How the IRA’s 45V and 45Q Tax Credits Incentivize New Hydrogen-Production Investments

Author

Alexander M. Economides, in collaboration with Enerdatics Energy Analytics Team

Purpose

This article was written in collaboration with Enerdatics Energy Analytics to explain how new U.S. tax incentives under the Inflation Reduction Act are altering the economics of hydrogen production. It aims to help investors and developers understand the mechanisms and potential challenges of the 45V and 45Q credits within the context of Enerdatics’ hydrogen cost analysis framework.

Summary

The Inflation Reduction Act of 2022 introduced two powerful incentives—Section 45V (hydrogen production credit) and Section 45Q (carbon capture credit)—that are reshaping the investment landscape for U.S. hydrogen projects. The 45V credit offers up to $3 per kilogram of low-carbon hydrogen produced, while 45Q provides $85 per ton of CO₂sequestered.

Together, these credits can reduce hydrogen’s levelized cost by more than 50%, but new Treasury guidelines impose strict qualification requirements around deliverability, temporal matching, and incrementality. This Enerdatics analysis unpacks both the opportunities and constraints these rules create—highlighting how they affect project siting, renewable integration, and long-term cost competitiveness.

Tags: Hydrogen, 45V Tax Credit, 45Q Tax Credit, Inflation Reduction Act, IRA 2022, Enerdatics, Energy Transition, Investment Incentives