Hydrogen’s $3 Credit Fuels a High-Stakes Race

A generous federal tax credit is accelerating US hydrogen plans, but strict rules and market hurdles are testing developers

19 Feb 2026

The US hydrogen market is stepping into a decisive moment. Federal tax credits and a steady drumbeat of project announcements have nudged clean hydrogen closer to commercial reality, though the picture is more layered than the buzz suggests.

At the heart of the shift is the Section 45V production tax credit created under the Inflation Reduction Act. It offers up to $3 per kilogram for hydrogen that meets tough lifecycle emissions standards. To claim the top tier, developers must prove very low carbon intensity and meet prevailing wage and apprenticeship rules. For projects that qualify, the incentive can transform the math. For those that fall short, margins tighten quickly and financing grows more complicated.

Major industrial players are still in the game, but their playbooks are evolving. Air Products is pressing ahead with large hydrogen and ammonia developments while adjusting timelines as guidance and markets take shape. Plug Power continues to build out capacity and sign supply deals, yet it has slowed or reconsidered some US projects amid funding and demand questions. Linde has leaned into long-term contracts with established customers, choosing steady extensions over splashy acquisitions. The competitive landscape is shifting through joint ventures and phased builds rather than headline grabbing mergers.

Analysts say the tax credit meaningfully narrows the cost gap between conventional hydrogen and cleaner alternatives, assuming projects meet final emissions accounting rules. Carbon intensity is now central to contract talks, especially for buyers facing decarbonization mandates. Cleaner production can offer a tangible edge in winning business.

Uncertainty remains. Final federal guidance on emissions methodology is still critical, and developers face electrolyzer supply limits, grid connection delays, and slower than hoped for customer commitments. In several regions, production announcements are running ahead of firm long-term offtake deals.

Even so, interest from refining, chemicals, and heavy transport is holding steady. Planned regional hydrogen hubs could eventually align supply, infrastructure, and demand. The opportunity is real, but selective, and the next phase will reward discipline as much as ambition.