As global climate action accelerates, clean hydrogen has emerged as a key tool to slash pollution from heavy industry processes. The clean hydrogen production credit in the Inflation Reduction Act — 45V — works to accelerate its use in the United States.

However, at the heart of the 45V credit lies a complex puzzle: how can developers build grid-connected projects with low carbon emissions? There are real challenges around developing registries for tracking certified clean electricity purchases, contracting for clean power procurement, and optimizing projects to navigate credit requirements. These challenges have drawn broad attention, sparking debates on the role and efficacy of offsets, emissions accounting, managing intermittent resources for industrial-scale projects, and the future of energy procurement across the policy landscape.

Earlier this year, RMI convened a working group spanning developers, registries, and electricity forecasting experts to discuss solutions to navigate these challenges. This article examines four key concepts to navigate clean power procurement for clean hydrogen:

1. Registry development for tracking clean energy attributes
2. Contracting strategies for clean power procurement
3. Project optimization to navigate credit requirements
4. Managing real-time electrolyzer operations

Understanding these elements can help developers unlock the potential of clean hydrogen, ensure regulatory compliance, and manage risk.

How to Prove Consumption of Clean Electricity

The simplest way to calculate the 45V credit calculation uses a method based on average grid emissions over a year for each region. This approach creates a single emissions factor for all electricity consumption. However, this method effectively disqualified all grid-connected projects, as grid average emissions in the United States (around 370 g CO₂/kWh) far exceed the 9 g CO₂/kWh threshold required for the most valuable tier of the credit.

Right before the passage of the Inflation Reduction Act, the law’s authors directed the Treasury to “recognize and incorporate indirect book accounting factors, also known as a book and claim system, that reduce effective greenhouse gas emissions.”

To achieve this, the Treasury’s proposed guidance:

1. Allows producers to retire qualifying certificates (EACs) representing clean power;
2. Enables demonstration of “lower-than-average” emissions through these certificates; and
3. Potentially qualifies projects for the highest level of 45V tax credit ($3 per kg of hydrogen)

The proposed guidance expands eligibility for tax credits by creating a flexible electricity accounting pathway for grid producers. That creates opportunities for a wider range of projects.

The Treasury designed a system to balance many objectives, including:

1. Achieving the emissions reductions required by law
2. Creating a system that can be administered by the agency while avoiding fraud and abuse
3. Providing enough certainty and flexibility to enable producers to kickstart the industry

This system can be classified as both attributional and market-based:

An attributional emissions accounting system: Zero-carbon electricity generators can attribute their power to a hydrogen producer by creating and retiring an Energy Attribute Certificate (EAC) representing a volume of clean electricity.

A market-based instrument: EACs can be traded between producers and hydrogen developers, creating a new market dynamic that then incentivizes clean energy development.

The market balances supply and demand: high demand raises EAC prices, spurring new clean energy projects; excess supply lowers prices, potentially reducing hydrogen production costs. This dynamic balance helps align hydrogen production growth with clean energy expansion.

The system’s effectiveness relies on four key elements or “pillars”:

1. Regionality: EACs must come from the same Transmission Needs Region (there are 15 in total), to ensure that clean electricity generated for hydrogen production can physically “reach” the production facilities. This prevents scenarios where solar generation in California “offsets” emissions from electrolysis in Maine.
2. Hourly matching: Hydrogen producers may only claim zero-carbon power if the amount of clean electricity needed during that hour is generated within that same hour.
3. Incrementality: Power must come from carbon-free electricity facilities placed into service up to 36 months before the commencement of the hydrogen project, to ensure that new clean energy capacity meets or exceeds the energy intensity of hydrogen production.
4. Attribute tradeability: The 45V guidance enables various forms of hourly certificate trading, unlike the EU hydrogen accounting system, which also requires corresponding physical power contracts.

The strictness or flexibility of this 45V compliance system primarily depends on regional clean energy buildout rates. This incentivizes developers and regions to build more clean energy infrastructure — faster — particularly in regions where the buildout is currently lagging.

Such standards create strong physical alignment between hydrogen assets and physical clean power assets. And thanks to historic laws like the Inflation Reduction Act and the Infrastructure Investment and Jobs Act, clean power is projected to boom in the United States.

According to modeling from the National Renewable Energy Laboratory, enough new clean power will be built from 2025 to 2035 to provide enough qualifying EACs to support 200 gigawatts of hydrogen production facilities operating at 80 percent capacity around the nation.

However, bottlenecks like grid upgrades and permitting delays can undermine even the most economic projects. To solve these challenges, RMI focuses on key enabling infrastructure, including streamlining interconnection queues, supporting new transmission permitting, and improving utility and regulatory design to support the energy transition far beyond hydrogen.

Additionally, the mere existence of qualifying attributes is not sufficient — developers will need to contract, match, retire, and then prove compliance.

We have outlined the ecosystem needed to unlock and allocate EACs to hydrogen projects.

Exhibit 1: Pathway To 45V Compliant Clean Power Procurement

RMI convened a working group focused on registry development that covered four main elements:

1. Registries – systems to mint and retire hourly EACs, and demonstrate matching
2. Contracts – the basic building blocks to transfer ownership of EACs to hydrogen developers
3. Project Optimization – the combination of contracts, electrolyzer sizing, buffering, and offtake flexibility that enables hourly matching
4. Real-time operations – forecasting clean power availability and ramping an electrolyzer in order to maintain hourly matching

These elements form the foundation of an ecosystem where developers and third-party companies can collaborate to reduce project risk and provide essential services for hydrogen projects seeking to receive the 45V credit.

Registry development

Myth: Hourly registries will require years to develop and implement, delaying projects that require hourly EACs.

Reality: The foundation for hourly registries already exists, within current grid operations. The grid balances load and generation on a sub-second basis, and most physical power markets settle every 5 minutes. The real challenge lies not in hourly tracking, but in creating credible, auditable systems.

While hourly registry solutions are still maturing, current systems are sufficient for first movers’ energy accounting and regulatory compliance. Developers have several near-term options:

1. Use existing registries to ensure proper EAC retirement without double-counting.
2. Use meter data to prove hourly matching between electricity generation and consumption.
3. Leverage bilateral contracts like Power Purchase Agreements (PPAs) for structured arrangements.

Companies specializing in energy data management like Singularity and FlexiDao have already developed products that could integrate into the Greenhouse Gases, Regulated Emissions, and Energy use in Technologies model (GREET) for 45V qualification. These solutions work across various market structures nationwide and could be ready in the near term.

The primary benefit of advanced hourly registry solutions will be to enable EAC trading. However, developers of early commercial-scale projects, especially those pre-final investment decision, may opt for structured contracts. As the industry matures, full registries and spot markets will develop alongside the first movers. This will create a flywheel effect where increased project activity drives demand for more sophisticated services.

This path enables meaningful progress through existing methods. As the ecosystem evolves, it will create opportunities for energy data specialists, markets, and registries to provide increasingly advanced solutions for EAC management and trading.

Contracts

Myth: Hourly matching is not possible due to lack of EAC marketplaces and speculative spot purchases.

Reality: Instead of hourly marketplaces, first mover hydrogen projects will likely only have access to bilateral hourly contracts that provide EAC ownership for a certain volume of power capacity. For example, a hydrogen producer may sign two contracts for 20 MWs of wind capacity and 10 MWs of solar to achieve the desired utilization and load shape.

Hydrogen producers will not have to reinvent the wheel. EAC ownership contracts are a straightforward extension of traditional PPAs, incorporating additional compliance elements. Organizations like Level10 have already developed scalable “hourly ready” contract language as part of their GC Trading Alliance. In addition, leading corporate procurers have learned key lessons on how to streamline negotiations and ensure that the data flows with high levels of accuracy and flexibility.

Key considerations for contract development include providing real-time production data and settlement data, enabling third-party access, and establishing benchmarks for data availability and accuracy.

Power ownership

Contracts can convey both environmental attribute ownership (relevant to 45V) and power ownership, which is necessary for hydrogen production. The spectrum of options includes physical PPAs (full power ownership with delivery costs), virtual PPAs (financial stake without physical ownership), and unbundled PPAs (EAC ownership only).

Hydrogen projects may employ a combination of these contract types to optimize economics.

Contract aggregation and project design

Myth: The only solution to hourly matching is massive “overbuilding” and ownership of excess renewable capacity.

Reality: Project design requires a nuanced approach that considers both total energy production and capacity value for hourly matching.

There is a balance to strike when contracting renewable energy. As you increase contracted capacity:

• Curtailment increases, leading to a higher cost per MWh actually used by the electrolyzer
• Hydrogen production increases, generating more revenue

This relationship creates a “U-shaped” curve ((see page 48 of the IEA’s Future of Hydrogen report), with optimal utilization rates typically landing around 60–80 percent. This means that some level of curtailment and electrolyzer ramping are necessary features of competitive project designs.

Offtake Requirements:

Offtakers often require a steady stream of hydrogen or a certain volume over a given period, which could be misaligned with times of abundant clean power production and low grid prices.

Since hydrogen storage is significantly cheaper than electricity storage, intermittent production is typically buffered by hydrogen storage. However, even multi-day storage can be depleted during extended renewable droughts. Offtake agreements vary in flexibility and penalties, with some enabling lower hydrogen costs through more flexible terms. Large joint storage facilities, such as salt caverns, can increase project competitiveness by allowing for more extensive buffering.

Real-time operations

Myth: Electrolyzers cannot achieve real-time matching with clean power availability due to operational constraints and grid variability. As a result, hydrogen producers will be forced to rely on non-existent, retrospective “imbalance markets” to purchase certificates for compliance, making projects unbankable and stifling industry growth.

To receive the top credit, electrolyzers will need to ramp up and down so that the volumes of retired hourly certificates match on average the electricity consumed. While this may sound daunting, an hour is in fact a long time in electricity markets, and as a result there are a variety of services and strategies available for producers to match in real time.

Key Operational Constraints for Electrolyzers

Electrolyzers face two major limitations when attempting to match production with clean electricity availability.

1. Ramping rate refers to the speed at which power input can be adjusted. Alkaline electrolyzers can typically ramp to 100 percent within 15 minutes, while PEM electrolyzers can ramp even faster, often within minutes (source).
2. Operation minimum is the lowest power level at which the electrolyzer can safely operate. In some cases, a minimum amount of power or production is required for the facility to run safely. This usually ranges between 10 and 40 percent of nameplate capacity and limits how closely an electrolyzer can follow renewable generation profiles.

Strategies for Achieving Real-Time Matching

To achieve real-time matching, developers typically contract a pool of wind and solar capacity with the goal of never being short on Energy Attribute Certificates (EACs).

Developers can use renewables forecasting and cloud data hosting vendors to employ sophisticated renewables forecasting. For example, the weather forecaster Vaisala has machine learning algorithms with hour-ahead error bars of around 5 percent. By maintaining a margin of error and being conservative in production estimates, producers can use advanced forecasts to determine electrolyzer ramping to manage the risk of falling short on EACs for any given hour.

In addition, an hour is a long time. Producers can be conservative for part of the hour and then ramp up production later to maximize matching and overall production. This flexibility allows for dynamic management of the production process in response to real-time conditions.

To Hedge or Not to Hedge

Power trading strategies play an important role in optimizing clean hydrogen production. Electrolyzers offer high flexibility, allowing producers to avoid peak pricing periods and potentially export energy if paired with behind-the-meter clean resources. This flexibility may help lower overall electricity costs. For example, by strategically ramping down for just 3 percent of the hours, electrolyzers can potentially reduce the locational marginal price of electricity by up to 50 percent in some markets like Texas.

However, these strategies also carry inherent market risks. There is an opportunity for specialized power trading firms to offer third-party services, which could provide additional assurances to financiers and help manage these risks effectively.

Handling Missed Hours

Despite best efforts, achieving perfect matching can be challenging. The combined wind/solar profile may occasionally dip below the electrolyzer’s operational minimum, or offtaker requirements may necessitate production regardless of clean power availability. In such situations, producers may be forced to generate hydrogen without full EAC coverage.

The current guidance lacks clarity on precise credit calculations for partial matching scenarios. Potential calculation methods include averaging emissions over the entire year, calculating each hour separately, or determining credits for each kilogram of hydrogen produced. The choice of calculation method significantly impacts project design and economics, affecting decisions on electrolyzer sizing, upstream clean power contracts, hydrogen storage requirements, and offtake agreement structures.

RMI recommends calculating each hour separately, similar to the EU clean hydrogen methodology. This approach maintains flexibility while providing limited penalties for unavoidable non-compliance, striking a balance between incentivizing clean production and acknowledging real-world operational constraints.

Exhibit 2: Alternative 45V Value Calculations

By implementing these strategies and considering the various operational factors, clean hydrogen producers can work toward achieving real-time matching of production with clean electricity availability, even in the face of challenges. This approach aligns with the goals of the 45V tax credit while providing a practical pathway for industry development.

The 45V tax credit creates both enormous opportunity and novel challenges for both the hydrogen and clean development industries. With deep understanding of the proposed guidance and integrating insights around registries engagement, contract language, project optimization, and real-time operations, developers should be able to navigate the complexities of 45V compliance.

As the clean energy landscape evolves, driven by supportive legislation and technological advancements, the hydrogen industry stands poised for significant growth. However, success will require careful project design, innovative contracting approaches, and sophisticated operational strategies to manage the inherent variability of renewable energy sources.

The goal isn’t just to understand the risks, but also to actively manage them in ways that make hydrogen production more competitive, recognizing there are many points of failure before getting projects over the finish line. Importantly, developers are not on an island — an ecosystem of companies is developing to provide robust solutions with track records to provide assurances to investors.

At RMI, we’re collaborating with industry leaders to tackle both technical and regulatory challenges. Our aim is to catalyze the growth of a competitive, sustainable clean hydrogen sector.

In the race to decarbonize our energy systems, mastering the art of clean electricity procurement isn’t just an advantage — it’s make-or-break for the hydrogen industry.