrogen fuel cell manufacturer Plug Power says that the Biden administration may be making a mistake with its proposed clean hydrogen tax credit
The U.S. Treasury Department is expected to release the so-called 45V tax credit that would provide up to a $3 subsidy per kilogram of clean hydrogen produced through electrolyzers, which turn water into hydrogen. The new rules are expected to be officially released by the end of the year.
Currently, most hydrogen is made directly from natural gas, but Plug Power — which is based in Latham — has built its business strategy on producing clean hydrogen using this electrolysis method. The company has been building industrial-scale electrolyzer facilities across the U.S. and also internationally.
The tax credit for clean hydrogen production would essentially put clean, also known as green hydrogen, on par with hydrogen produced from fossil fuels. The tax credit was authorized under the bipartisan Inflation Reduction Act of 2022, which included many climate change provisions to encourage the use of more carbon-neutral technologies and fuels.
Earlier this month, several news outlets reported leaked details of the clean hydrogen tax credit rules. Among them is a requirement that to be eligible for the tax credit, a production facility must be directly tied to new clean power sources such as wind or solar farms that have been built within the past three years, along with other stringent rules that would likely sideline potential projects.
Hydrogen advocates have said if the rules are too strict, they may do more harm than good getting the clean hydrogen industry off the ground.
Plug Power CEO Andy Marsh released a statement to the Times Union this week that showed how concerned Plug Power is about the proposed rules.
“As one of the first companies to build clean hydrogen projects at scale, Plug is deeply concerned that the Biden Administration’s rumored guidance on the Clean Hydrogen Production Credit will achieve the exact opposite outcome Congress intended,” Marsh said in the statement. “The administration has the opportunity to achieve tremendous decarbonization and job creation benefits by helping our nascent industry compete with incumbent fossil technologies. That will all be lost if they advance rules which exceed the scope and authority of Congress’ mandate in enacting the Inflation Reduction Act.”
A Treasury Department spokesperson did not immediately respond to a request for comment. Some news outlets have reported that the new rules may not be released until early 2024.
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