The Cost of Clean Hydrogen with Robust Emissions Standards: A Comparison Across Studies

Recent peer-reviewed research has demonstrated that the ‘Three Pillars’ standard for clean hydrogen carbon accounting – new supply, deliverability, and hourly matching – is necessary to avoid significant excess emissions from government-subsidized electrolytic hydrogen production in the United States. However, some parties have argued that the cost of meeting the Three Pillars would be large enough to overwhelm the $3/kg clean hydrogen production tax credit introduced in the Inflation Reduction Act (IRA), rendering the US clean hydrogen industry “dead on arrival.” Others argue that while the Three Pillars standard appears necessary to avoid near-term emissions inconsistent with IRA’s statutory requirements, the Treasury Department faces an unavoidable trade-off between implementing “strict” emissions accounting rules and prioritizing rapid electrolyzer deployment and improvements that could enable the realization of much larger emissions reductions over the long term. However, this asserted trade-off only holds if the Three Pillars approach truly prevents early grid-connected hydrogen projects from being economically viable under reasonable conditions. As this memo demonstrates, such claims are not substantiated.

Version 2 of this memo contains data from two new studies by E3 and the MIT Energy Initiative. The cost comparison tool's handling of tax rates has also been updated to ensure a like-for-like comparison of cost assumptions. See the new Notes tab for details.

Version 3 contains confirmed electricity cost values from the MITEI study and additional references in the memo.