Clean Hydrogen Investment Tax Credit – Technical and Equipment Guidance Document

Aussi disponible en français sous le titre : Crédit d’impôt à l’investissement pour l’hydrogène propre – Guide technique relatif au matériel

Table of Contents

• List of Tables
• List of Figures
• Abbreviations
• 1 Overview
• 1.1 About This Guide
• 1.2 Terms Used in This Guide
• 1.3 Services Provided by Finance Canada, Natural Resources Canada, Environment and Climate Change Canada, and the Canada Revenue Agency
  • 1.3.1 Finance Canada
  • 1.3.2 Natural Resources Canada
  • 1.3.3 Environment and Climate Change Canada
  • 1.3.4 Canada Revenue Agency
• 1.4 Background
  • 1.4.1 Amount of the Clean Hydrogen Tax Credit
  • 1.4.2 Confirmation of a Clean Hydrogen Project
  • 1.4.3 Carbon Intensity Determination, Validation, and Verification
  • 1.4.4 Determination of Capital Cost
  • 1.4.5 Clean Hydrogen Project Determination
• 1.5 Eligible Clean Hydrogen Property
  • 1.5.1 Ancillary Equipment
  • 1.5.2 System Safety, Integrity, Control, and Monitoring Equipment
• 1.6 Excluded Property
• 1.7 Prorating of Capital Cost
  • 1.7.1 Calculation of Prorating Factors for Dual-Use Electricity and Heat Equipment
  • 1.7.2 Calculation of Prorating Factors for Dual-Use Hydrogen and Ammonia Equipment
  • 1.7.3 Calculation of Prorating Factors for Project Support Equipment
• 2 Common Supporting Processes
  • 2.1 Water Treatment and Use
    • 2.1.1 Water Treatment and Use Processes
    • 2.1.2 Pertinent Eligible Property
    • 2.1.3 Typical Excluded Property
    • 2.1.4 Typical Capital Costs of Eligible Property
    • 2.1.5 Schematic for Eligible Property in a Water Treatment and Use Process
  • 2.2 Electricity and Heat
    • 2.2.1 Electricity and Heat Generation Process, Electricity and Heat Distribution System, and Electricity Transmission System
    • 2.2.2 Pertinent Eligible Property
    • 2.2.3 Typical Excluded Property
    • 2.2.4 Typical Capital Costs of Eligible Property
    • 2.2.5 Schematic for Eligible Property in Electricity and Heat Generation Process, Electricity or Heat Distribution System, and Electricity Transmission System
  • 2.3 Oxygen and Nitrogen Generation
    • 2.3.1 Oxygen and Nitrogen Generation Processes
    • 2.3.2 Pertinent Eligible Property
    • 2.3.3 Typical Excluded Property
    • 2.3.4 Typical Capital Costs of Eligible Property
    • 2.3.5 Schematic for Eligible Property in Oxygen and Nitrogen Generation Processes
  • 2.4 Hydrogen Compression and On-Site Storage
    • 2.4.1 Hydrogen Compression and On-Site Storage Processes
    • 2.4.2 Pertinent Eligible Property
    • 2.4.3 Typical Excluded Property
    • 2.4.4 Typical Capital Costs of Eligible Property
    • 2.4.5 Schematic for Eligible Property in Hydrogen Compression and On-Site Storage Processes
  • 2.5 Notes on Schematics of Common Supporting Processes
    • 2.5.1 Additional Eligible Property Not Shown on the Schematics of Common Supporting Processes
• 3 Production of Hydrogen from Electrolysis of Water
  • 3.1 Low-Temperature Electrolysis of Water
    • 3.1.1 Low-Temperature Water Electrolysis Processes
    • 3.1.2 Pertinent Eligible Property
    • 3.1.3 Typical Excluded Property
    • 3.1.4 Typical Capital Costs of Eligible Property
    • 3.1.5 Schematics for Eligible Property in Low-Temperature Water Electrolysis Processes Using Alkaline and PEM Electrolyser Cell
  • 3.2 High-Temperature Electrolysis of Water
    • 3.2.1 High-Temperature Water Electrolysis Processes
    • 3.2.2 Pertinent Eligible Property
    • 3.2.3 Typical Excluded Property
    • 3.2.4 Typical Capital Costs of Eligible Property
    • 3.2.5 Schematic for Eligible Property in a High-Temperature Water Electrolysis Process Using a SOEC
  • 3.3 Notes on Schematics of Water Electrolysis
    • 3.3.1 Additional Eligible Property Not Shown on the Schematics of Water Electrolysis Processes
• 4 Production of Hydrogen from the Reforming or Partial Oxidation of Eligible Hydrocarbons, with Carbon Dioxide Captured Using a CCUS Process
  • 4.1 Steam Methane Reforming of Eligible Hydrocarbons with Carbon Dioxide Captured Using a CCUS Process
    • 4.1.1 Steam Methane Reforming Processes with Carbon Dioxide Captured Using a CCUS Process
    • 4.1.2 Pertinent Eligible Property
    • 4.1.3 Typical Excluded Property
    • 4.1.4 Typical Capital Costs of Eligible Property
    • 4.1.5 Schematic for Eligible Property in Steam Methane Reforming Process
  • 4.2 Auto-Thermal Reforming of Eligible Hydrocarbons with Carbon Dioxide Captured Using a CCUS Process
    • 4.2.1 Auto-Thermal Reforming Processes with Carbon Dioxide Captured Using a CCUS Process
    • 4.2.2 Pertinent Eligible Property
    • 4.2.3 Typical Excluded Property
    • 4.2.4 Typical Capital Costs of Eligible Property
    • 4.2.5 Schematic for Eligible Property in Auto-Thermal Reforming Process
  • 4.3 Partial Oxidation of Eligible Hydrocarbons with Carbon Dioxide Captured Using a CCUS Process
    • 4.3.1 Partial Oxidation Processes with Carbon Dioxide Captured Using a CCUS Process
    • 4.3.2 Pertinent Eligible Property
    • 4.3.3 Typical Excluded Property
    • 4.3.4 Typical Capital Costs of Eligible Property
    • 4.3.5 Schematic for Eligible Property in Partial Oxidation Process
  • 4.4 Notes on Schematics of Hydrogen Production from Eligible Hydrocarbon Reforming or Partial Oxidation Processes
    • 4.4.1 Additional Eligible Property Not Shown on the Schematics of Hydrogen from Eligible Hydrocarbon Reforming or Partial Oxidation Processes
• 5 Production of Ammonia
  • 5.1 Ammonia from Hydrogen
    • 5.1.1 Ammonia-from-Hydrogen Processes
    • 5.1.2 Pertinent Eligible Property
    • 5.1.3 Typical Excluded Property
    • 5.1.4 Typical Capital Costs of Eligible Property
    • 5.1.5 Schematic for Eligible Property in an Ammonia-from-Hydrogen Process
  • 5.2 Ammonia from an Integrated Clean Hydrogen Project
    • 5.2.1 Ammonia from an Integrated Process
    • 5.2.2 Pertinent Eligible Property
    • 5.2.3 Typical Excluded Property
    • 5.2.4 Typical Capital Costs of Eligible Property
    • 5.2.5 Schematic for Eligible Property in Ammonia Production from an Integrated Process
  • 5.3 Notes on Schematics of Ammonia Production Processes
    • 5.3.1 Additional Eligible Property Not Shown on the Schematics of Ammonia Production Processes
• 6 Glossary of Useful Terms
• 7 Key to Symbols Used in Schematics

List of Tables

• Table 1-1: Examples of clean hydrogen and clean ammonia factors for heat generation equipment
• Table 1-2: Examples of clean hydrogen and clean ammonia factors for electricity generation equipment
• Table 1-3: Example of a project factor for combined heat and power equipment
• Table 1-4: Examples of clean hydrogen and clean ammonia factors for electricity transmission equipment
• Table 1-5: Examples of clean hydrogen and clean ammonia factors for oxygen and nitrogen generation equipment
• Table 1-6: Example of project factor for heat distribution equipment
• Table 1-7: Examples of clean hydrogen and clean ammonia factors for heat distribution equipment
• Table 1-8: Example of project factor for electricity distribution equipment
• Table 1-9: Example of project factor for electricity distribution equipment
• Table 1-10: Examples of clean hydrogen and clean ammonia factors for electricity distribution equipment
• Table 1-11: Examples of clean hydrogen and clean ammonia factors for electricity transmission equipment
• Table 1-12: Examples of clean hydrogen and clean ammonia factors for water treatment and use equipment
• Table 2-1: Project costs for water treatment and use processes.
• Table 2-2: Project costs for electricity and heat generation process, electricity or heat distribution system, and electricity transmission system.
• Table 2-3: Project costs for oxygen and nitrogen generation processes.
• Table 2-4: Project costs for hydrogen compression and on-site storage processes.
• Table 3-1: Project costs for low-temperature water electrolysis processes.
• Table 3-2: Project costs for high-temperature water electrolysis processes.
• Table 4-1: Project costs for steam methane reforming processes.
• Table 4-2: Project costs for auto-thermal reforming processes.
• Table 4-3: Project costs for partial oxidation processes.
• Table 5-1: Project costs for ammonia-from-hydrogen processes.
• Table 5-2: Project costs for an integrated ammonia process.

List of Figures

• Figure 2-1: Example of a water treatment and use process.
• Figure 2-2: Example of an electricity and heat generation process, electricity and heat distribution system, and electricity transmission system.
• Figure 2-3: Example of an oxygen and nitrogen generation process using cryogenic air separation.
• Figure 2-4: Example of a hydrogen compression and on-site storage process.
• Figure 3-1: Example of a low-temperature water electrolysis process using an alkaline electrolyser.
• Figure 3-2: Example of a low-temperature water electrolysis process using a proton exchange membrane electrolyser.
• Figure 3-3: Example of a high-temperature water electrolysis process using a SOEC.
• Figure 4-1: Example of a steam methane reforming process for hydrogen production.
• Figure 4-2: Example of an auto-thermal reforming process for hydrogen production.
• Figure 4-3: Example of a partial oxidation process for hydrogen production.
• Figure 5-1: Example of an ammonia-from-hydrogen process.
• Figure 5-2: Example of an integrated ammonia process using an auto-thermal reforming process.

Abbreviations

AC	Alternating Current
ASU	Air Separation Unit
CCUS	Carbon Capture, Utilization, and Storage
CH4	Methane
CO	Carbon Monoxide
CO2	Carbon Dioxide
CRA	Canada Revenue Agency
DC	Direct Current
ECCC	Environment and Climate Change Canada
GJ	Gigajoule
H2	Hydrogen
H2O	Water
HRSG	Heat Recovery Steam Generator
IGBT	Insulated-Gate Bipolar Transistor
MWh	Megawatt Hour
LCA	Life Cycle Assessment
NH3	Ammonia
NOx	Nitrogen Oxides
NRCan	Natural Resources Canada
PEM	Proton Exchange Membrane
PSA	Pressure Swing Adsorption
SOEC	Solid Oxide Electrolyser Cell

1.0 Overview

1.1 About This Guide

This edition of the Clean Hydrogen Investment Tax Credit – Technical and Equipment Guidance Document

• provides information concerning the Clean Hydrogen investment tax credit (clean hydrogen tax credit) that is set out in the Income Tax Act (the Act);
• provides guidance on the types of property that are described under eligible clean hydrogen property, including clean ammonia equipment, project support equipment, dual-use electricity and heat equipment, and dual-use hydrogen and ammonia equipment, as defined in the Act;
• applies conclusively with respect to engineering and scientific matters only as it pertains to the determination of whether a property is an eligible clean hydrogen property; and
• provides schematic diagrams of common clean hydrogen project types and property that may be eligible for the clean hydrogen tax credit.

Clean hydrogen projects include a broad range of technologies used to produce clean hydrogen and clean ammonia. In the context of the clean hydrogen tax credit, pathways such as low and high-temperature electrolysis of water, and the reforming or partial oxidation of hydrocarbons with carbon dioxide captured using a carbon capture, utilization, and storage (CCUS) process, may constitute an eligible pathway. While not all these technologies have been commercialized, they are included for reference.

This Guide may not reflect changes to the clean hydrogen tax credit, through subsequent amendments to the Act, but will be updated periodically. Taxpayers should consult the latest version of the Act when they are considering a project to ensure that decisions are based on the legislation in force at that time.

1.2 Terms Used in This Guide

Certain terms used in this Guide, including the terms that are defined in subsection 127.48(1) of the Act, are summarized in the Glossary of Useful Terms, found in Section 6 of this Guide. Throughout this Guide, terms that are defined in the Act are italicized and bolded the first time they appear, and excerpts from the Act are shown in italics.

1.3 Services Provided by Finance Canada, Natural Resources Canada, Environment and Climate Change Canada, and the Canada Revenue Agency

1.3.1 Finance Canada

Finance Canada is responsible for developing tax policy, providing advice to the Minister of Finance, and for the drafting and development of tax legislation and regulations. The legislated conditions of eligibility for the clean hydrogen tax credit are set out in the provisions of the Act. Comments and concerns regarding the policy considerations related to the legislation may be directed to the following address:

1.3.2 Natural Resources Canada

The clean hydrogen tax credit group at Natural Resources Canada (NRCan) is staffed with knowledgeable engineering professionals who are responsible for providing project evaluations of clean hydrogen projects. The clean hydrogen tax credit group advises the Canada Revenue Agency (CRA) on engineering and scientific matters relating to investments in clean hydrogen projects. If in need of guidance on the NRCan submission process, taxpayers or their authorized representatives may contact the clean hydrogen tax credit group at the following address:

To submit a clean hydrogen project plan for evaluation, a taxpayer must complete the pre-screening questionnaire and provide all required documentation in the form and manner determined by the Minister of Natural Resources. This includes a front-end engineering design study, documentation that sets out the expected sources of electricity for the project, and a report by a validation firm that sets out the expected carbon intensity of the hydrogen to be produced by the project. Upon evaluation, the Minister may confirm in writing that the project is a qualified clean hydrogen project. Once the confirmed project has begun operating, NRCan will require the submission of annual carbon intensity reports to confirm the carbon intensity of the hydrogen produced.

1.3.3 Environment and Climate Change Canada

Environment and Climate Change Canada (ECCC) is responsible for the Government of Canada’s Fuel Life Cycle Assessment (LCA) Model and supporting related guidance (including the Clean Hydrogen Investment Tax Credit—Carbon Intensity Modelling Guidance Document).

1.3.4 Canada Revenue Agency

Further information regarding the clean hydrogen tax credit’s administration as it relates to the CRA is available at Clean Hydrogen Investment Tax Credit.

1.4 Background

The legislation enacting the clean hydrogen tax credit, as set out in the Act, is the authority in determining the eligibility of expenditures for the clean hydrogen tax credit. Only capital cost of property that is described in the definition of eligible clean hydrogen property, which will be referred to as “Eligible Property,” including clean ammonia equipment, dual-use electricity and heat equipment, dual-use hydrogen and ammonia equipment, or project support equipment, as defined in subsection 127.48(1) of the Act, may be eligible for the clean hydrogen tax credit (see Sections 1.5 to 1.7 of this Guide for more details).

To be considered Eligible Property, the property must

• be acquired by a qualifying taxpayer;
• become available for use in respect of a qualified clean hydrogen project; and
• satisfy other conditions found in Section 1.5 of this Guide.

This Guide provides information on common types of technologies for which equipment may be Eligible Property. More than one technology listed in this Guide may be relevant for a clean hydrogen project. Eligible Property under the clean hydrogen tax credit may be subject to different credit rates. Please refer to all applicable sections of this Guide for information on Eligible Property and for the delineation of process boundaries.

1.4.1 Amount of the Clean Hydrogen Tax Credit

A taxpayer’s clean hydrogen tax credit for a taxation year is the total of all amounts, each of which is the specified percentage of the capital cost of Eligible Property that has been acquired by the taxpayer and becomes available for use in the year, plus any amounts allocated to the taxpayer by a partnership that can be reasonably considered to be the taxpayer’s share of the clean hydrogen tax credit. The specified percentage varies based on the expected carbon intensity of the hydrogen to be produced, as confirmed by the Minister of Natural Resources. For clean ammonia equipment, the specified percentage is different and set at a fixed rate.

The clean hydrogen tax credit rates for Eligible Property (other than clean ammonia equipment or equipment used solely in connection with clean ammonia equipment) acquired and that becomes available for use before 2034 are set at

• 40% if the expected carbon intensity of the hydrogen to be produced by the project is less than 0.75;
• 25% if the expected carbon intensity of the hydrogen to be produced by the project is 0.75 or greater and less than two;
• 15% if the expected carbon intensity of the hydrogen to be produced by the project is two or greater and less than four; and
• 0% if the expected carbon intensity of the hydrogen to be produced by the project is four or greater.

The clean hydrogen tax credit rate for clean ammonia equipment, or equipment described in any of the subparagraphs (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property that is used solely in connection with clean ammonia equipment to produce clean ammonia, and acquired and that becomes available for use before 2034 is set at

• 15% if the expected carbon intensity of the hydrogen to be produced by the clean hydrogen project and used in the production of ammonia is less than four; and
• 0% if the expected carbon intensity of the hydrogen to be produced by the clean hydrogen project and used in the production of ammonia is four or greater.

These rates are reduced by 50% in 2034 and to 0% after 2034.

Qualifying taxpayers must elect to meet certain labour requirements for prevailing wages and apprenticeships to benefit from the regular credit rate for the clean hydrogen tax credit. If qualifying taxpayers do not meet the labour requirements, the credit rate will be reduced by 10 percentage points.

The labour requirements apply to work that is performed on or after November 28, 2023. More information is available at Avoid the reduced tax credit rate for clean economy ITCs.

1.4.2 Confirmation of a Clean Hydrogen Project

To be considered a qualified clean hydrogen project, the Minister of Natural Resources must confirm in writing that

1. the hydrogen will be produced from an eligible pathway;
2. the expected carbon intensity contained in the taxpayer’s most recent clean hydrogen project plan:
   1. is determined in accordance with subsection 127.48(6) of the Act; and
   2. can reasonably be expected to be achieved based on the project design; and
3. if the project is intended to produce clean ammonia, the taxpayer has demonstrated:
   1. that the project can reasonably be expected to have sufficient hydrogen production capacity to satisfy the needs of the taxpayer’s ammonia production facility; and
   2. if the taxpayer’s hydrogen production facility and its ammonia production facility are not co-located, the feasibility of transporting hydrogen between the facilities.

1.4.3 Carbon Intensity Determination, Validation, and Verification

Two other guidance documents provide instructions in the context of the clean hydrogen tax credit:

• the Clean Hydrogen Investment Tax Credit—Carbon Intensity Modelling Guidance Document specifies how to calculate the cradle-to-gate life cycle greenhouse gas emissions (i.e., carbon intensity) of a clean hydrogen project, including for different eligible hydrogen production pathways, using the Government of Canada’s Fuel Life Cycle Assessment Model; and
• the Clean Hydrogen Investment Tax Credit—Validation and Verification Guidance Document specifies the requirements and guidance for validation and verification activities.

1.4.4 Determination of Capital Cost

Capital cost of property generally means the taxpayer’s full cost of acquiring the property and includes

• legal, accounting, engineering, or other fees incurred to acquire the property;
• site preparation, delivery, installation, testing, or other costs incurred to put the property into service; and
• in the case of a property that a taxpayer manufactures for their own use, material, labour, and overhead costs reasonably attributable to the property, but not any profit that might have been earned had the asset been sold.

More information is available in the CRA’s Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance.

The capital cost of Eligible Property does not include any amount in respect of an expenditure incurred for preliminary clean hydrogen work activity.

1.4.5 Clean Hydrogen Project Determination

The Minister of National Revenue may, in consultation with the Minister of Natural Resources, determine that one or more clean hydrogen projects is one project or multiple projects. Any determination is deemed to result in the clean hydrogen project or clean hydrogen projects, being one project or multiple projects, as the case may be.

Final detailed engineering designs must be filed with the Minister of Natural Resources for each clean hydrogen project by the earlier of

• the day on which hydrogen is first produced by the project; and
• the day that is 60 days after the final detailed engineering designs are prepared.

The Minister of Natural Resources may also request from a taxpayer all documentation and information necessary to fulfill their responsibilities in respect of the clean hydrogen tax credit. The Minister may refuse to confirm a clean hydrogen project plan or a revised clean hydrogen project plan if such documentation or information is not provided by the taxpayer on or before the day that is 180 days after it was requested.

1.5 Eligible Clean Hydrogen Property

As defined in subsection 127.48(1) of the Act, eligible clean hydrogen property means property, other than excluded property, that

1. is acquired by a qualifying taxpayer and becomes available for use in respect of a qualified clean hydrogen project of the taxpayer in Canada on or after March 28, 2023;
2. has not been used, or acquired for use or lease, by any person or partnership for any purpose whatever before it was acquired by the taxpayer; and
3. is property situated in Canada
   1. that is used all or substantially all to produce hydrogen through electrolysis of water, including electrolysers, rectifiers, purification equipment, water treatment and conditioning equipment and equipment used for hydrogen compression and storage,
   2. that is used all or substantially all to produce hydrogen from eligible hydrocarbons, including pre-reformers, auto-thermal reformers, steam methane reformers, pre-heating equipment, syngas coolers, shift reactors, purification equipment, fired heaters, water treatment and conditioning equipment, equipment used in hydrogen compression and storage of hydrogen, oxygen production equipment and methanators,
   3. that is
      1. clean ammonia equipment,
      2. dual-use electricity and heat equipment,
      3. dual-use hydrogen and ammonia equipment, or
      4. project support equipment,
   4. that is physically and functionally integrated with the equipment described in any of subparagraphs (i) to (iii) and that is ancillary equipment used solely to support the functioning of equipment described in any of subparagraphs (i) to (iii) within a hydrogen or ammonia production process as part of
      1. an electrical system,
      2. a feed supply system,
      3. a fuel supply system,
      4. a liquid delivery and distribution system,
      5. a cooling system,
      6. a process material storage and handling and distribution system,
      7. a process venting system,
      8. a process waste management system, or
      9. a utility air or nitrogen distribution system,
   5. that is equipment used for system safety and integrity, or as part of a control or monitoring system, solely to support the equipment described in any of subparagraphs (i) to (iv), or
   6. that is property used solely to convert another property that would not otherwise be described in subparagraphs (i) to (v) if the conversion causes the other property to satisfy the description in any of subparagraphs (i) to (v).

The term “all or substantially all” in this Guide is commonly used in the Income Tax Act and is understood to mean at least 90%.

1.5.1 Ancillary Equipment

Examples of ancillary equipment that may qualify as Eligible Property as described in subparagraph (c)(iv) of the definition of eligible clean hydrogen property include:

• equipment that is part of an electrical system to provide electrical power to Eligible Property, such as power wires and cables, conduits, raceways and cable trays, push-button stations, welding and power receptacles, and grounding and instrument wires and cables;
• equipment that is part of a feed supply system to supply feed to equipment, such as piping, valves;
• equipment that is part of a fuel supply system to supply fuel to fuel-fired equipment, such as piping, valves, conveyors, and hoppers;
• equipment that is part of a liquid delivery and distribution system to circulate liquids within the clean hydrogen project, such as piping, holding and temporary storage tanks, loading and unloading equipment (e.g., top and bottom loading arms and loaders, chemical hoses, pumps, vapour recovery lines, valves, joints, fittings), and mechanical circulation equipment;
• equipment that is part of a cooling system to circulate cooling fluid within the clean hydrogen project, such as pumps, compressors, coolers, cooling towers, storage tanks, and filters;
• equipment that is part of a process material storage and handling and distribution system to hold, load and unload, and circulate materials, such as piping, ducting, holding and temporary storage tanks, loading and unloading equipment (e.g., top and bottom loading arms and loaders, chemical hoses, pumps, vapour recovery lines, valves, joints, fittings), conveyors, hoppers, reclaimers, and mechanical circulation equipment;
• equipment that is part of a process venting system to vent gaseous impurities and flare gases (e.g., vent stacks, exhaust stacks, emission control equipment), such as equipment that is used for collecting liquids or other impurities as part of the venting process and mechanical circulation equipment that is used to facilitate venting;
• equipment that is part of a process waste management system to remove waste generated by the clean hydrogen project, such as drain tanks, filters, neutralization basins, pumps, waste effluent handling, separators, condensers, interceptor tanks, and conveyors; and
• equipment that is part of a utility air or nitrogen distribution system to allow operation of process controls and instrumentation in the clean hydrogen project, such as piping, compressors, coolers, and dryers.

1.5.2 System Safety, Integrity, Control, and Monitoring Equipment

Examples of system safety, integrity, control, and monitoring equipment that may qualify as Eligible Property, as described in subparagraph (c)(v) of the definition of eligible clean hydrogen property, include

• equipment to ensure process safety and integrity by reducing the danger of hazardous elements to personnel and equipment that arise from the operation of the clean hydrogen project;
• equipment to achieve process control, such as sensors, meters, actuators, gauges, supervisory control and data acquisition systems, programmable logic controllers, hydrogen leak detection equipment, electrical panel boxes, cables, sampling ports and lines, breakers, and switchgears; and
• equipment to monitor air emissions, flue gas composition, and hydrogen concentration.

1.6 Excluded Property

As defined in subsection 127.48(1) of the Act, excluded property means property that is

1. included in Class 57 or 58 of Schedule II to the Income Tax Regulations;
2. equipment used for the off-site transmission, transportation or distribution of hydrogen or ammonia;
3. equipment used to prepare hydrogen for transport, including liquefaction equipment and equipment used to compress hydrogen to levels suitable for transportation;
4. an automotive vehicle or related refuelling or charging equipment;
5. a building or other structure;
6. construction equipment, furniture or office equipment; or
7. equipment used for off-site storage.

1.7 Prorating of Capital Cost

A prorated portion of the capital cost for the equipment listed below may be eligible for the clean hydrogen tax credit if the equipment is not used all or substantially all to support a qualified clean hydrogen project:

• dual-use electricity and heat equipment;
• project support equipment; and
• equipment described in any of the subparagraphs (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property in subsection 127.48(1) of the Act.

There are four relevant percentages: dual-use factor, project factor, clean hydrogen factor, and clean ammonia factor.

Dual-use electricity and heat equipment must pass a 50% test referred to as the “dual-use factor.” If that is achieved, then all or a portion of the capital cost of dual-use electricity and heat equipment may be eligible for the clean hydrogen tax credit while the remaining portion of the capital cost is ineligible. The dual-use factor does not apply to project support equipment or equipment described in any of the subparagraphs (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property.

The proportion of the capital cost of the equipment listed above that is expected to be used in a qualified clean hydrogen project, referred to below as the “project factor,” is eligible for the clean hydrogen tax credit, while the remaining portion of the cost is ineligible. Where the equipment is used all or substantially all to support a qualified clean hydrogen project, a project factor does not need to be calculated and the entire capital cost of the equipment is eligible for the clean hydrogen tax credit.

Where the capital cost of the following equipment is fully or partially eligible for the clean hydrogen tax credit and the equipment is used in the production of hydrogen and ammonia, the capital cost is allocated between two separate capital cost amounts according to a “clean hydrogen factor” and a “clean ammonia factor”:

• dual-use hydrogen and ammonia equipment;
• dual-use electricity and heat equipment;
• project support equipment; and
• equipment described in any of the subparagraphs (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property in subsection 127.48(1) of the Act.

If an equipment is only used for either hydrogen or ammonia production, clean hydrogen and clean ammonia factors do not need to be calculated and the capital cost of the property is 100% attributable to hydrogen or ammonia production respectively.

The clean hydrogen factor is the percentage of the expected use of the equipment for hydrogen and ammonia production, that is attributable to hydrogen production. Maximum investment tax credit rates of 15%, 25%, or 40% depending on the expected carbon intensity of the hydrogen to be produced, would be applicable to the prorated capital cost of the Eligible property, that is:

$\mathrm{ prorated\; capital\; cost\; of\; Eligible\; <br>Property\; attributable\; to\; hydrogen\; production }<br> = \mathrm{ capital\; cost\; <br>of\; Eligible\; Property }<br> \times \mathrm{ project\; <br>factor }<br> \times \mathrm{ clean\; <br>hydrogen\; factor }$

The clean ammonia factor is the percentage of the expected use of the equipment for hydrogen and ammonia production, that is attributable to ammonia production. A maximum investment tax credit rate of 15% would be applicable to the prorated capital cost of the Eligible property, that is:

$\mathrm{ prorated\; capital\; cost\; <br>of\; Eligible\; Property\; attributable\; to\; <br>ammonia\; production }<br> = \mathrm{ capital\; cost\; <br>of\; Eligible\; Property }<br> \times \mathrm{ project\; <br>factor }<br> \times \mathrm{ clean\; <br>ammonia\; factor }$

1.7.1 Calculation of Prorating Factors for Dual-Use Electricity and Heat Equipment

1.7.1.1 Heat Generation

Heat generation equipment could be Eligible Property if it satisfies paragraph (a) of the definition of dual-use electricity and heat equipment.

The dual-use factor for the heat generation equipment must exceed 50%, based on the project’s most recent clean hydrogen project plan. The dual-use factor is calculated as the percentage of the total amount of heat energy expected to be produced that is expected to be used in a qualified clean hydrogen project or a qualified CCUS project, excluding equipment that uses fossil fuels and emits carbon dioxide (CO₂) that is not subject to capture by a CCUS process, over the first 20 years of the project’s operations.

$\mathrm{dual-use\; factor}=\frac{A}{B}\times 100\%$

If the dual-use factor is greater than 50%, the heat generation equipment is eligible, and a project factor must be calculated to determine the proportion of the capital cost of the equipment that would be considered eligible.

The project factor for heat generation equipment will be calculated as the proportion of heat produced by heat generation equipment that is expected to be used in a qualified clean hydrogen project on an energy basis, based on the project’s most recent clean hydrogen project plan, that is:

$\mathrm{project\; factor}=\frac{C}{B}\times 100\%$

In instances where ammonia is also produced, the clean hydrogen factor and clean ammonia factor for heat generation equipment must then be calculated to determine the proportion of the capital cost amount attributable to hydrogen and ammonia production respectively.

The clean hydrogen factor for heat generation will be calculated as the percentage of the expected use of the equipment attributable to hydrogen production on an energy basis, based on the project’s most recent clean hydrogen project plan, that is:

$\mathrm{clean\; hydrogen\; factor}=\frac{D}{C}\times 100\%$

The clean ammonia factor for heat generation will be calculated as the percentage of the expected use of the equipment attributable to ammonia production on an energy basis, based on the project’s most recent clean hydrogen project plan, that is:

$\mathrm{clean\; ammonia\; factor}=\frac{E}{C}\times 100\%$

All the values should be calculated as totals for the first 20 years of the qualified clean hydrogen project’s operations, taking into account variable plant operation such as maintenance downtime. In addition to applying to the heat generation equipment itself, these factors (excluding the dual-use factor) will apply to equipment supporting heat generation equipment, described in subparagraphs (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property (e.g., ancillary equipment, monitoring and control equipment, conversion equipment). Heat that is recovered from a clean hydrogen project and reused in a different application should not be included in this calculation. If the qualified clean hydrogen project does not produce ammonia, a clean hydrogen factor and a clean ammonia factor do not need to be calculated.

Example 1: A steam boiler generates 3,000,000 GJ of steam over the first 20 years of the clean hydrogen project’s operations (B). A qualified clean hydrogen project making ammonia through reforming of eligible hydrocarbons with carbon dioxide captured using a CCUS process uses 1,950,000 GJ of the heat produced by the steam boiler (C). The qualified CCUS project uses 500,000 GJ of heat, making the total heat used in the clean hydrogen and CCUS projects 2,450,000 GJ (A), where A = C + 500,000. Hydrogen production uses 1,500,000 GJ of heat (D), and ammonia production uses 450,000 GJ of heat (E). The remaining 550,000 GJ of the heat is used to provide energy to a non-clean hydrogen and non-CCUS project.

In this example, the proportion of total heat energy generated that is used in the qualified clean hydrogen or CCUS projects (A/B) is greater than 50% making it Eligible Property (provided that the other conditions are also met). The project factor for the steam boiler would be C/B x 100% = 65%, making 65% of the capital cost of the steam boiler eligible for the clean hydrogen tax credit.

Finally, the clean hydrogen factor is D/C x 100% = 77% and the clean ammonia factor is E/C x 100% = 23%. The project factor, clean hydrogen factor and clean ammonia factor would be applied to the capital cost of the steam boiler, as well as the other equipment used to support the heat generation process such as ancillary equipment described in subparagraphs (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property.

Table 1-1: Examples of clean hydrogen and clean ammonia factors for heat generation equipment

Steam Used in the Qualified Clean Hydrogen Project or Qualified CCUS Project (A)	2,450,000 GJ
Steam Boiler Total Output (B)	3,000,000 GJ
Steam Used in the Qualified Clean Hydrogen Project (C)	1,950,000 GJ
Steam Used in Hydrogen Production (D)	1,500,000 GJ
Steam Used in Ammonia Production (E)	450,000 GJ
Dual-Use Factor (A/B)	82%
Project Factor (C/B)	65%
Clean Hydrogen Factor (D/C)	77%
Clean Ammonia Factor (E/C)	23%

1.7.1.2 Electricity Generation

Electricity generation equipment could be Eligible Property if it satisfies paragraph (a) of the definition of dual-use electricity and heat equipment.

A dual-use factor for the electricity generation equipment must exceed 50%, based on the project’s most recent clean hydrogen project plan. The dual-use factor is calculated as the percentage of the total amount of electricity expected to be produced that is expected to be used in a qualified clean hydrogen project or a qualified CCUS project, excluding equipment that uses fossil fuels and emits carbon dioxide that is not subject to capture by a CCUS process, over the first 20 years of the project’s operations.

$\mathrm{dual-use\; factor}=\frac{F}{G}\times 100\%$

If the dual-use factor is greater than 50%, the electricity generation equipment is eligible, and a project factor must be calculated to determine the proportion of the capital cost of Eligible Property that would be considered eligible.

The project factor for electricity generation equipment will be calculated as the proportion of electricity produced by electricity generation equipment that is expected to be used in a qualified clean hydrogen project on an energy basis, based on the project’s most recent clean hydrogen project plan, that is:

$\mathrm{project\; factor}=\frac{H}{G}\times 100\%$

In instances where ammonia is also produced, the clean hydrogen factor and clean ammonia factor for electricity generation equipment must then be calculated to determine the proportion of the capital cost amount attributable to hydrogen and ammonia production respectively.

The clean hydrogen factor for electricity generation could be calculated as the percentage of the expected use of the equipment attributable to hydrogen production on an energy basis, based on the project’s most recent project plan, that is:

$\mathrm{clean\; hydrogen\; factor}=\frac{I}{H}\times 100\%$

The clean ammonia factor for electricity generation could be calculated as the percentage of the expected use of the equipment attributable to ammonia production on an energy basis, based on the project’s most recent project plan, that is:

$\mathrm{clean\; ammonia\; factor}=\frac{J}{H}\times 100\%$

All values should be calculated as totals for the first 20 years of the qualified clean hydrogen project’s operations, taking into account variable plant operation such as maintenance downtime. In addition to applying to the electricity generation equipment itself, these factors (excluding the dual-use factor) will apply to equipment supporting electricity generation equipment, described in subparagraph (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property (e.g., ancillary equipment, monitoring and control equipment, conversion equipment). If the qualified clean hydrogen project does not produce ammonia a clean hydrogen factor and a clean ammonia factor do not need to be calculated.

Example 2: A steam turbine generates electricity that amounts to 1,200,000 MWh over the first 20 years of the clean hydrogen project’s operations (G). A qualified clean hydrogen project, making ammonia through reforming of eligible hydrocarbons with carbon dioxide captured using a CCUS process uses 650,000 MWh of the electricity produced by the steam turbine (H). A qualified CCUS process uses 200,000 MWh of the electricity, making the total electricity used in the clean hydrogen and CCUS projects 850,000 MWh (F), where F = H + 200,000. Hydrogen production uses 450,000 MWh of electricity (I) while the remaining 200,000 MWh is used for ammonia production (J). The remaining 350,000 MWh is used to provide power to a non-clean hydrogen and non-CCUS project.

In this example, the proportion of the total electrical energy generated that is used in the qualified clean hydrogen or CCUS projects (F/G) is greater than 50%, making it Eligible Property (provided that the other conditions are also met). The project factor for the steam turbine would be H/G x 100% = 54%, making 54% of the capital cost of the steam turbine eligible for the clean hydrogen tax credit.

The clean hydrogen factor is I/H x 100% = 69% and the clean ammonia factor is J/H x 100% = 31%. The project factor, clean hydrogen factor and clean ammonia factor would be applied to the capital cost of the steam turbine, as well as the other equipment used to support the heat generation process such as ancillary equipment described in subparagraphs (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property.

Table 1-2: Examples of clean hydrogen and clean ammonia factors for electricity generation equipment

Electricity Used in the Qualified Clean Hydrogen Project or Qualified CCUS Project (F)	850,000 MWh
Steam Turbine Total Output (G)	1,200,000 MWh
Electricity Used in the Qualified Clean Hydrogen Project (H)	650,000 MWh
Electricity Used in Hydrogen Production (I)	450,000 MWh
Electricity Used in Ammonia Production (J)	200,000 MWh
Dual-Use Factor (F/G)	71%
Project Factor (H/G)	54%
Clean Hydrogen Factor (I/H)	69%
Clean Ammonia Factor (J/H)	31%

1.7.1.3 Combined Electricity and Heat

Combined electricity and heat generation equipment could be Eligible Property if it satisfies paragraph (a) of the definition of dual-use electricity and heat equipment.

A dual-use factor for the electrical energy and heat generation equipment must exceed 50%, based on the project’s most recent clean hydrogen project plan. The dual-use factor is calculated as the percentage of the total amount of electrical or heat energy expected to be produced that is expected to be used in a qualified clean hydrogen project or a qualified CCUS project, excluding equipment that uses fossil fuels and emits carbon dioxide that is not subject to capture by a CCUS process, and the total amount of electrical energy or heat expected to be produced, over the first 20 years of the project’s operations.

$\mathrm{dual-use\; factor}=\frac{A}{B}\times 100\%$

or

$\mathrm{dual-use\; factor}=\frac{F}{G}\times 100\%$

If the dual-use factor is greater than 50%, the combined electricity and heat generation equipment are eligible, and a project factor must be calculated to determine the proportion of the capital cost of Eligible Property that would be considered eligible.

The project factor for combined electricity and heat generation equipment will be calculated as the proportion of combined electricity and heat produced by combined electricity and heat generation equipment that is expected to be used in a qualified clean hydrogen project on an energy basis, based on the project’s most recent clean hydrogen project plan, that is:

$\mathrm{project\; factor}=\frac{M}{L}=\frac{C+(H\times \Theta )}{B+(G\times \Theta )}\times 100\%$

In instances where ammonia is also produced, the clean hydrogen factor and clean ammonia factor for combined electricity and heat generation equipment must then be calculated to determine the proportion of the capital cost amount attributable to hydrogen and ammonia production respectively.

The clean hydrogen factor for combined electricity and heat could be calculated as the percentage of the expected use of the equipment attributable to hydrogen production on an energy basis, based on the project’s most recent clean hydrogen project plan, that is:

$\mathrm{clean\; hydrogen\; factor}=\frac{N}{M}\times 100\%$

Where:

$N=D+(I\times \Theta )$

$M=C+(H\times \Theta )$

The clean ammonia factor for combined electricity and heat could be calculated as the percentage of the expected use of the equipment attributable to ammonia production on an energy basis, based on the project’s most recent project plan, that is:

$\mathrm{clean\; ammonia\; factor}=\frac{O}{M}\times 100\%$

Where:

$O=E+(J\times \Theta )$

$M=C+(H\times \Theta )$

All values should be calculated as totals for the first 20 years of the qualified clean hydrogen project’s operations, taking into account variable plant operation such as maintenance downtime. In addition to applying to the combined heat and power generation equipment itself, these factors (excluding the dual-use factor) will apply to all equipment supporting combined heat and power generation equipment, described in subparagraphs (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property (e.g., ancillary equipment, monitoring and control equipment, conversion equipment). Heat that is recovered from a clean hydrogen project and reused in a different application should not be included in this calculation. If the qualified clean hydrogen project does not produce ammonia, a clean hydrogen factor and clean ammonia factor do not need to be calculated.

Example 3: Combined heat and electricity generation equipment generates 16,000,000 MWh (57,600,000 GJ) of energy over the first 20 years of the clean hydrogen project’s operations (L). Of that amount, 6,400,000 MWh is converted into electrical energy using a generator (G) and the rest is recovered as useful heat energy using a heat recovery steam generator (HRSG), amounting to 34,560,000 GJ of heat energy (B). The qualified clean hydrogen project, making hydrogen through partial oxidation of eligible hydrocarbons with carbon dioxide captured using a CCUS process, consumes 1,500,000 MWh of electrical energy (H) and 20,000,000 GJ of heat energy (C), for a total of 25,400,000 GJ of energy used for the clean hydrogen project (M). The remainder of the generated energy is used to support a qualified CCUS project.

In this example, the total heat energy generated that is used in a qualified clean hydrogen project or for a qualified CCUS project, the dual-use factor for combined electricity and heat, is greater than 50%, making it Eligible Property (provided that the other conditions are also met). The project factor for combined electricity and heat generation would be M/L x 100% = 44%, making 44% of the capital cost of the combined electricity and heat generation equipment eligible for the clean hydrogen tax credit.

Finally, the clean hydrogen factor does not need to be calculated because the project produces only hydrogen. The project factor would be applied to the combined electricity and heat generation equipment, as well as the other equipment used to support the electricity and heat generation process such as ancillary equipment described in subparagraphs (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property.

Table 1-3: Example of a project factor for combined heat and power equipment

Combined Heat and Electricity Output (L)	57,600,000 GJ
Electricity and Heat Used in the Qualified Clean Hydrogen Project (M)	25,400,000 GJ
Total Heat Output (B)	34,560,000 GJ
Total Electricity Output (G)	6,400,000 MWh
Electricity Used in Hydrogen Production (H)	1,500,000 MWh
Heat Used in Hydrogen Production (C)	20,000,000 GJ
Dual-Use Factor (A/B or F/G)	100%
Project Factor (M/L)	44%

1.7.1.4 Electricity Transmission

Electricity transmission equipment could be Eligible Property if it satisfies paragraph (b) of the definition of dual-use electricity and heat equipment and directly transmits electricity from energy generation equipment described in paragraph (a) of the definition of dual-use electricity and heat equipment.

A dual-use factor for the electricity transmission equipment must exceed 50%, based on the project’s most recent clean hydrogen project plan. The dual-use factor is calculated as the percentage of the total amount of electricity expected to be transmitted that is expected to be used in a qualified clean hydrogen project or a qualified CCUS project over the first 20 years of the clean hydrogen project’s operations, that is:

$\mathrm{dual-use\; factor}=\frac{P}{Q}\times 100\%$

If the dual-use factor is greater than 50%, the electricity transmission equipment is eligible, and a project factor must be calculated to determine the proportion of the capital cost of Eligible Property that would be considered to be eligible.

The project factor for electricity transmission equipment is calculated as the proportion of electricity transmitted by electricity transmission equipment that is expected to be used in a qualified clean hydrogen project and the total amount of electricity expected to be transmitted by the equipment, on an energy basis, based on the project’s most recent clean hydrogen project plan, that is:

$\mathrm{project\; factor}=\frac{R}{Q}\times 100\%$

In instances where ammonia is also produced, the clean hydrogen factor and clean ammonia factor for electricity transmission equipment must be calculated to determine the proportion of the capital cost amount attributable to hydrogen and ammonia production respectively.

The clean hydrogen factor for electricity transmission equipment is calculated as the percentage of the expected use of the equipment attributable to hydrogen production on an energy basis, based on the project’s most recent project plan, that is:

$\mathrm{clean\; hydrogen\; factor}=\frac{S}{R}\times 100\%$

The clean ammonia factor for electricity transmission could be calculated as the percentage of the expected use of the equipment attributable to ammonia production on an energy basis, based on the project’s most recent project plan, that is:

$\mathrm{clean\; ammonia\; factor}=\frac{T}{R}\times 100\%$

All values should be calculated as totals for the first 20 years of the qualified clean hydrogen project’s operations, taking into account variable plant operation, such as maintenance downtime. In addition to applying to the transmission equipment itself, these factors (excluding the dual-use factor) will apply to all equipment supporting electricity transmission equipment, described in subparagraphs (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property (e.g., ancillary equipment, monitoring and control equipment, conversion equipment). If the qualified clean hydrogen project does not produce ammonia a clean hydrogen factor and a clean ammonia factor do not need to be calculated.

Example 4: A hydroelectric power dam produces 20,000,000 MWh (Q) over the first 20 years of the clean hydrogen project’s operations and transmits all the power to a primary substation that services a qualified clean hydrogen project making ammonia through reforming of eligible hydrocarbons with carbon dioxide captured using a qualified CCUS process. The qualified clean hydrogen project uses 10,000,000 MWh (S) of this power for hydrogen production, 8,000,000 MWh is used in the ammonia synthesis process (T), and the remaining 2,000,000 MWh is used in the qualified CCUS process. The total electricity consumption for the qualified clean hydrogen project is 18,000,000 MWh (R), where R = S + T.

In this example, the total electrical energy transmitted that is used by a qualified clean hydrogen project or a qualified CCUS project is greater than 50%, making it Eligible Property. The project factor for the hydroelectric power dam and the transmission equipment is 90% and the clean hydrogen factor and the clean ammonia factor are 56% and 44% respectively.

Table 1-4: Examples of clean hydrogen and clean ammonia factors for electricity transmission equipment

Total Electricity Transmitted (Q)	20,000,000 MWh
Electricity Transmitted for Use in the Qualified Clean Hydrogen Project (R)	18,000,000 MWh
Electricity Transmitted for Hydrogen Production (S)	10,000,000 MWh
Electricity Transmitted for Ammonia Production (T)	8,000,000 MWh
Dual-Use Factor (P/Q)	100%
Project Factor (R/Q)	90%
Clean Hydrogen Factor (S/R)	56%
Clean Ammonia Factor (T/R)	44%

1.7.2 Calculation of Prorating Factors for Dual-Use Hydrogen and Ammonia Equipment

Oxygen or nitrogen generation equipment could be Eligible Property if it satisfies the definition of dual-use hydrogen and ammonia equipment.

The clean hydrogen factor for dual-use hydrogen and ammonia equipment is calculated as the percentage of the expected use of the equipment attributable to hydrogen production on a mass basis, based on the project’s most recent project plan, that is:

$\mathrm{clean\; hydrogen\; factor}=\frac{A}{B}\times 100\%$

$\mathrm{clean\; ammonia\; factor}=(1-\frac{A}{B})\times 100\%$

The values for A and B should be calculated as totals for the first 20 years of the qualified clean hydrogen project’s operations, taking into account variable plant operation, such as maintenance downtime. In addition to applying to the oxygen and nitrogen generation equipment itself, the clean hydrogen and clean ammonia factors will apply to all equipment supporting oxygen and nitrogen generation equipment, described in subparagraphs (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property (e.g., ancillary equipment, monitoring and control equipment, conversion equipment). The oxygen and nitrogen generation system does not include the equipment that uses the oxygen and nitrogen.

For systems where either oxygen or nitrogen is being used all or substantially all for the qualified clean hydrogen project, i.e.,

• the oxygen is used for hydrogen production, but the nitrogen is not used for ammonia production, or
• nitrogen is used for ammonia production, but the oxygen is not used for hydrogen production;

the equipment is not a dual-use hydrogen and ammonia equipment, and a clean hydrogen factor does not need to be calculated.

Example 5: A cryogenic air separation unit (ASU) is used to generate oxygen and nitrogen for a plant producing hydrogen by auto-thermal reforming of natural gas and converting it to ammonia. The total mass of oxygen and nitrogen out of the ASU is 38,000,000 tonnes over the first 20 years of the project’s operations. Of that amount, 9,000,000 tonnes of oxygen is supplied to the reformer (A), which is all the generated oxygen, 9,000,000 tonnes of nitrogen is supplied to the Haber-Bosch process to produce ammonia, and the remaining nitrogen is vented, making the total mass of oxygen and nitrogen, which is expected to be supplied by the ASU to the clean hydrogen project’s operations over the first 20 years to be 18,000,000 tonnes (B). This ASU can be considered a dual-use hydrogen and ammonia equipment because all the generated oxygen is supplied for hydrogen production. The clean ammonia and clean hydrogen factors that apply to this ASU are 50% and 50% respectively. These factors are also applied to the equipment used to support the process, such as ancillary equipment described in subparagraphs (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property.

Table 1-5: Examples of clean hydrogen and clean ammonia factors for oxygen and nitrogen generation equipment

Total Useful Oxygen and Nitrogen Output (B)	18,000,000 tonnes
Oxygen Used in Hydrogen Production (A)	9,000,000 tonnes
Nitrogen Used in Ammonia Production	9,000,000 tonnes
Clean Hydrogen Factor (A/B)	50%
Clean Ammonia Factor	50%

1.7.3 Calculation of Prorating Factors for Project Support Equipment

1.7.3.1 Heat Distribution

Heat distribution equipment could be Eligible Property if it satisfies paragraph (b) of the definition of project support equipment.

A project factor must be calculated to determine the proportion of the capital cost of Eligible Property that would be considered to be eligible for the clean hydrogen tax credit.

The project factor for heat distribution equipment is calculated as the proportion between the heat energy directly distributed by heat distribution equipment that is expected to be used in a qualified clean hydrogen project and the total amount of heat energy expected to be distributed by the equipment, based on the project’s most recent clean hydrogen project plan, over the first 20 years of the clean hydrogen project’s operations, that is:

$\mathrm{project\; factor}=\frac{A}{B}\times 100\%$

In instances where ammonia is also produced, the clean hydrogen factor and clean ammonia factor for heat distribution equipment must be calculated to determine the proportion of the capital cost amount attributable to hydrogen and ammonia production respectively.

The clean hydrogen factor for heat distribution equipment is calculated as the percentage of the expected use of the equipment attributable to hydrogen production on an energy basis, based on the project’s most recent clean hydrogen project plan, that is:

$\mathrm{clean\; hydrogen\; factor}=\frac{C}{A}\times 100\%$

The clean ammonia factor for heat distribution equipment is calculated as the percentage of the expected use of the equipment attributable to ammonia production on an energy basis, based on the project’s most recent clean hydrogen project plan, that is:

$\mathrm{clean\; ammonia\; factor}=\frac{D}{A}\times 100\%$

The values for A, B, C, and D should be calculated as totals for the first 20 years of the qualified clean hydrogen project’s operations, taking into account variable plant operation, such as maintenance downtime. In addition to applying to the heat distribution equipment itself, these factors will apply to all equipment supporting heat distribution equipment, described in subparagraphs (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property (e.g., ancillary equipment, monitoring and control equipment, conversion equipment). Heat distribution equipment is considered the equipment required to directly deliver heat from the heat production equipment to the equipment that requires it, including equipment required to recirculate the heating medium to the heat production system. If the qualified clean hydrogen project does not produce ammonia, a clean hydrogen factor and a clean ammonia factor do not need to be calculated.

Example 6: A steam boiler provides 400,000,000 GJ (B) of heat over the first 20 years of the clean hydrogen project’s operations. Of that amount, 300,000,000 GJ is distributed to a non-clean hydrogen project, and 100,000,000 GJ (A) is distributed to a qualified clean hydrogen project. All the 100,000,000 GJ (C) that is distributed to the clean hydrogen project is used for hydrogen production, meaning A = C. The heat distribution system project factor is 25%. The project factor is applied to the entire heat distribution network including the equipment used to support the heat distribution process, such as ancillary equipment described in subparagraphs (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property.

Table 1-6: Example of project factor for heat distribution equipment

Heat Distributed for Use in the Qualified Clean Hydrogen Project (A)	100,000,000 GJ
Total Distributed Heat (B)	400,000,000 GJ
Distributed Heat for Hydrogen Production (C)	100,000,000 GJ
Project Factor (A/B)	25%

Example 7: A heat distribution system is expanded to accommodate a clean hydrogen project. The original heat distribution system was to provide 300,000,000 GJ to non-clean hydrogen equipment over the first 20 years of the clean hydrogen project’s operations, and it is expanded to accommodate 500,000,000 GJ (B) over the same period. The additional 200,000,000 GJ of capacity provides heat to the qualified clean hydrogen project (A). Of this amount, 150,000,000 GJ of heat is distributed for hydrogen production (C) and 50,000,000 GJ of heat is distributed for ammonia production (D). The project factor for this heat distribution expansion is 40% and the clean hydrogen factor and clean ammonia factor are 75% and 25% respectively, which are also applied to any installed equipment used to support the heat distribution process, such as ancillary equipment described in subparagraphs (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property.

Table 1-7: Examples of clean hydrogen and clean ammonia factors for heat distribution equipment

Heat Distributed for Use in the Qualified Clean Hydrogen Project (A)	200,000,000 GJ
Total Distributed Heat (B)	500,000,000 GJ
Heat Distributed for Hydrogen Production (C)	150,000,000 GJ
Heat Distributed for Ammonia Production (D)	50,000,000 GJ
Project Factor (A/B)	40%
Clean Hydrogen Factor (C/A)	75%
Clean Ammonia Factor (D/A)	25%

1.7.3.2 Electricity Distribution

Electricity distribution equipment can be Eligible Property if it satisfies paragraph (b) of the definition of project support equipment.

Each segment of the electricity distribution equipment, namely primary substations, secondary substations, and distribution points could have different factors. Primary substations are regarded as the equipment that transforms high-voltage electricity (i.e., transmission power) into medium voltage electricity (i.e., distribution power) and distributes it to secondary substations. Secondary substations are regarded as the equipment that transforms medium voltage electricity into low-voltage electricity (i.e., utilization power) and distributes it to distribution points. Distribution points are the equipment that transform and distribute the low-voltage electricity to plant equipment as required. The power lines that supply the secondary substations and distribution points with electricity shall have a clean hydrogen factor equal to the secondary substation or distribution point they power.

A project factor must be calculated to determine the proportion of the capital cost of electricity transmission equipment that would be considered to be eligible for the clean hydrogen tax credit.

The project factor for electricity distribution equipment is calculated as the proportion between the electrical energy directly distributed by electricity distribution equipment that is expected to be used in a qualified clean hydrogen project and the total amount of electrical energy expected to be distributed by the equipment, based on the project’s most recent clean hydrogen project plan, over the first 20 years of the clean hydrogen project’s operations, that is:

$\mathrm{project\; factor}=\frac{E_{i,j}}{F_{i,j}}\times 100\%$

In instances where ammonia is also produced, the clean hydrogen factor and clean ammonia factor for electricity distribution equipment must be calculated to determine the proportion of the capital cost amount attributable to hydrogen and ammonia production respectively.

The clean hydrogen factor for electricity distribution could be calculated as the percentage of the expected use of the equipment attributable to hydrogen production on an energy basis, based on the project’s most recent project plan, that is:

$\mathrm{Distribution\; Point\; clean\; hydrogen\; Factor}=\frac{G}{E}\times 100\%$

$\mathrm{Secondary\; Substation\; clean\; hydrogen\; Factor}=\frac{1}{E}\begin{array}{c}n\\ \sum \\ i=1\end{array}{J}_i\times 100\%$

$\mathrm{Primary\; Substation\; clean\; hydrogen\; Factor}=\frac{1}{E}\begin{array}{c}m\\ \sum \\ j=1\end{array}\begin{array}{c}n\\ \sum \\ i=1\end{array}\left(K_{j,i}\right)\times 100\%$

The clean hydrogen factor for electricity distribution could be calculated as the percentage of the expected use of the equipment attributable to ammonia production on an energy basis, based on the project’s most recent project plan, that is:

$\mathrm{Distribution\; Point\; clean\; ammonia\; Factor}=\frac{L}{E}\times 100\%$

$\mathrm{Secondary\; Substation\; clean\; ammonia\; Factor}=\frac{1}{E}\begin{array}{c}n\\ \sum \\ i=1\end{array}{M}_i\times 100\%$

$\mathrm{Primary\; Substation\; clean\; ammonia\; Factor}=\frac{1}{E}\begin{array}{c}m\\ \sum \\ j=1\end{array}\begin{array}{c}n\\ \sum \\ i=1\end{array}\left(N_{j,i}\right)\times 100\%$

All values should be calculated as totals for the first 20 years of the qualified clean hydrogen project’s operations, taking into account variable plant operation, such as maintenance downtime. In addition to applying to the electricity distribution equipment itself, these factors will apply to all equipment supporting electricity distribution equipment, described in subparagraphs (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property (e.g., ancillary equipment, monitoring and control equipment, conversion equipment). Each primary and secondary substation and distribution point that distributes power to a qualified clean hydrogen project will have a separate clean hydrogen and clean ammonia factor calculated. If the qualified clean hydrogen project does not produce ammonia, a clean hydrogen factor and a clean ammonia factor do not need to be calculated.

Example 8: A clean hydrogen production facility is installed in a biofuel plant. The electrical requirement of the electrolysers in this qualified clean hydrogen project is 10,000,000 MWh (J). There is an existing primary substation that provides power to the biofuel plant, and the primary substation is sized to accommodate this additional capacity requirement. However, an additional secondary substation must be built to supply power to the qualified clean hydrogen project. From this secondary substation, 10,000,000 MWh (E) will be delivered to the qualified clean hydrogen project, and 5,000,000 MWh will be delivered to the biofuel plant equipment. In total, the secondary substation will deliver 15,000,000 MWh of electricity (F). In this scenario, the transmission lines and primary substation would not be eligible for the clean hydrogen tax credit. The secondary substation and distribution power lines would have a project factor of 67%, and the low-voltage power lines and low-voltage supply systems used to distribute electricity to the clean hydrogen equipment would be considered used all or substantially all by the qualified clean hydrogen project.

Table 1-8: Example of project factor for electricity distribution equipment

Electricity Distributed for Use in the Qualified Clean Hydrogen Project (E)	10,000,000 MWh
Total Electricity Distributed by Secondary Substation (F)	15,000,000 MWh
Electricity Distributed by Secondary Substation for Hydrogen Production (J)	10,000,000 MWh
Project Factor (E/F)	67%

Example 9: A clean hydrogen production facility is installed in a refinery. The electrical requirement of the qualified clean hydrogen project is 20,000,000 MWh (E). A primary substation exists in the region, but it does not have adequate capacity to service the increased demand. An expansion is installed to increase the substation’s capacity from 20,000,000 MWh to 40,000,000 MWh (F) over the first 20 years of the clean hydrogen project’s operations. No new transmission lines are needed. A new secondary substation is installed to service the qualified clean hydrogen project. In this scenario, the primary substation expansion would have a project factor of 50% because, after the expansion, the substation would deliver 20,000,000 MWh to the clean hydrogen project (K) and 20,000,000 MWh to the refinery. The secondary substation would be considered used all or substantially all by the qualified clean hydrogen project, as would the distribution lines and low-voltage power lines. These systems would therefore not be subject to a project factor.

Table 1-9: Example of project factor for electricity distribution equipment

Electricity Distributed for Use in the Qualified Clean Hydrogen Project (E)	20,000,000 MWh
Total Electricity Distributed by Primary Substation (F)	40,000,000 MWh
Electricity Distributed by Primary Substation for Hydrogen Production (K)	20,000,000 MWh
Project Factor (E/F)	50%

Example 10: A wind farm provides 60,000,000 MWh, over the first 20 years of the clean hydrogen project’s operations, to the grid and a clean hydrogen project making ammonia from reforming of natural gas. As the wind farm provides intermittent capacity, the existing primary substation is used to support the qualified clean hydrogen project with grid electricity without requiring an expansion. At the primary substation, the power is sent to three secondary substations. An existing secondary substation is expanded, and two new secondary substations are installed to service the clean hydrogen project. Secondary substation A, which is a new substation, draws 10,000,000 MWh of the electricity to power the hydrogen production process of the clean hydrogen project for hydrogen production (J_A, E_Secondary,A, F_Secondary,A). Secondary substation B, which is expanded from 5,000,000 MWh to 10,000,000 MWh (F_Secondary,B) over the first 20 years of the clean hydrogen project’s operations, draws 2,000,000 MWh to power the hydrogen production equipment (J_B) and 8,000,000 MWh to power the ammonia synthesis (M_B), making the total electricity transmitted from secondary substation B to the clean hydrogen project 10,000,000 MWh (E_Secondary,B). Secondary substation C draws 10,000,000 MWh (F_Secondary,C) and uses 5,000,000 MWh for the clean hydrogen process (J_C) and 5,000,000 MWh for ineligible processes, making the total electricity transmitted from secondary substation C to the clean hydrogen project 5,000,000 MWh (E_Secondary,C). The primary substation provides 5,000,000 MWh to ineligible processes, 8,000,000 MWh to the ammonia synthesis (N_Primary) of the clean hydrogen project, and 17,000,000 MWh for the hydrogen production (K_Primary) of the clean hydrogen project, for a total capacity of 30,000,000 MWh (F_Primary), making the total electricity transmitted from the primary substation to the clean hydrogen project 25,000,000 MWh, where E_Primary = K_Primary + N_Primary. The primary substation has a project factor of 83% and a clean hydrogen factor and a clean ammonia factor of 68% and 32% respectively. Secondary substation A has a project factor of 100% and does not need a clean hydrogen factor nor a clean ammonia factor as it is only used for hydrogen production in a qualified clean hydrogen project, as are its distribution lines. Secondary substation B and its distribution lines have a project factor of 100%, a clean hydrogen factor of 20%, and a clean ammonia factor of 80%. Secondary substation C and its distribution lines have a project factor of 50% and does not need a clean hydrogen factor nor a clean ammonia factor as it is only used for hydrogen production.

Table 1-10: Examples of clean hydrogen and clean ammonia factors for electricity distribution equipment

Total Electricity Distributed by Primary Substation for Use in the Qualified Clean Hydrogen Project (EPrimary)	25,000,000 MWh
Total Electricity Distributed by Primary Substation (FPrimary)	30,000,000 MWh
Total Electricity Distributed by Primary Substation for Hydrogen Production (KPrimary)	17,000,000 MWh
Total Electricity Distributed by Primary Substation for Ammonia Production (NPrimary)	8,000,000 MWh
Total Distributed Electricity by Secondary Substation A (FSecondary,A)	10,000,000 MWh
Total Electricity Distributed by Secondary Substation A for Hydrogen Production (JA)	10,000,000 MWh
Total Distributed Electricity by Secondary Substation B (FSecondary,B)	10,000,000 MWh
Total Electricity Distributed by Secondary Substation B for Hydrogen Production (JB)	2,000,000 MWh
Total Electricity Distributed by Secondary Substation B for Ammonia Production (MB)	8,000,000 MWh
Total Distributed Electricity by Secondary Substation C (FSecondary,C)	10,000,000 MWh
Total Electricity Distributed by Secondary Substation C for Hydrogen Production (JC)	5,000,000 MWh
Project Factor for Primary Substation (EPrimary/FPrimary)	83%
Project Factor for Secondary Substation A (ESecondary,A/FSecondary,A)	100%
Project Factor for Secondary Substation B (ESecondary,B/FSecondary,B)	100%
Project Factor for Secondary Substation C (ESecondary,C/FSecondary,C)	50%
Clean Hydrogen Factor for Primary Substation (KPrimary/EPrimary)	68%
Clean Ammonia Factor for Primary Substation (NPrimary/EPrimary)	32%
Clean Hydrogen Factor for Secondary Substation B (JSecondary,B/ESecondary,B)	20%
Clean Ammonia Factor for Secondary Substation B (MSecondary,B/ESecondary,B)	80%

1.7.3.3 Electricity Transmission

Electricity transmission equipment could be Eligible Property if it satisfies paragraph (a) of the definition of project support equipment.

For electricity transmission equipment to be project support equipment, it needs to be directly transmitting electrical energy from on-site electrical generation equipment to a qualified clean hydrogen project. If the electricity transmission equipment is a project support equipment, a project factor, a clean hydrogen factor, and a clean ammonia factor must be calculated to determine the proportion of the capital cost of project support equipment that would be considered to be eligible for the clean hydrogen tax credit.

The project factor for electricity transmission equipment is calculated as the proportion of electricity directly transmitted by electricity transmission equipment that is expected to be used in a qualified clean hydrogen project and the total amount of electricity expected to be transmitted by the equipment, on an energy basis, based on the project’s most recent clean hydrogen project plan, that is:

$\mathrm{project\; factor}=\frac{O}{P}\times 100\%$

In instances where ammonia is also produced, the clean hydrogen factor and clean ammonia factor for electricity transmission equipment must be calculated to determine the proportion of the capital cost amount attributable to hydrogen and ammonia production respectively.

The clean hydrogen factor for electricity transmission equipment is calculated as the percentage of the expected use of the equipment attributable to hydrogen production on an energy basis, based on the project’s most recent project plan, that is:

$\mathrm{clean\; hydrogen\; factor}=\frac{Q}{O}\times 100\%$

The clean ammonia factor for electricity generation could be calculated as the percentage of the expected use of the equipment attributable to ammonia production on an energy basis, based on the project’s most recent project plan, that is:

$\mathrm{clean\; ammonia\; factor}=\frac{R}{O}\times 100\%$

The values for O, P, Q, and R should be calculated as totals for the first 20 years of the qualified clean hydrogen project’s operations, taking into account variable plant operation, such as maintenance downtime. In addition to applying to the transmission equipment itself, these factors will apply to equipment supporting electricity transmission equipment, described in subparagraphs (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property (e.g., ancillary equipment, monitoring and control equipment, conversion equipment). If the qualified clean hydrogen project does not produce ammonia, a clean hydrogen factor and a clean ammonia factor do not need to be calculated.

Example 11: An on-site solar plant produces 5,000,000 MWh (P) over the first 20 years of the clean hydrogen project’s operations and transmits all of the power to a primary substation that services a qualified clean hydrogen project. Of that amount, 2,500,000 MWh (Q) is used for electrolysers, 500,000 MWh (R) is used for ammonia production, and the remaining 2,000,000 MWh is used by another facility. The total electricity transmitted to the qualified Clean Hydrogen Project is 3,000,000 MWh (O), where O = Q + R. In this scenario, the primary substation directly transmits electrical energy from on-site electrical generation equipment to a qualified clean hydrogen project, making it project support equipment, but the solar plant is not eligible for clean hydrogen tax credit because electricity generation equipment is not Eligible Property when producing hydrogen via electrolysis of water. The project factor for the transmission equipment would be 60% and the clean hydrogen factor and the clean ammonia factor would be 83% and 17% respectively.

Table 1-11: Examples of clean hydrogen and clean ammonia factors for electricity transmission equipment

Total Transmitted Electricity (P)	5,000,000 MWh
Electricity Transmitted for Use in the Qualified Clean Hydrogen Project (O)	3,000,000 MWh
Electricity Transmitted for Hydrogen Production (Q)	2,500,000 MWh
Electricity Transmitted for Ammonia Production (R)	500,000 MWh
Project Factor (O/P)	60%
Clean Hydrogen Factor (Q/O)	83%
Clean Ammonia Factor (R/O)	17%

1.7.3.4 Water Delivery, Collection, Recovery, Treatment, or Recirculation

Water delivery, collection, recovery, treatment, or recirculation equipment could be Eligible Property if it satisfies paragraph (c) of the definition of project support equipment.

A project factor must be calculated to determine the proportion of the capital cost of Eligible Property that would be considered to be eligible for the clean hydrogen tax credit.

The project factor for water delivery, collection, recovery, treatment, or recirculation equipment is calculated as the proportion between the mass of water that is expected to be used in a qualified clean hydrogen project and the total mass of water expected to be supplied by the equipment, based on the project’s most recent clean hydrogen project plan, over the first 20 years of the clean hydrogen project’s operations, that is:

$\mathrm{project\; factor}=\frac{S}{T}\times 100\%$

In instances where ammonia is also produced, the clean hydrogen factor and clean ammonia factor for water delivery, collection, recovery, treatment, or recirculation equipment is calculated to determine the proportion of the capital cost amount attributable to hydrogen and ammonia production respectively.

The clean hydrogen factor for water delivery, collection, recovery, treatment, or recirculation equipment will be the proportion between the project factor that is expected to be used by a qualified clean hydrogen project for hydrogen production and the total mass of water expected to be supplied by the water delivery, collection, recovery, treatment, or recirculation equipment over the first 20 years of the clean hydrogen project’s operations, that is:

$\mathrm{clean\; hydrogen\; factor}=\frac{U}{S}\times 100\%$

The clean ammonia factor for water delivery, collection, recovery, treatment, or recirculation equipment will be the proportion between the project factor that is expected to be used by a qualified clean hydrogen project for ammonia production and the total mass of water expected to be supplied by the water delivery, collection, recovery, treatment, or recirculation equipment over the first 20 years of the clean hydrogen project’s operations, that is:

$\mathrm{clean\; ammonia\; factor}=\frac{V}{S}\times 100\%$

The values for S, T, U, and V should be calculated as totals for the first 20 years of the qualified clean hydrogen project’s operations, taking into account variable plant operation, such as maintenance downtime. In addition to applying to the water delivery, collection, recovery, treatment, and recirculation equipment itself, this clean hydrogen factor will apply to equipment supporting water delivery, collection, recovery, treatment, and recirculation equipment, described in subparagraphs (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property (e.g., ancillary equipment, monitoring and control equipment, conversion equipment). If the qualified clean hydrogen project does not produce ammonia, a clean hydrogen factor does not need to be calculated.

Example 12: A water delivery, collection, recovery, treatment, and recirculation process that meets the definition of project support equipment supports a plant producing clean hydrogen from eligible hydrocarbons with carbon dioxide captured using a CCUS process. This water treatment and use process delivers 18,000,000 tonnes of water over the first 20 years of the clean hydrogen project’s operations (T), of which 8,000,000 tonnes is supplied for the reforming of eligible hydrocarbons (U), 4,000,000 tonnes is supplied for ammonia synthesis (V), and 6,000,000 tonnes is supplied to a CCUS process. Total water consumption by the qualified clean hydrogen project is 12,000,000 tonnes (S), where S = U + V. The project factor for this water treatment and use process is 67%, the clean hydrogen factor is 67%, and the clean ammonia factor is 33%. These factors would be applied to the water delivery, collection, recovery, treatment, and recirculation equipment, as well as any installed equipment used to support the water delivery, collection, recovery, treatment, and recirculation process, such as ancillary equipment described in subparagraphs (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property.

Table 1-12: Examples of clean hydrogen and clean ammonia factors for water treatment and use equipment

Qualified Clean Hydrogen Project Water Consumption (S)	12,000,000 tonnes
Total Processed Water (T)	18,000,000 tonnes
Processed Water for Hydrogen Production (U)	8,000,000 tonnes
Processed Water for Ammonia Production (V)	4,000,000 tonnes
Project Factor (S/T)	67%
Clean Hydrogen Factor (U/S)	67%
Clean Ammonia Factor (V/S)	33%

2.0 Common Supporting Processes

2.1 Water Treatment and Use

2.1.1 Water Treatment and Use Processes

2.1.2 Pertinent Eligible Property

This section lists equipment related to a water treatment and use process that may qualify as Eligible Property. While this list is intended to include key equipment examples, recognizing the variability in processes and equipment configurations for clean hydrogen production, property will be evaluated on a case-by-case basis. The equipment described in this section must meet the conditions of Section 2.1.1 above. Whether a particular property is Eligible Property within a qualified clean hydrogen project will be based on the definitions set out in the Act and determined by this Guide.

Examples of Eligible Property for a water treatment and use process could include, but are not limited to

• water treatment and conditioning equipment (e.g., screens, clarifiers, filters, ultrafilters, ultraviolet clarifiers, ultraviolet disinfecting units, reverse osmosis membranes, degassers, scrubbers, softeners, deaerators, descalers, evaporators, crystallizers, electrodeionizer, ion exchange resin beds) to remove impurities and treat the incoming and outgoing water to meet quality requirements so that the clean hydrogen project can function at its intended level of performance;
• water supply equipment (e.g., pumps, piping, valves, utility lines) to move the incoming, treated, and outgoing water required for electrolysis, reforming, steam generation, cooling, and other water needs that support the clean hydrogen project;
• on-site tanks and vessels for handling water and chemicals (e.g., mixing tanks, make-up tanks, holding tanks, chemical totes) to hold water and other fluids and material and recover water for re-use, as well as equipment that is used to maintain the chemicals and fluids at the necessary storage conditions;
• mechanical fluid circulation equipment (e.g., pumps) to move process streams; and
• any other property that is described in the definition of eligible clean hydrogen property in relation to a water treatment and use process in a qualified clean hydrogen project, including, but not limited to, ancillary equipment and system safety, integrity, control, or monitoring equipment listed respectively in Sections 1.5.1 and 1.5.2 of this Guide, as well as property used solely to convert another property to satisfy the description of equipment in clause (c)(iii)(D) or subparagraphs (c)(iv) or (c)(v) of the definition of eligible clean hydrogen property.

Certain property that supports a water treatment and use process, described in the definitions of project support equipment and dual-use electricity and heat equipment, may also be Eligible Property. See Section 2.2 of this Guide for more information on the following property:

• equipment that generates heat energy in support of a qualified clean hydrogen project;
• equipment that generates electrical energy in support of a qualified clean hydrogen project excluding electricity generation equipment that supports the project indirectly by way of an electrical utility grid;
• equipment that generates a combination of electrical and heat energy in support of a qualified clean hydrogen project excluding electricity generation equipment that supports the project indirectly by way of an electrical utility grid;
• equipment that distributes electrical energy or heat energy in direct support of a qualified clean hydrogen project; and
• equipment that directly transmits electrical energy from electrical generation equipment to a qualified clean hydrogen project.

2.1.3 Typical Excluded Property

Property used in a water treatment and use process that is not Eligible Property is ineligible for the clean hydrogen tax credit. Examples of typical excluded property are listed in Section 1.6 of this Guide.

2.1.4 Typical Capital Costs of Eligible Property

Typical capital costs of constructing a water treatment and use process would include costs for equipment categories that are provided in Table 2-1.

Table 2-1: Project costs for water treatment and use processes

1	Water treatment equipment
2	Water delivery, collection, recovery, and recirculation equipment
3	Mechanical fluid circulation equipment
4	Cooling and heat transfer equipment
5	Water supply system
6	Electricity distribution equipment—see Section 2.2 of this Guide for details
7	Electricity transmission equipment—see Section 2.2 of this Guide for details
8	Electricity generation equipment—see Section 2.2 of this Guide for details
9	Electrical system equipment
10	Liquid delivery and distribution system equipment
11	Utility cooling system equipment
12	Process material storage and handling and distribution system equipment (e.g., holding tanks, conditioning equipment, fluid transfer equipment, piping)
13	Venting system equipment
14	Process waste management system equipment
15	Compressed utility air or nitrogen distribution system equipment
16	Complete monitoring and process control systems, including gas monitoring and leak detection and air emissions monitoring equipment
17	Process safety equipment
18	Flow control and containment equipment
19	Equipment for conversion of existing property into Eligible Property

2.1.5 Schematic for Eligible Property in a Water Treatment and Use Process

Some typical elements of a water treatment and use process that is part of a clean hydrogen project are shown in Figure 2-1. Process boundaries described here are for a typical water treatment and use process, using a schematic of a water treatment process using filters, reverse osmosis membranes, and ion exchange demineralisation as a representative example.

The specific property that is used in a water treatment and use process may depend on the level of water treatment required in the clean hydrogen project. Whether particular property is Eligible Property will depend on its function within the clean hydrogen project.

For notes on the boundaries of this schematic, as well as other schematics in Section 2, refer to Section 2.5 of this Guide. Not all notes apply to each schematic.

Figure 2-1: Example of a water treatment and use process

Click for larger image

Table Data

Equipment Identifier	Equipment Type	Equipment Description
F-101	Filter	Raw Water Filters
F-102	Filter	Reverse Osmosis Membranes
P-101	Pump	Untreated Water Pump
P-102	Pump	Reverse Osmosis Water Pump
P-103	Pump	Reverse Osmosis Clean-In-Place Pump
P-104	Pump	Demineralized Water Pump
P-105	Pump	Treated Water Pump
T-101	Tank	Untreated Water Tank
T-102	Tank	Reverse Osmosis Feedwater Tank
T-103	Tank	Water Treatment Chemicals Tank
T-104	Tank	Clean-In-Place Tank
T-105	Tank	Ion Exchange Regeneration Chemicals Tank
T-106	Tank	Demineralized Water Tank
T-107	Tank	Treated Water Tank
T-108	Tank	Ion Exchange Regeneration Waste Water Tank
V-101	Packed Vessel	Ion Exchange Demineralisation Vessels

Stream Number	Stream Description
1	Raw Water Inlet
2	Chemicals for Clean-In-Place
3	Condensate and Cooling Water Return
4	Filtered Water
5	Water Treatment Chemicals
6	Reverse Osmosis Membrane Water Inlet
7	Reverse Osmosis Membrane Cleaning Solution
8	Ion Exchange Demineralisation Inlet
9	Demineralized Water
10	Treated Water
11	Chemicals for Ion Exchange Regeneration
12	Ion Exchange Regeneration Waste Water
13	Ion Exchange Regeneration Waste Water Purge
14	Back Wash Water
15	Clean-In-Place Purge
16	Retentate Purge

Reference Identifier	Referenced Plant Section	CH-ITC Technical and Equipment Guidance Section
REF-01	Production of Hydrogen	3, 4
REF-02	Oxygen and Nitrogen Generation	2.3
REF-03	Hydrogen Compression and On-site Storage	2.4
REF-04	Electricity and Heat	2.2
REF-05	Production of Ammonia	5

Text version

Diagram illustrating the boundaries of water treatment and use process, which begin from the water source at CSS-3 and water return at CSS-5 and includes items such as filters, tanks, pumps, and deionizers needed to treat water until it reaches CSS-6, where the use of treated and demineralized water begins. Boundaries for secondary streams within this process include CSS-4 for water treatment chemicals inlet and CSS-7 for purge water streams.

2.2 Electricity and Heat

2.2.1 Electricity and Heat Generation Process, Electricity and Heat Distribution System, and Electricity Transmission System

2.2.2 Pertinent Eligible Property

This section lists equipment related to electricity and heat generation, electricity or heat distribution, and electricity transmission that may qualify as Eligible Property. While this list is intended to include key equipment examples, recognizing the variability in processes and equipment configurations for clean hydrogen production, property will be evaluated on a case-by-case basis. The equipment described in this section must meet the conditions of Section 2.2.1 above. Whether a particular property is Eligible Property within a qualified clean hydrogen project will be based on the definitions set out in the Act and determined by this Guide.

Examples of Eligible Property for electricity and heat generation, electricity or heat distribution, and electricity transmission could include, but are not limited to

• electricity, heat, or combined electricity and heat generation equipment to produce the electricity and heat in a clean hydrogen project that produces hydrogen from eligible hydrocarbons, such as
  • conventional electricity and heat-generating equipment and cogeneration equipment (e.g., steam turbine generators, gas turbine generators, reciprocating engine generator, steam boilers, expander generators) to provide electrical or heat energy to a clean hydrogen project;
  • clean electricity and heat-generating equipment to produce electrical or heat energy for a clean hydrogen project from
    • eligible electricity generation sources;
    • hydrogen or eligible hydrocarbons; or
    • waste heat recovered from hydrogen or ammonia production;
  • heat recovery equipment (e.g., HRSGs, heat recovery boilers, heat exchangers, evaporators, recuperators) to recover heat for use in a cogeneration system within a clean hydrogen project;
  • backup power equipment (e.g., generator sets, uninterruptible power supply, battery backups) to be used for alternate power supply as needed for the clean hydrogen project;
• heat distribution equipment (e.g., piping, valves, ducts, steam traps) to deliver heat energy to support a clean hydrogen project;
• electricity transmission or distribution equipment to deliver electrical power to support a clean hydrogen project, such as
  • electrical substation equipment (e.g., transmission lines, distribution lines, lighting arresters, bus bars) to interconnect parts of an electric utility system within the clean hydrogen project;
  • voltage/power transformation equipment (e.g., step-down and step-up transformers, voltage adaptors, voltage regulators, volt-ampere reactive compensator capacity upgrade) to stabilize electricity and transfer electricity between circuits that have a change in voltage level;
  • wiring equipment (e.g., wires and cables, conduits, raceways and cable trays, industrial outlets, connectors) to conduct electric current through the power system, including equipment to enclose electrical or electronic equipment and protect them against harsh environments (e.g., electrical enclosures);
  • protection and switchgear equipment (e.g., fuse boxes, breakers and breaker panels, transfer switch systems, disconnects, contactors, protection relays) to control, protect, and isolate electrical equipment or an electrical circuit from damage due to overload or short circuit in the power system;
• on-site tanks and vessels (e.g., mixing tanks, make-up tanks, holding tanks) for handling water and other process material, as well as equipment that is used to maintain fluids at the necessary storage conditions;
• mechanical fluid circulation equipment (e.g., blowers, fans, vacuum pumps, pumps) to maintain circulation in the cooling water loops and moving process streams and fluids; and
• any other property that is described in the definition of eligible clean hydrogen property in relation to electricity and heat generation, electricity or heat distribution and electricity transmission, including, but not limited to, ancillary equipment and system safety, integrity, control, or monitoring equipment listed respectively in Sections 1.5.1 and 1.5.2 of this Guide, as well as property used solely to convert another property to satisfy the description of equipment in clauses (c)(iii)(B) or (c)(iii)(D) or subparagraphs (c)(iv) or (c)(v) of the definition of eligible clean hydrogen property.

Certain property that supports an electricity and heat generation process, electricity or heat distribution system, or electricity transmission system, described in paragraph (c) of the definition of project support equipment, may also be Eligible Property. See Section 2.1 of this Guide for more information on water treatment and use equipment that delivers, collects, recovers, treats, or recirculates water, or a combination of any of those activities, in direct support of a qualified clean hydrogen project.

2.2.3 Typical Excluded Property

Property used in an electricity and heat generation process, electricity or heat distribution system, or electricity transmission system that is not Eligible Property is ineligible for the clean hydrogen tax credit. Examples of typical ineligible property of an electricity and heat process comprise excluded property listed in Section 1.6 of this Guide, and the following:

• electricity and heat generation equipment where the equipment uses fossil fuels and emits carbon dioxide that is not subject to capture by a CCUS process;
• fuel storage, processing, conditioning, and upgrading equipment that is used to bring fuel to the conditions required for the electricity and heat generation equipment, including monitoring and control equipment, buildings or other structures, and ancillary equipment that supports such equipment;
• power lines that sit on a shared transmission tower but are solely used to deliver electrical power as part of the electrical grid system to a process that is not part of the clean hydrogen project;
• electricity and heat generation equipment when producing clean hydrogen solely via electrolysis of water;
• equipment indirectly distributing electrical energy by way of an electrical utility grid; and
• equipment directly transmitting electrical energy from off-site electrical generation equipment when producing hydrogen via electrolysis of water.

This list is not exhaustive and is meant to provide general guidance on property that is not Eligible Property.

2.2.4 Typical Capital Costs of Eligible Property

Typical capital costs of constructing an electricity and heat generation process, electricity or heat distribution system, or electricity transmission system would include costs for equipment categories that are provided in Table 2-2.

Table 2-2: Project costs for electricity and heat generation process, electricity or heat distribution system, and electricity transmission system

1	Electricity and mechanical work generation equipment, including process maintenance equipment
2	Electricity transmission and distribution equipment, including ancillary phase synchronization, voltage regulation, frequency control, cooling, lubrication, fire protection, and acoustic protection equipment
3	Steam or heat generation equipment, including air supply and ash elimination equipment
4	Heat distribution equipment
5	Water delivery, collection, recovery, treatment, and recirculation equipment, including impurity removal and heat recovery equipment—see Section 2.1 of this Guide for details
6	Boiler feed water systems
7	Heat recovery equipment
8	Mechanical fluid circulation equipment
9	Electrical system equipment
10	Fuel supply system equipment
11	Liquid delivery and distribution system equipment
12	Utility cooling system equipment
13	Process material storage and handling and distribution system equipment (e.g., holding tanks, conditioning equipment, fluid transfer equipment, piping)
14	Venting system equipment
15	Process waste management system equipment
16	Compressed utility air or nitrogen distribution system equipment
17	Complete monitoring and process control systems, including gas monitoring and leak detection and air emissions monitoring equipment
18	Process safety equipment
19	Flow control and containment equipment
20	Equipment for conversion of existing property into Eligible Property

2.2.5 Schematic for Eligible Property in Electricity and Heat Generation Process, Electricity or Heat Distribution System, and Electricity Transmission System

Some typical elements of an electricity and heat generation process, electricity or heat distribution system, or electricity transmission system that is part of a clean hydrogen project are shown in Figure 2-2. Process boundaries defined here are for a typical electricity and heat generation process, electricity or heat distribution system, or electricity transmission system, using a schematic of a combined cycle gas turbine as a representative example.

The specific property that is used in an electricity and heat generation process, electricity or heat distribution system, or electricity transmission system may depend on the type and configuration of the process used in the clean hydrogen project. Whether particular property is Eligible Property will depend on its function within the clean hydrogen project.

For notes on the boundaries of this schematic, as well as the other schematics in Section 2, refer to Section 2.5 of this Guide. Not all notes apply to each schematic.

Figure 2-2: Example of an electricity and heat generation process, electricity and heat distribution system, and electricity transmission system

Click for larger image

Table Data

Equipment Identifier	Equipment Type	Equipment Description
B-101	Blower	Filtered Air Supply Blower
E-101	Steam Generator	Heat Recovery Steam Generator (HRSG)
E-102	Heat Exchanger	Condensate Return Heat Exchanger
E-103	Heat Exchanger	Turbine Steam Condenser
EL-101	Electrical Infrastructure	Gas Turbine Electrical Generator
EL-102	Electrical Infrastructure	Alternating Current Source
EL-103	Electrical Infrastructure	Electrical Substation 1
EL-104	Electrical Infrastructure	Transmission Equipment
EL-105	Electrical Infrastructure	Steam Turbine Electrical Generator
EL-106	Electrical Infrastructure	Back-Up Generator
EL-107	Electrical Infrastructure	Battery Storage / Uninterruptable Power Supply
EL-108	Electrical Infrastructure	Electrical Substation 2
K-101	Turbine	Gas Turbine
K-102	Turbine	Steam Turbine
P-101	Pump	Demineralized Water Pump
P-102	Pump	HRSG Feedwater Pump
T-101	Tank	Condensate Storage Tank
V-101	Gas-Liquid Separator	Blowdown Knock-Out Drum
V-102	Deaerator	Boiler Feedwater Deaerator

Stream Number	Stream Description
1	Gas Turbine Fuel Supply
2	Fuel Supply to HRSG
3	Filtered Air
4	Demineralized Water
5	Heated Deaerator Feed
6	HRSG Feed Water
7	Steam Supply
8	Low Pressure Steam
9	Steam Condensate
10	Condensate to Water Treatment
11	HRSG Blowdown
12	Low Pressure Flash Steam
13	Boiler Blowdown Liquids
14	Gas Turbine Flue Gas
15	HRSG Flue Gas
16	High Voltage Substation Supply
17	Battery/Uninterruptable Power Supply Tie-In
18	Back-Up Generator Supply
19	Transmission Line
20	Distribution Line

Reference Identifier	Referenced Plant Section	CH-ITC Technical and Equipment Guidance Section
REF-01	Water Treatment and Use	2.1
REF-02	Oxygen and Nitrogen Generation	2.3
REF-03	Hydrogen Compression and On-site Storage	2.4
REF-04	Production of Hydrogen from Reforming	4
REF-05	Production of Ammonia	5
REF-06	CO2 Capture and Storage Process(es)	-
REF-07	Off-site Electricity Generation	-

Text version

Diagram illustrating the boundaries of electricity and heat process equipment supporting a clean hydrogen project, which includes equipment, such as electricity and steam generators, and substations needed to provide electricity and/or steam to a clean hydrogen project. Boundaries for electricity within this process include CSS-9 and CSS-11, and boundaries for steam include CSS-10. Boundaries for secondary streams within this process include CSS-8 for fuel supply inlet.

2.3 Oxygen and Nitrogen Generation

2.3.1 Oxygen and Nitrogen Generation Processes

2.3.2 Pertinent Eligible Property

This section lists equipment related to an oxygen or nitrogen generation process that may qualify as Eligible Property. While this list is intended to include key equipment examples, recognizing the variability in processes and equipment configurations for clean hydrogen production, property will be evaluated on a case-by-case basis. The equipment described in this section must meet the conditions of Section 2.3.1 above. Whether a particular property is Eligible Property within a qualified clean hydrogen project will be based on the definitions set out in the Act and determined by this Guide.

Examples of Eligible Property for an oxygen and nitrogen generation process could include, but are not limited to

• air compression and expansion equipment (e.g., multistage centrifugal compressors, axial compressors, reciprocating compressors, expansion turbines) to compress atmospheric air to desired conditions prior to undergoing liquefaction and separation, including any mechanical fluid circulating equipment, such as pumps, blowers, and fans;
• air pre-purification equipment (e.g., temperature swing adsorption columns, reversing heat exchangers, chilled-water condenser/separators, knockout drums, scrubbers, oil absorbers, filters, dryers) to remove contaminants, such as moisture, dust, carbon dioxide, and hydrocarbons;
• heat exchange and cooling equipment (e.g., reversing heat exchangers, precoolers, intercoolers, aftercoolers, condensers, cooling water heat exchangers, direct contact coolers, turbo-expanders, condenser/evaporator heat exchangers, cooling towers, multi-stream plate-fin heat exchangers) to cool the compressed air and resulting product streams and to transfer heat between warm and cold streams to optimize the efficiency of the process;
• cold containment equipment (e.g., cold box) used to minimize heat exchange, which contains the cryogenic rectification, separation, and heat exchange equipment, such as subcooler heat exchangers;
• air separation system (e.g., low- and high-pressure distillation columns of ASUs, reboilers, molecular sieves, adsorption columns, semipermeable membranes, ion exchange resins, vortex tubes) to fractionate air into oxygen and nitrogen using distillation, adsorption, membranes, ion exchange, or vortex tube technologies;
• mechanical fluid circulation, pressurization, and expansion equipment (e.g., expanders, Joule-Thompson valves, compressors, expansion turbines, cryogenic pumps) to pressurize, expand, and move air, the resulting oxygen and nitrogen, and other process streams;
• on-site tanks for handling materials (e.g., high-pressure cylinders, cylinder filling systems, pressure regulators, storage tanks, cryogenic storage tanks) as well as equipment that is used to maintain the fluids at the necessary storage conditions; and
• any other property that is described in the definition of eligible clean hydrogen property in relation to an oxygen and nitrogen generation process, including, but not limited to, ancillary equipment and system safety, integrity, control, or monitoring equipment, listed respectively in Sections 1.5.1 and 1.5.2 of this Guide, as well as property used solely to convert another property to satisfy the description of equipment in paragraph (c) of the definition of clean ammonia equipment or clause (c)(iii)(C) or subparagraphs (c)(ii), (c)(iv), or (c)(v) of the definition of eligible clean hydrogen property.

Certain property that supports an oxygen or nitrogen generation process, described in the definition of project support equipment and the definition of dual-use electricity and heat equipment, may also be Eligible Property. See Sections 2.1 and 2.2 of this Guide for more information on the following property:

• equipment that generates heat energy in support of a qualified clean hydrogen project;
• equipment that generates electrical energy in support of a qualified clean hydrogen project excluding electricity generation equipment that supports the project indirectly by way of an electrical utility grid;
• equipment that generates a combination of electrical and heat energy in support of a qualified clean hydrogen project excluding electricity generation equipment that supports the project indirectly by way of an electrical utility grid;
• equipment that distributes electrical energy or heat energy in direct support of a qualified clean hydrogen project;
• equipment that directly transmits electrical energy from electrical generation equipment to a qualified clean hydrogen project; and
• equipment that delivers, collects, recovers, treats, or recirculates water, or a combination of any of those activities, in direct support of a qualified clean hydrogen project.

2.3.3 Typical Excluded Property

Property used in an oxygen and nitrogen generation process that is not Eligible Property is ineligible for the clean hydrogen tax credit. Examples of typical ineligible property of an oxygen and nitrogen generation process comprise excluded property listed in Section 1.6 of this Guide, and separation, handling, treatment, and storage equipment (e.g., filters, fluid circulation equipment, cooling equipment, separation equipment, ancillary equipment) for by-product gases.

2.3.4 Typical Capital Costs of Eligible Property

Typical capital costs of constructing an oxygen and nitrogen generation process would include costs for equipment categories that are provided in Table 2-3.

Table 2-3: Project costs for oxygen and nitrogen generation processes

1	Air purification equipment
2	Air compression equipment
3	Air separation equipment
4	Oxygen and nitrogen liquefaction and storage equipment
5	Cold containment equipment (e.g., cold box)
6	Heat exchange and cooling equipment
7	Water delivery, collection, recovery, treatment, and recirculation equipment—see Section 2.1 of this Guide for details
8	Electricity distribution equipment—see Section 2.2 of this Guide for details
9	Electricity transmission equipment—see Section 2.2 of this Guide for details
10	Electricity generation equipment—see Section 2.2 of this Guide for details
11	Electrical system equipment
12	Liquid delivery and distribution system equipment
13	Utility cooling system equipment
14	Process material storage and handling and distribution system equipment (e.g., holding tanks, conditioning equipment, fluid transfer equipment, piping)
15	Venting system equipment
16	Process waste management system equipment
17	Compressed utility air or nitrogen distribution system equipment
18	Complete monitoring and process control systems, including gas monitoring and leak detection and air emissions monitoring equipment
19	Process safety equipment
20	Flow control and containment equipment
21	Equipment for conversion of existing property into Eligible Property

2.3.5 Schematic for Eligible Property in Oxygen and Nitrogen Generation Processes

Some typical elements of an oxygen and nitrogen generation process that is part of a clean hydrogen project are shown in Figure 2-3. Process boundaries defined here are for a typical oxygen and nitrogen generation process, using a schematic of cryogenic air separation as a representative example.

The specific property that is used in an oxygen and nitrogen generation process may depend on the type and configuration of the process used in the clean hydrogen project. Whether particular property is Eligible Property will depend on its function within the clean hydrogen project.

For notes on the boundaries of this schematic, as well as the other schematics in Section 2, refer to Section 2.5 of this Guide. Not all notes apply to each schematic.

Figure 2-3: Example of an oxygen and nitrogen generation process using cryogenic air separation

Click for larger image

Table Data

Equipment Identifier	Equipment Type	Equipment Description
C-101	Compressor	Main Air Compressor
C-102	Compressor	Booster Compressor
C-103	Compressor	Oxygen Compressor
E-101	Heat Exchanger	Air Compressor Water Aftercooler
E-102	Heat Exchanger	Air Water Cooling Tower
E-103	Heat Exchanger	Nitrogen Water Cooling Tower
E-104	Heat Exchanger	Main Air Separation Unit Heat Exchanger
E-105	Heat Exchanger	Sub-Cooler Heat Exchanger
E-106	Heat Exchanger	Distillation Column Heat Exchanger
E-107	Heat Exchanger	Oxygen Vaporizer
E-108	Heat Exchanger	Nitrogen Vaporizer
E-109	Heat Exchanger	Oxygen Compressor Water Aftercooler
E-110	Heat Exchanger	Nitrogen Heater
F-101	Filter	Dust Filter
K-101	Expander	Air Expansion
P-101	Pump	Cooling Water Pump
P-102	Pump	Liquid Oxygen Pump
P-103	Pump	Liquid Oxygen Pump 2
P-104	Pump	Liquid Nitrogen Pump
T-101	Tank	Liquid Oxygen Storage Tank
T-102	Tank	Liquid Nitrogen Storage Tank
V-101	Adsorption Colmn	Molecular Sieve Columns
V-102	Distillation Column	High Pressure (HP) Distillation Column
V-103	Distillation Column	Low Pressure (LP) Distillation Column

Stream Number	Stream Description
1	Inlet Air
2	Filtered Air
3	Compressed Air
4	Cooled Air
5	Cooling Water Inlet
6	Chilled Water
7	Low Pressure Purified Air
8	Purified High Pressure Air
9	High Pressure Liquid Air to HP Column
10	Low Pressure Air to HP Column
11	Low Pressure Air to LP Column
12	Liquid Crude Oxygen Output from HP Column
13	Liquid Nitrogen Output from Column
14	Liquid Air Output from HP Column
15	Liquid Oxygen to Main Heat Exchanger
16	Oxygen Gas Output
17	Liquid Oxygen to Subcooler
18	Liquid Oxygen for Storage
19	Vaporized Oxygen for Reforming
20	Nitrogen Feed to Low Pressure Column
21	Liquid Nitrogen for Storage
22	Vaporized Nitrogen for Ammonia Production
23	Low Pressure Column Nitrogen Gas Output
24	Nitrogen Gas for Ammonia Production
25	Vented Nitrogen
26	Nitrogen Gas for Chilling Water
27	Nitrogen Gas for Regeneration of the Adsorption Column
28	Waste Nitrogen
29	Steam for Heating Nitrogen
30	Steam Condensate Return

Reference Identifier	Referenced Plant Section	CH-ITC Technical and Equipment Guidance Section
REF-01	Electricity and Heat	2.2
REF-02	Water Treatment and Use	2.1
REF-03	Production of Hydrogen from Reforming	4
REF-04	Production of Ammonia	5

Text version

Diagram illustrating the boundaries of an oxygen and nitrogen generation process using cryogenic air separation. The boundary ends at oxygen supply at CSS-12 and nitrogen supply at CSS-13 and includes items needed to cool and separate air to oxygen and nitrogen, such as compressors, heat exchangers, distillation columns, and storage tanks. Boundaries for secondary streams within this process include CSS-10 for steam supply inlet and CSS-5 for water return for treatment.

2.4 Hydrogen Compression and On-Site Storage

2.4.1 Hydrogen Compression and On-Site Storage Processes

2.4.2 Pertinent Eligible Property

This section lists equipment related to a hydrogen compression and on-site storage process that may qualify as Eligible Property. While this list is intended to include key equipment examples, recognizing the variability in processes and equipment configurations for clean hydrogen production, property will be evaluated on a case-by-case basis. The equipment described in this section must meet the conditions of Section 2.4.1 above. Whether a particular property is Eligible Property within a qualified clean hydrogen project will be based on the definitions set out in the Act and determined by this Guide.

Examples of Eligible Property for a hydrogen compression and on-site storage process could include, but are not limited to

• mechanical pressurization and circulation equipment (e.g., reciprocating compressors, diaphragm compressors, centrifugal compressors, pumps, blowers, fans) to circulate cooling fluid and hydrogen and pressurize hydrogen to conditions required for storage, transportation, or distribution;
• cooling and heat exchange equipment (e.g., intercoolers, aftercoolers, cooling water heat exchangers, direct contact coolers, turbo-expanders) to dissipate heat generated during hydrogen compression;
• impurity separation equipment (e.g., knockout drums, scrubbers, filters, dryers, other separators) to separate liquids and other impurities from hydrogen;
• on-site tanks for storing hydrogen (e.g., steel tanks, compressed gas tanks) as well as equipment to maintain the fluids at the necessary storage conditions; and
• any other property that is described in the definition of eligible clean hydrogen property in relation to a hydrogen compression and on-site storage process in a qualified clean hydrogen project, including, but not limited to, ancillary equipment and system safety, integrity, control, or monitoring equipment listed respectively in Sections 1.5.1 and 1.5.2 of this Guide, as well as property used solely to convert another property to satisfy the description of equipment in subparagraphs (c)(i), (c)(ii), (c)(iv), or (c)(v) of the definition of eligible clean hydrogen property.

Certain property that supports a hydrogen compression and on-site storage process, described in the definitions of project support equipment and dual-use electricity and heat equipment, may also be Eligible Property. See Sections 2.1 and 2.2 of this Guide for more information on the following property:

• equipment that generates heat energy in support of a qualified clean hydrogen project;
• equipment that generates electrical energy in support of a qualified clean hydrogen project excluding electricity generation equipment that supports the project indirectly by way of an electrical utility grid;
• equipment that generates a combination of electrical and heat energy in support of a qualified clean hydrogen project excluding electricity generation equipment that supports the project indirectly by way of an electrical utility grid;
• equipment that distributes electrical energy or heat energy in direct support of a qualified clean hydrogen project;
• equipment that directly transmits electrical energy from electrical generation equipment to a qualified clean hydrogen project.
• equipment that delivers, collects, recovers, treats, or recirculates water, or a combination of any of those activities, in direct support of a qualified clean hydrogen project.

2.4.3 Typical Excluded Property

Property used in the hydrogen compression and on-site storage process that is not Eligible Property is ineligible for the clean hydrogen tax credit. Examples of typical ineligible property of a hydrogen compression and on-site storage process comprise excluded property listed in Section 1.6 of this Guide, and equipment for compression of gases other than hydrogen.

2.4.4 Typical Capital Costs of Eligible Property

Typical capital costs of constructing a hydrogen compression and on-site storage process would include costs for equipment categories that are provided in Table 2-4.

Table 2-4: Project costs for hydrogen compression and on-site storage processes

1	Hydrogen pressurization and compression equipment
2	Mechanical fluid circulation equipment
3	Cooling and heat transfer equipment
4	Impurity separation equipment
5	Water delivery, collection, recovery, treatment, and recirculation equipment—see Section 2.1 of this Guide for details
6	Electricity distribution equipment—see Section 2.2 of this Guide for details
7	Electricity transmission equipment—see Section 2.2 of this Guide for details
8	Electricity generation equipment—see Section 2.2 of this Guide for details
9	Electrical system equipment
10	Liquid delivery and distribution system equipment
11	Utility cooling system equipment
12	Process material storage and handling and distribution system equipment (e.g., holding tanks, conditioning equipment, fluid transfer equipment, piping)
13	Venting system equipment
14	Process waste management system equipment
15	Compressed utility air or nitrogen distribution system equipment
16	Complete monitoring and process control systems, including gas monitoring and leak detection and air emissions monitoring equipment
17	Process safety equipment
18	Flow control and containment equipment
19	Equipment for conversion of existing property into Eligible Property

2.4.5 Schematic for Eligible Property in Hydrogen Compression and On-Site Storage Processes

Some typical elements of hydrogen compression and on-site storage that is part of a clean hydrogen project are shown in Figure 2-4. Process boundaries defined here are for a typical hydrogen compression and on-site storage process, using a schematic of a multistage compression process with intercoolers and aftercoolers as a representative example.

The specific property that is used in a hydrogen compression and on-site storage process may depend on the type and configuration of the process used in the clean hydrogen project. Whether particular property is Eligible Property will depend on its function within the clean hydrogen project.

For notes on the boundaries of this schematic, as well as the other schematics in Section 2, refer to Section 2.5 of this Guide. Not all notes apply to each schematic.

Figure 2-4: Example of a hydrogen compression and on-site storage process

Click for larger image

Table Data

Equipment Identifier	Equipment Type	Equipment Description
C-101	Compressor	Hydrogen 1st Stage Compressor
C-102	Compressor	Hydrogen 2nd Stage Compressor
E-101	Heat Exchanger	Compressor Intercooler
E-102	Heat Exchanger	Compressor Aftercooler
T-101	Tank	Hydrogen Storage Tank

Stream Number	Stream Description
1	Low Pressure Hydrogen
2	Compressed Hydrogen
3	Compressed and Cooled Hydrogen
4	Compressed Hydrogen to Ammonia Synthesis
5	Compressed Hydrogen for Offsite Distribution
6	Compressed Hydrogen for Onsite Storage

Reference Identifier	Referenced Plant Section	CH-ITC Technical and Equipment Guidance Section
REF-01	Production of Hydrogen	3, 4
REF-02	Production of Ammonia	5

Text version

Diagram illustrating the boundaries of a hydrogen compression and on-site storage process. The boundary begins after hydrogen production at CSS-14 (see Sections 3 or 4 of this Guide) and includes items needed to compress, cool, and store hydrogen, such as compressors, intercoolers, aftercoolers, and storage tanks. The boundary ends at CSS-15 where compressed hydrogen is delivered to an ammonia synthesis plant and for off-site storage and transportation begins.

2.5 Notes on Schematics of Common Supporting Processes

Notes on the schematic boundaries are provided here, including the definition of process boundaries for common supporting processes described in Sections 2.1, 2.2, 2.3, and 2.4 of this Guide.

CSS-1	For descriptions of Eligible Property included within this process boundary, see Sections 2.1.2, 2.2.2, 2.3.2, and 2.4.2 of this Guide.
CSS-2	For descriptions of ineligible property within the process, see Sections 2.1.3, 2.2.3, 2.3.3, and 2.4.3 of this Guide.
CSS-3	The water delivery, collection, recovery, treatment, and recirculation system used by a water treatment process is described in paragraph (c) of the definition of project support equipment. It includes piping and components that are used to supply feed water to Eligible Property. The water treatment and use process boundary related to the water system begins at and includes the first control valve along the piping system that is used by project support equipment. In the absence of the control valve, the boundary begins at the first Eligible Property in the water treatment and use process. The boundary includes downstream piping and components, up to the point where the piping for the water use process physically connects to the property described in paragraph (c) of the definition of project support equipment, or other equipment described in the definitions of eligible clean hydrogen property, dual-use electricity and heat equipment, or dual-use hydrogen and ammonia equipment.
CSS-4	The process material storage and handling and distribution system used by a water treatment process is described in clause (c)(iv)(F) of the definition of eligible clean hydrogen property. It includes piping and components that are used to carry solid, liquid, or gaseous materials from unloading areas to Eligible Property. The water treatment process boundary related to the material storage and handling and distribution system begins at and includes the fitting that connects the piping to the delivery vessel or pipeline. The boundary includes downstream piping, up to the point where the piping for the process material storage and handling and distribution system physically connects to the property described in paragraph (c) of the definition of project support equipment.
CSS-5	The water delivery, collection, recovery, treatment, and recirculation system that supports a qualified clean hydrogen project is described in paragraph (c) of the definition of project support equipment. The water treatment process boundary related to the water use system begins at and includes the first control valve along the piping, that is used by property described in paragraph (c) of the definition of project support equipment. In the absence of a control valve, the process boundary begins at the point where the piping for the water use process physically connects to property described in paragraph (c) of the definition of project support equipment. The boundary includes downstream piping and components and ends at the point where the piping for the water use process physically connects to the property described in paragraph (c) of the definition of project support equipment.
CSS-6	The water delivery, collection, recovery, treatment, and recirculation system that supports an Eligible Property is described in paragraph (c) of the definition of project support equipment. The water treatment and use process boundary, as it pertains to, and is used solely for, the transfer of water from a water treatment process to other Eligible Property, begins at the first fitting used to transfer water from Eligible Property in the water treatment process. The boundary includes downstream piping and components, up to but excluding, the first control valve used solely by other Eligible Property (e.g., water electrolysis hydrogen production process) described in subparagraphs (c)(i) to (c)(vi) of the definition of eligible clean hydrogen property. In the absence of the above-mentioned control valve, the boundary does not include the piping and components used to transfer water.
CSS-7	The process waste management system used by a water treatment process is described in clause (c)(iv)(H) of the definition of eligible clean hydrogen property. It includes piping and components that are used to deliver waste streams from Eligible Property to loading areas. The water treatment process boundary related to the waste management system begins at the point where the piping for the process waste management system physically connects to the property described in paragraph (c) of the definition of project support equipment. The boundary includes downstream piping and components, up to and including, the last control valve before the point where the waste is removed from the plant boundary.
CSS-8	The fuel supply system used by a dual-use electricity and heat process is described in clause (c)(iv)(C) of the definition of eligible clean hydrogen property. It includes piping and components used to deliver fuel to dual-use electricity and heat equipment. The electricity and heat process boundary related to the fuel supply system begins at and includes the first control valve or fitting along the piping that is used solely by dual-use electricity and heat equipment. The boundary includes piping up to the point where the piping physically connects to the property described in paragraph (a) in the definition of dual-use electricity and heat equipment.
CSS-9	The power distribution system that is part of a project support equipment is described in paragraph (b) of the definition of project support equipment. It includes the power lines and components that are used to distribute electrical energy from an on-site electricity generation property. The process boundary related to the power distribution system begins at and includes the master substation breaker for a power distribution substation along the power distribution system that is used by the Eligible Property. The boundary includes downstream power lines, up to the point where the power lines for the power distribution system physically connects to other property described in subparagraphs (c)(i) to (c)(vi) of the definition of eligible clean hydrogen property. If the power distribution substation is not used by the Eligible Property, the project support equipment boundary related to the power distribution system begins at and includes the first master breaker along the power distribution system that is used by the Eligible Property. Where there is no master breaker, the power distribution system is not within the boundary of the project support equipment.
CSS-10	The heat distribution system that is part of a project support equipment is described in paragraph (b) of the definition of project support equipment. It includes piping and components that are used to distribute heat energy to Eligible Property. The process boundary related to the heat distribution system, as it pertains to the transfer of heat from the heat generation equipment to other Eligible Property, begins at the point where the piping for the heat distribution system physically connects to the heat generation equipment described in paragraph (a) of the definition of dual-use electricity and heat equipment or in the definition of eligible clean hydrogen property. The boundary includes downstream piping and components, up to but excluding, the first control valve that is used by other Eligible Property described in the definition of eligible clean hydrogen property. In the absence of the above-mentioned valve, the boundary does not include the piping or components used to transfer heat.
CSS-11	The power transmission system that is part of a dual-use electricity and heat equipment is described in paragraph (b) of the definition of dual-use electricity and heat equipment. It includes the power lines and components that are used to transmit electrical energy from an electricity generation property. The process boundary related to the power transmission system begins at and includes the master substation breaker for a power transmission substation along the power transmission system that is used by the Eligible Property. The boundary includes downstream power lines, up to the point where the power lines for the power transmission system physically connects to other property described in subparagraphs (c)(ii) to (c)(vi) of the definition of eligible clean hydrogen property. If not physically connected to this other property, the process boundary related to the power transmission system begins at and includes the first isolation switch along the power lines that is used by Eligible Property. Where there is no isolation switch, the power transmission system is not within the boundary of the power and heat and water process.
CSS-12	The process material storage and handling and distribution system used by an oxygen generation process is described in clause (c)(iv)(F) of the definition of eligible clean hydrogen property. It includes piping and components that are used to carry solid, liquid, or gaseous materials from the oxygen generation equipment to Eligible Property. The oxygen generation process boundary, as it pertains to, and is used solely for, the transfer of oxygen from an oxygen generation process to other Eligible Property in reforming or partial oxidation hydrogen production, begins at the first fitting used to transfer oxygen from Eligible Property in an oxygen generation process. The boundary includes downstream piping and components, up to but excluding, the first control valve used solely by other Eligible Property in reforming or partial oxidation hydrogen production described in subparagraph (c)(ii) of the definition of eligible clean hydrogen property. In the absence of the above-mentioned control valve, the boundary does not include the piping and components used to transfer oxygen.
CSS-13	The process material storage and handling and distribution system used by a nitrogen generation process is described in clause (c)(iv)(F) of the definition of eligible clean hydrogen property. It includes piping and components that are used to carry solid, liquid, or gaseous materials from the nitrogen generation equipment to Eligible Property. The nitrogen generation process boundary, as it pertains to, and is used solely for, the transfer of nitrogen from a nitrogen generation process to other Eligible Property in ammonia production, begins at the first fitting used to transfer nitrogen from Eligible Property in a nitrogen generation process. The boundary includes downstream piping and components, up to but excluding, the first control valve used solely by other Eligible Property in ammonia production described in clause (c)(iii)(A) of the definition of eligible clean hydrogen property. In the absence of the above-mentioned control valve, the boundary does not include the piping and components used to transfer nitrogen.
CSS-14	The hydrogen supply piping that is used by a compression and storage process is described in clause (c)(iv)(F) of the definition of eligible clean hydrogen property. The process boundary, as it pertains to the transfer of hydrogen from Eligible Property in a hydrogen production process to Eligible Property in the hydrogen compression and on-site storage process, begins at and includes the first control valve that is used solely by hydrogen compression and on-site storage Eligible Property. The boundary includes downstream piping and components, up to Eligible Property used for hydrogen compression and on-site storage described in subparagraph (c)(i) or (c)(ii) of the definition of eligible clean hydrogen property. In the absence of the above-mentioned control valve, the boundary does not include the piping and components used to transfer hydrogen.
CSS-15	The process boundary of the compressed hydrogen transfer piping system that is used by a hydrogen compression and on-site storage process is described in clause (c)(iv)(F) of the definition of eligible clean hydrogen property. The boundary includes piping and components downstream of hydrogen compression and storage Eligible Property described in subparagraph (c)(i) or (c)(ii), up to, and including, the last control valve before the point where clean hydrogen is removed from the plant boundary, or further compressed for transportation. If the hydrogen is used to produce ammonia, the process boundary includes piping and components downstream of hydrogen compression and storage Eligible Property described in subparagraph (c)(i) or (c)(ii). The boundary ends at and excludes the first control valve where the piping is solely used by property described in clause (c)(iii)(A) of the definition of eligible clean hydrogen property. In the absence of the control valve, the boundary does not include the piping and components used to transfer hydrogen.

2.5.1 Additional Eligible Property Not Shown on the Schematics of Common Supporting Processes

There are additional properties and systems ancillary to water treatment and use, electricity and heat, oxygen and nitrogen generation, and hydrogen compression processes that are not explicitly shown in the schematics but are still part of a clean hydrogen project.

• The cooling system used by a water treatment, electricity and heat, oxygen and nitrogen generation, or hydrogen compression process is described in clause (c)(iv)(E) of the definition of eligible clean hydrogen property. It includes piping and components that are used solely to deliver cooling fluid (e.g., cooling water, air, glycol) to and from the Eligible Property. The water treatment, electricity and heat, oxygen and nitrogen generation, or hydrogen compression process boundary related to the cooling system begins at and includes the first control valve along the piping or ducting system that is used solely by the Eligible Property. The boundary includes downstream piping or ducting, up to and including the last control valve along the piping or ducting system that is used solely by the Eligible Property. These points are located before and after property described in subparagraphs (c)(i) and (c)(ii) and clauses (c)(iii)(B) to (c)(iii)(D) of the definition of eligible clean hydrogen property. If the whole cooling system is used solely by the Eligible Property, all piping and components are within the process boundaries of these processes.
• The utility air or nitrogen distribution system used by a water treatment, electricity and heat, oxygen and nitrogen generation, or hydrogen compression process is described in clause (c)(iv)(I) of the definition of eligible clean hydrogen property. It includes piping and components that are used solely to supply utility air or nitrogen for the operation of equipment (e.g., pneumatic) and control systems (e.g., actuators) that is Eligible Property. The water treatment, electricity and heat, oxygen and nitrogen generation, or hydrogen compression process boundary related to the utility air or nitrogen system begins at and includes the first control valve along the piping system that is used solely by the Eligible Property. The boundary includes downstream piping, up to the point where the piping for the utility air or nitrogen system physically connects to the property described in subparagraphs (c)(i) and (c)(ii) and clauses (c)(iii)(B) to (c)(iii)(D) of the definition of eligible clean hydrogen property.
• The electrical system used by a water treatment, electricity and heat, oxygen and nitrogen generation, or hydrogen compression process is described in clause (c)(iv)(A) of the definition of eligible clean hydrogen property. It includes wiring and components that are used solely to supply electrical energy for the operation of equipment that is Eligible Property. The water treatment, electricity and heat, oxygen and nitrogen generation, or hydrogen compression process boundary related to the electrical system begins at and includes the first isolation switch along the wiring system that is used solely by the Eligible Property. The boundary includes downstream wiring, up to the point where the wiring for the electrical system physically connects to the property described in subparagraphs (c)(i) and (c)(ii) and clauses (c)(iii)(B) to (c)(iii)(D) of the definition of eligible clean hydrogen property. Otherwise, the water treatment, electricity and heat, oxygen and nitrogen generation, or hydrogen compression process boundary related to the electrical system is the point where the wiring for the electrical system physically connects to the property described in subparagraphs (c)(i) and (c)(ii) and clauses (c)(iii)(B) to (c)(iii)(D) of the definition of eligible clean hydrogen property.
• The power distribution system that supports a water treatment, oxygen and nitrogen generation, or hydrogen compression process is described in paragraph (b) of the definition of project support equipment and is not within the water treatment, oxygen and nitrogen generation, or hydrogen compression process boundary. The water treatment, oxygen and nitrogen generation, or hydrogen compression process boundary related to the power distribution system begins at the point where the power lines for the power distribution system physically connect to the property described in subparagraphs (c)(i) and (c)(ii) and clause (c)(iii)(C) of the definition of eligible clean hydrogen property and paragraph (c) of the definition of project support equipment.

3.0 Production of Hydrogen from Electrolysis of Water

3.1 Low-Temperature Electrolysis of Water

3.1.1 Low-Temperature Water Electrolysis Processes

3.1.2 Pertinent Eligible Property

This section lists equipment related to a low-temperature electrolysis of water process that may qualify as Eligible Property. While this list is intended to include key equipment examples, recognizing the variability in processes and equipment configurations for clean hydrogen production, property will be evaluated on a case-by-case basis. The equipment described in this section must meet the conditions of Section 3.1.1 above. Whether a particular property is Eligible Property within a qualified clean hydrogen project will be based on the definitions set out in the Act and determined by this Guide.

Examples of Eligible Property for a low-temperature water electrolysis process could include, but are not limited to

• electrolyser stack modules (e.g., alkaline and proton exchange membrane [PEM] stacks) to split water into hydrogen and oxygen using electricity;
• electrical equipment (e.g., thyristor rectifiers, insulated-gate bipolar transistor [IGBT] rectifiers, direct current [DC] to DC converters, filter circuits) to convert alternating current (AC) to DC;
• hydrogen separation and purification equipment (e.g., separators, demisters, scrubbers, deoxidizers, dryers, water knockout drums, adsorption columns, membranes) to separate water and electrolyte from hydrogen;
• impurity separation equipment (e.g., filters, ion exchangers) to filter lye from the electrolyte and for treating water;
• cooling and heat exchange equipment (e.g., intercoolers, aftercoolers, heat exchangers, coolers, chillers, condensers, air-cooled exchangers) to prevent overheating of the electrolyser, purify hydrogen by condensing water, and regulate the operating temperature of the reactors and other process streams;
• mechanical fluid circulation and pressurization equipment (e.g., compressors, pumps, blowers, fans, expansion valves) to pressurize and move hydrogen and other fluids and process streams;
• on-site tanks for handling materials used for clean hydrogen production (e.g., surge tanks and holding tanks for water, electrolyte solution, and cooling fluid) as well as equipment to maintain the fluids at the necessary storage conditions; and
• any other property that is described in the definition of eligible clean hydrogen property in relation to a low-temperature water electrolysis process in a qualified clean hydrogen project, including, but not limited to, ancillary equipment and system safety, integrity, control, or monitoring equipment listed respectively in Sections 1.5.1 and 1.5.2 of this Guide, as well as property used solely to convert another property to satisfy the description of equipment in subparagraphs (c)(i), (c)(iv), or (c)(v) of the definition of eligible clean hydrogen property.

Certain property that supports a low-temperature water electrolysis process, described in the definition of project support equipment, may also be Eligible Property. See Sections 2.1 and 2.2 of this Guide for more information on the following property:

• equipment that distributes electrical energy or heat energy in direct support of a qualified clean hydrogen project;
• equipment that directly transmits electrical energy from on-site electrical generation equipment to a qualified clean hydrogen project; and
• equipment that delivers, collects, recovers, treats, or recirculates water, or a combination of any of those activities, in direct support of a qualified clean hydrogen project.

A hydrogen compression and on-site storage process is often integrated with hydrogen production processes and certain property, described in subparagraph (c)(i) of the definition of eligible clean hydrogen property, may be Eligible Property. See Section 2.4 of this Guide for more information on Eligible Property in the hydrogen compression and on-site storage process.

3.1.3 Typical Excluded Property

Property used in a low-temperature water electrolysis process that is not Eligible Property is ineligible for the clean hydrogen tax credit. Examples of typical ineligible property of a low-temperature water electrolysis process comprise excluded property listed in Section 1.6 of this Guide, and the following:

• equipment used in an electrolysis process that is not electrolysis of water, and that produces products other than hydrogen and oxygen, and is therefore not used all or substantially all for a clean hydrogen project (e.g., co-electrolysis of water and carbon dioxide, metal electrowinning);
• equipment used to operate the electrolyser reversibly as a fuel cell; and
• equipment used to handle and store oxygen other than venting equipment.

This list is not exhaustive and is meant to provide general guidance on typical property used in a low-temperature water electrolysis process that is not Eligible Property.

3.1.4 Typical Capital Costs of Eligible Property

Typical capital costs of constructing a low-temperature water electrolysis process would include costs for equipment categories that are provided in Table 3-1.

Table 3-1: Project costs for low-temperature water electrolysis processes

1	Electrolyser stack with all its components
2	Electrical system equipment including rectifiers
3	Hydrogen separation and purification equipment
4	Cooling, chilling, and heat transfer equipment
5	Mechanical fluid circulation equipment
6	Impurity separation equipment
7	Hydrogen compression and on-site storage equipment—see Section 2.4 of this Guide for details
8	Water delivery, collection, recovery, treatment, and recirculation equipment—see Section 2.1 of this Guide for details
9	Electricity distribution equipment—see Section 2.2 of this Guide for details
10	Electricity transmission equipment—see Section 2.2 of this Guide for details
11	Liquid delivery and distribution system equipment
12	Utility cooling system equipment
13	Process material storage and handling and distribution system equipment (e.g., holding tanks, conditioning equipment, fluid transfer equipment, piping)
14	Venting system equipment
15	Process waste management system equipment
16	Compressed utility air or nitrogen distribution system equipment
17	Complete monitoring and process control systems, including gas monitoring and leak detection and air emissions monitoring equipment
18	Process safety equipment
19	Flow control and containment equipment
20	Equipment for conversion of existing property into Eligible Property

3.1.5 Schematics for Eligible Property in Low-Temperature Water Electrolysis Processes Using Alkaline and PEM Electrolyser Cell

Some typical elements of a clean hydrogen project that can be used for hydrogen production via low-temperature electrolysis of water are shown in Figure 3-1 and Figure 3-2. Process boundaries defined here are for typical low-temperature water electrolysis processes, using schematics of alkaline and PEM electrolysis of water as representative examples.

The specific property that is used in a low-temperature water electrolysis process may depend on the type and configuration of the low-temperature water electrolysis process used in the clean hydrogen project. Whether particular property is Eligible Property will depend on its function within the clean hydrogen project.

For notes on the boundaries of this schematic, as well as the other schematics in Section 3, refer to Section 3.3 of this Guide. Not all notes apply to each schematic.

Figure 3-1: Example of a low-temperature water electrolysis process using an alkaline electrolyser

Click for larger image

Table Data

Equipment Identifier	Equipment Type	Equipment Description
C-101	Compressor	Hydrogen Compressor
C-102	Compressor	Refrigerant Compressor
E-101	Heat Exchanger	Hydrogen Water Cooler
E-102	Heat Exchanger	Hydrogen Water Cooler 2
E-103	Heat Exchanger	Hydrogen Chiller
E-104	Heat Exchanger	Air-Cooled Condenser
E-105	Heat Exchanger	Electrolyte Water Cooler
E-106	Heat Exchanger	Electrolyte Cooler 2
E-107	Heat Exchanger	Air-Blown Cooler
EL-101	Rectifier	AC to DC Converter
EL-102	Electrolyser	Alkaline Electrolyser
F-101	Filter	Lye Filter
P-101	Pump	Recirculating Electrolyte Pump
P-102	Pump	Cooling Solution Pump
P-103	Pump	Electrolyte Pump
PV-101	Valve	Refrigerant Expansion Valve
R-101	Catalytic Reactor	Hydrogen Deoxidizer
T-101	Tank	Electrolyte Tank
T-102	Tank	Cooling Solution Tank
V-101	Gas-Liquid Separator	Hydrogen Water Knock-out Drum
V-102	Gas-Liquid Separator	Oxygen Water Knock-out Drum
V-103	Gas-Liquid Separator	Hydrogen Demister
V-104	Scrubber	Electrolyte Scrubber
V-105	Storage Vessel	Hydrogen Buffer Tank
V-106	Adsorption Column	Molecular Sieve Columns
V-107	Gas-Liquid Separator	Oxygen Demister

Stream Number	Stream Description
1	Ultra Pure Water
2	Alternating Current (AC) to Rectifier
3	Direct Current (DC) to Electrolyser
4	Electrolyzer Hydrogen Output
5	Electrolyzer Oxygen Output
6	Gas-Liquid Separator Hydrogen Output
7	Gas-Liquid Separator Electrolyte Output
8	Demister Hydrogen Output
9	Demister Electrolyte Output
10	Scrubber Hydrogen Output
11	Scrubber Electrolyte Output
12	Compressed Hydrogen
13	Deoxidized Hydrogen
14	Chilled Hydrogen
15	Dried Hydrogen
16	Compressed Refrigerant
17	Cooled Refrigerant
18	Gas-Liquid Separator Oxygen Output
19	Gas-Liquid Separator Electrolyte Output
20	Demister Oxygen Output
21	Demister Electrolyte Output
22	Filtered Electrolyte
23	Electrolyte Makeup
24	Electrolyte Return
25	Cooled Recirculated Electrolyte
26	Cooling Solution Recirculation
27	Cooled Cooling Solution

Reference Identifier	Referenced Plant Section	CH-ITC Technical and Equipment Guidance Section
REF-01	Water Treatment and Use	2.1
REF-02	Electricity and Heat	2.2
REF-03	Hydrogen Compression and On-site Storage	2.4

Text version

Diagram illustrating the boundaries of a low-temperature water electrolysis process using an alkaline electrolyser. The boundary begins at ES-4 (see Section 2.1 of this Guide) after water treatment and includes equipment such as electrolyser stacks, rectifiers, gas-liquid separators, coolers, condensers, pumps, compressors, adsorption columns, deoxidizers, and tanks. The boundary ends at ES-7, which is where hydrogen compression and on-site storage starts. Boundaries on secondary streams within the boundary for alkaline electrolysis include ES-5 (see Section 2.2 of this Guide) for alternating current to the rectifier, ES-3 for electrolyte inlet, and ES-8 for vented oxygen.

Figure 3-2: Example of a low-temperature water electrolysis process using a proton exchange membrane electrolyser

Click for larger image

Table Data

Equipment Identifier	Equipment Type	Equipment Description
C-101	Compressor	Refrigerant Compressor
E-101	Heat Exchanger	Hydrogen Chiller
E-102	Heat Exchanger	Air Cooled Condenser
E-103	Heat Exchanger	Water Cooler
E-104	Heat Exchanger	Air Blown Cooler
EL-101	Rectifier	AC to DC Converter
EL-102	Electrolyser	PEM Electrolyser
P-101	Pump	Recirculating Water Pump
P-102	Pump	Cooling Solution Pump
PV-101	Valve	Refrigerant Expansion Valve
R-101	Catalytic Reactor	Hydrogen Deoxidizer
T-101	Tank	Water Tank
T-102	Tank	Cooling Solution Tank
V-101	Gas-Liquid Separator	Oxygen Water Knock-out Drum
V-102	Gas-Liquid Separator	Hydrogen Water Knock-out Drum
V-103	Gas-Liquid Separator	Hydrogen Demister
V-104	Condenser	Water Condenser
V-105	Packed Vessel	Molecular Sieve Columns
V-106	Gas-Liquid Separator	Oxygen Demister
V-107	Packed Vessel	Ion Exchange Demineralisation Vessel

Stream Number	Stream Description
1	Ultra Pure Water
2	Alternating Current to Rectifier
3	Direct Current to Electrolyser
4	Electrolyser Hydrogen Output
5	Electrolyser Oxygen Output
6	Gas Liquid Separator Hydrogen Output
7	Gas Liquid Separator Water Output
8	Demister Hydrogen Output
9	Demister Water Output
10	Condenser Hydrogen Output
11	Condenser Water Output
12	Deoxidized Hydrogen
13	Chilled Hydrogen
14	Compressed Refrigerant
15	Cooled Refrigerant
16	Dried Hydrogen
17	Gas-Liquid Separator Oxygen Output
18	Gas-Liquid Separator Water Output
19	Demister Oxygen Output
20	Demister Water Output
21	Cooled Recirculated Water
22	Deionized Water
23	Cooling Solution Recirculation
24	Cooled Cooling Solution

Reference Identifier	Referenced Plant Section	CH-ITC Technical and Equipment Guidance Section
REF-01	Water Treatment and Use	2.1
REF-02	Electricity and Heat	2.2
REF-03	Hydrogen Compression and On-site Storage	2.4

Text version

Diagram illustrating the boundaries of a low-temperature water electrolysis process using a PEM electrolyser. The boundary begins at ES-4 (see Section 2.1 of this Guide) after water treatment and includes equipment such as electrolyser stacks, rectifiers, gas-liquid separators, coolers, condensers, pumps, compressors, adsorption columns, deoxidizers, and tanks. The boundary ends at ES-7, which is where hydrogen compression and on-site storage begins. Boundaries on secondary streams within the boundary for PEM electrolysis include ES-5 (see Section 2.2 of this Guide) for alternating current to the rectifier and ES-8 for vented oxygen.

3.2 High-Temperature Electrolysis of Water

3.2.1 High-Temperature Water Electrolysis Processes

3.2.2 Pertinent Eligible Property

This section lists equipment related to a high-temperature electrolysis of water process that may qualify as Eligible Property. While this list is intended to include key equipment examples, recognizing the variability in processes and equipment configurations for clean hydrogen production, property will be evaluated on a case-by-case basis. The equipment described in this section must meet the conditions of Section 3.2.1 above. Whether a particular property is Eligible Property within a qualified clean hydrogen project will be based on the definitions set out in the Act and determined by this Guide.

Examples of Eligible Property for a high-temperature water electrolysis process could include, but are not limited to

• electrolyser stack modules (e.g., solid oxide electrolyser cell [SOEC] stacks) to split water into hydrogen and oxygen using electricity;
• electrical equipment (e.g., thyristor rectifiers, IGBT rectifiers, DC to DC converters, filter circuits) to convert AC to DC;
• hydrogen separation and purification equipment (e.g., separators, demisters, scrubbers, deoxidizers, dryers, water knockout drums, adsorption columns, membranes) to separate water from hydrogen;
• cooling and heat exchange equipment (e.g., intercoolers, aftercoolers, heat exchangers, coolers, recuperators, air preheaters, electric heaters, cooling towers, condensers, air-cooled exchangers) to prevent overheating of the electrolyser, generate steam from water, preheat air, purify hydrogen by condensing water, and regulate the operating temperature of process streams;
• mechanical fluid circulation and pressurization equipment (e.g., compressors, pumps, blowers, fans, expansion valves) to pressurize and move hydrogen and other fluids and process streams;
• on-site tanks for handling materials that are used for clean hydrogen production (e.g., insulated pressure containment vessel) as well as equipment to maintain the fluids at the necessary storage conditions; and
• any other property that is described in the definition of eligible clean hydrogen property in relation to a high-temperature water electrolysis process in a qualified clean hydrogen project, including, but not limited to, ancillary equipment and system safety, integrity, control, or monitoring equipment listed respectively in Sections 1.5.1 and 1.5.2 of this Guide, as well as property used solely to convert another property to satisfy the description of equipment in subparagraphs (c)(i), (c)(iv), or (c)(v) of the definition of eligible clean hydrogen property.

Certain property that supports a high-temperature water electrolysis process, described in the definition of project support equipment, may also be Eligible Property. See Sections 2.1 and 2.2 of this Guide for more information on the following property:

• equipment that distributes electrical energy or heat energy in direct support of a qualified clean hydrogen project;
• equipment that directly transmits electrical energy from on-site electrical generation equipment to a qualified clean hydrogen project; and
• equipment that delivers, collects, recovers, treats, or recirculates water, or a combination of any of those activities, in direct support of a qualified clean hydrogen project.

A hydrogen compression and on-site storage process is often integrated with hydrogen production processes and certain property, described in subparagraph (c)(i) of the definition of eligible clean hydrogen property, may be Eligible Property. See Section 2.4 of this Guide for more information on Eligible Property in the hydrogen compression and on-site storage process.

3.2.3 Typical Excluded Property

Property used in a high-temperature water electrolysis process that is not Eligible Property is ineligible for the clean hydrogen tax credit. Examples of typical ineligible property of a high-temperature water electrolysis process comprise excluded property listed in Section 1.6 of this Guide, and the following:

• equipment used in an electrolysis process that is not electrolysis of water, and that produces products other than hydrogen and oxygen, and is therefore not used all or substantially all for a clean hydrogen project (e.g., co-electrolysis of water and carbon dioxide, metal electrowinning);
• equipment used to operate the electrolyser reversibly as a fuel cell; and
• equipment used to handle and store oxygen other than venting equipment.

This list is not exhaustive and is meant to provide general guidance on typical property used in a high-temperature water electrolysis process that is not Eligible Property.

3.2.4 Typical Capital Costs of Eligible Property

Typical capital costs of constructing a high-temperature water electrolysis process would include costs for equipment categories that are provided in Table 3-2.

Table 3-2: Project costs for high-temperature water electrolysis processes

1	Electrolyser stack with all its components
2	Electrical system equipment including rectifiers
3	Hydrogen separation and purification equipment
4	Cooling and heat transfer equipment
5	Mechanical fluid circulation equipment
6	Hydrogen compression and on-site storage equipment—see Section 2.4 of this Guide for details
7	Water delivery, collection, recovery, treatment, and recirculation equipment—see Section 2.1 of this Guide for details
8	Electricity distribution equipment—see Section 2.2 of this Guide for details
9	Electricity transmission equipment—see Section 2.2 of this Guide for details
10	Liquid delivery and distribution system equipment
11	Utility cooling system equipment
12	Process material storage and handling and distribution system equipment (e.g., holding tanks, conditioning equipment, fluid transfer equipment, piping)
13	Venting system equipment
14	Process waste management system equipment
15	Compressed utility air or nitrogen distribution system equipment
16	Complete monitoring and process control systems, including gas monitoring and leak detection and air emissions monitoring equipment
17	Process safety equipment
18	Flow control and containment equipment
19	Equipment for conversion of existing property into Eligible Property

3.2.5 Schematic for Eligible Property in a High-Temperature Water Electrolysis Process Using a SOEC

Some typical elements of a clean hydrogen project that can be used for hydrogen production via high-temperature electrolysis of water are shown in Figure 3-3. Process boundaries defined here are for a typical high-temperature water electrolysis process, using a schematic of a SOEC as a representative example.

The specific property that is used in a high-temperature water electrolysis process may depend on the type and configuration of the high-temperature water electrolysis process used in the clean hydrogen project. Whether particular property is Eligible Property will depend on its function within the clean hydrogen project.

For notes on the boundaries of this schematic, as well as the other schematics in Section 3, refer to Section 3.3 of this Guide. Not all notes apply to each schematic.

Figure 3-3: Example of a high-temperature water electrolysis process using a SOEC

Click for larger image

Table Data

Equipment Identifier	Equipment Type	Equipment Description
B-101	Blower	Filted Air Supply Blower
C-101	Compressor	Hydrogen Compressor
C-102	Compressor-Expander	Air and Oxygen Compressor Expander
C-103	Compressor	Refrigerant Compressor
E-101	Heat Exchanger	Low Temperature Recuperator
E-102	Heat Exchanger	Steam Generator
E-103	Heat Exchanger	Medium Temperature Recuperator
E-104	Heat Exchanger	High Temperature Recuperator
E-105	Heater	Feed Electric Heater
E-106	Heat Exchanger	Low Temperature Recuperator 2
E-107	Heat Exchanger	High Temperature Recuperator 2
E-108	Heater	Air Electric Heater
E-109	Heat Exchanger	Hydrogen Chiller
E-110	Heat Exchanger	Air-Cooled Condensor
EL-101	Rectifier	AC to DC Converter
EL-102	Electrolyser	Solid Oxide Electrolyser
P-101	Pump	Feedwater Pump
PV-101	Valve	Refrigerant Expansion Valve
V-101	Condenser	Water Condenser
V-102	Gas-Liquid Separator	Hydrogen Water Knock-out Drum
V-103	Packed Vessel	Molecular Sieve Columns

Stream Number	Stream Description
1	Ultra Pure Water Supply
2	Alternating Current (AC) to Rectifier
3	Steam
4	Steam Condensate
5	Direct Current (DC) to Electrolyser
6	Heated Water
7	Superheated Steam
8	High Temperature Superheated Steam
9	Electrolyser Hydrogen Output
10	Cooled Hydrogen
11	Condenser Hydrogen Output
12	Condenser Water Output
13	Gas-Liquid Separator Hydrogen Output
14	Gas-Liquid Separator Water Output
15	Cooled Hydrogen
16	Dry Hydrogen for Compression
17	Compressed Refrigerant
18	Cooled Refrigerant
19	Recycled Hydrogen
20	Compressed Recycled Hydrogen
21	Electrolyser Oxygen Output
22	Cooled Oxygen Enriched Air
23	Filtered Air Supply
24	Heated Air

Reference Identifier	Referenced Plant Section	CH-ITC Technical and Equipment Guidance Section
REF-01	Water Treatment and Use	2.1
REF-02	Electricity and Heat	2.2
REF-03	Production of Ammonia	5
REF-04	Hydrogen Compression and On-site Storage	2.4

Text version

Diagram illustrating the boundaries of a high temperature water electrolysis process using a solid oxide electrolyser cell. The boundary begins at ES-4 (see Section 2.1 of this Guide) after water treatment and includes equipment such as electrolyser stacks, rectifier, gas-liquid separators, heat exchangers, pumps, adsorption columns, and tanks. The boundary ends at ES-7, which is where hydrogen compression and on-site storage starts. Boundaries on secondary streams within the boundary for high temperature water electrolysis include ES-5 (see Section 2.2 of this Guide) for alternating current to the rectifier, ES-6 for externally-sourced heat, and ES-8 for vented oxygen.

3.3 Notes on Schematics of Water Electrolysis

Notes on the schematic boundaries are provided here, including the definition of process boundaries for typical water electrolysis processes.

ES-1	For descriptions of Eligible Property included within this process boundary, see Sections 3.1.2 and 3.2.2 of this Guide.
ES-2	For descriptions of ineligible property within the process, see Sections 3.1.3 and 3.2.3 of this Guide.
ES-3	The process material storage and handling and distribution system used by a water electrolysis process is described in clause (c)(iv)(F) of the definition of eligible clean hydrogen property. It includes piping and components that are used to carry solid, liquid, or gaseous materials from unloading areas to Eligible Property. The water electrolysis process boundary related to the electrolyte storage and handling and distribution system begins at and includes the fitting that connects the piping to the delivery vessel or pipeline. The boundary includes downstream piping and components, up to the point where the piping for the process material storage and handling and distribution system physically connects to the property described in subparagraph (c)(i) of the definition of eligible clean hydrogen property.
ES-4	The water delivery, collection, recovery, treatment, and recirculation system, as part of a water use process that supports clean hydrogen production equipment, is described in paragraph (c) of the definition of project support equipment. The water electrolysis process boundary, as it pertains to, and is used solely for, the transfer of water from Eligible Property used for water treatment and use to Eligible Property used for water electrolysis, begins at the first control valve along the piping used solely by Eligible Property in the water electrolysis process, described in subparagraph (c)(i) of the definition of eligible clean hydrogen property. In the absence of the above-mentioned control valve, the process boundary begins at the fitting that is used solely to supply water to the Eligible Property in the water electrolysis process. The process boundary includes downstream piping and components, up to the point where the piping physically connects to Eligible Property in the water electrolysis process, described in subparagraph (c)(i) of the definition of eligible clean hydrogen property.
ES-5	The power distribution system used by a water electrolysis process is described in paragraph (b) of the definition of project support equipment. It includes the power lines and components that are used to directly distribute electrical energy. The water electrolysis process boundary related to the power distribution system begins at and includes the master substation breaker for a power distribution substation along the power distribution system that is used by the Eligible Property. The boundary includes downstream power lines, up to the point where the power lines for the power distribution system physically connects to the property described in subparagraph (c)(i) of the definition of eligible clean hydrogen property. If the power distribution substation is not used by the Eligible Property, the water electrolysis process boundary related to the power distribution system begins at and includes the first master breaker along the power distribution system that is used by the Eligible Property. Where there is no master breaker, the power distribution system is not within the boundary of the water electrolysis process.
ES-6	The heat distribution system that supports water electrolysis is described in paragraph (b) of the definition of project support equipment. The water electrolysis process boundary related to the heat distribution process begins at the point where the piping for the heat distribution process physically connects to the property described in subparagraph (c)(i) of the definition of eligible clean hydrogen property.
ES-7	The process material storage and handling and distribution system used for on-site transport and delivery of hydrogen is described in clause (c)(iv)(F) of the definition of eligible clean hydrogen property. The process boundary of hydrogen transfer piping, from Eligible Property in the water electrolysis process to Eligible Property used for hydrogen compression and on-site storage, begins at the fitting that is used solely to transport hydrogen from Eligible Property in water electrolysis. The boundary includes downstream piping and components, up to but excluding, the first control valve used by the hydrogen compression and on-site transport Eligible Property as described in subparagraph (c)(i) of the definition of eligible clean hydrogen property. Where there is no control valve, the process boundary ends where the hydrogen piping physically connects to the Eligible Property used for hydrogen compression and on-site storage.

3.3.1 Additional Eligible Property Not Shown on the Schematics of Water Electrolysis Processes

There are other properties and systems ancillary to water electrolysis processes that are not explicitly shown in the schematic but are still part of the clean hydrogen project.

• The cooling system used by a water electrolysis process is described in clause (c)(iv)(E) of the definition of eligible clean hydrogen property. It includes piping and components that are used to deliver cooling fluid (e.g., cooling water, air, glycol) to and from the Eligible Property. The water electrolysis process boundary related to the cooling system begins at and includes the first control valve along the piping or ducting system that is used by the Eligible Property. The boundary includes downstream piping or ducting, up to and including, the last control valve along the piping or ducting system that is used by the Eligible Property described in subparagraphs (c)(i) and (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property. If the whole cooling system is used solely by Eligible Property, all piping and components are within the process boundaries of these processes.
• The utility air or nitrogen distribution system used by a water electrolysis process is described in clause (c)(iv)(I) of the definition of eligible clean hydrogen property. It includes piping, equipment, and components that are used to supply utility air or nitrogen for the operation of equipment (e.g., pneumatic) and control systems (e.g., actuators) that is Eligible Property. The water electrolysis process boundary related to the utility air or nitrogen system begins at and includes the first control valve along the piping system that is used by the Eligible Property. The boundary includes downstream piping, up to the point where the piping for the utility air or nitrogen system physically connects to the property described in subparagraphs (c)(i) and (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property. If the whole utility air or nitrogen system is used solely by Eligible Property, all piping and components are within the process boundaries of these processes.
• The electrical system used by a water electrolysis process is described clause (c)(iv)(A) of the definition of eligible clean hydrogen property. It includes wiring and components that are used to supply electrical energy for the operation of equipment that is Eligible Property. The water electrolysis process boundary related to the electrical system begins at and includes the first isolation switch along the wiring system that is used by Eligible Property. The boundary includes downstream wiring, up to the point where the wiring for the electrical system physically connects to the property described in subparagraphs (c)(i) and (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property. If the whole electrical system is solely by Eligible Property, all wiring and components are within the process boundaries of these processes. Otherwise, the water electrolysis process boundary related to the electrical system is the point where the wiring for the electrical system physically connects to the property described in subparagraphs (c)(i) and (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property.

4.0 Production of Hydrogen from the Reforming or Partial Oxidation of Eligible Hydrocarbons, with Carbon Dioxide Captured Using a CCUS Process

4.1 Steam Methane Reforming of Eligible Hydrocarbons with Carbon Dioxide Captured Using a CCUS Process

4.1.1 Steam Methane Reforming Processes with Carbon Dioxide Captured Using a CCUS Process

4.1.2 Pertinent Eligible Property

This section lists equipment related to a steam methane reforming process that may qualify as Eligible Property. While this list is intended to include key equipment examples, recognizing the variability in processes and equipment configurations for clean hydrogen production, property will be evaluated on a case-by-case basis. The equipment described in this section must meet the conditions of Section 4.1.1 above. Whether a particular property is Eligible Property within a qualified clean hydrogen project will be based on the definitions set out in the Act and determined by this Guide.

Examples of Eligible Property for a steam methane reforming process could include, but are not limited to

• eligible hydrocarbon feed supply equipment, including conditioning and pre-treatment equipment (e.g., hydrogenation reactors and catalytic beds for sulphur removal, pressurization and pressure and temperature control equipment [e.g., compressors and their associated interstage heat exchangers, aftercoolers, knockout drums, pumps, high-pressure valves, actuators]), to deliver a polished hydrocarbon feed stream at appropriate operating conditions to the steam methane reforming equipment;
• eligible hydrocarbon reforming equipment, such as
  • catalytic pre-reformers and main steam methane reformers (e.g., externally heated tubular reformers, electrically heated reformers, and steam methane reformers with other direct or indirect heat integration) to convert higher hydrocarbons in the feed to methane as well as steam and methane to syngas;
  • low-, medium-, and high-temperature adiabatic and isothermal water gas shift reactors (e.g., fixed bed catalytic reactors with or without integrated temperature control provisions) to increase the conversion of carbon monoxide (CO) to CO₂ and generate additional hydrogen using steam;
• hydrogen separation and purification equipment, such as
  • pressure swing adsorption (PSA) equipment (e.g., fixed bed adsorbers using multi-bed configurations for the separation of hydrogen from other gases and surge drums that are used for the collection of tail gases);
  • membrane separation equipment (e.g., permselective membranes and associated pressurization, pressure containment and control equipment);
  • methanation equipment (e.g., methanation reactors for exothermic conversion of CO and CO₂ to methane [CH₄] and associated heat recovery and water knockout equipment);
• fuel supply system equipment, including fuel compression and pressure control equipment (e.g., compressors, blowers, pressure control valves, actuators, knockout drums) to deliver the fuel at the required conditions to the points of use on site;
• heat generation, pre-heating, and heat recovery equipment (e.g., combustors, electric heaters, heat exchangers, condensers, economizers, and associated equipment that
  • enable the delivery of heat and containment of pressure and combustion flue gases and improve heat utilization [e.g., immersion heaters and their shells, combustion chambers, integrated heat exchange and heat recovery equipment];
  • enable the adjustment of temperature, pressure, and control of combustor streams as well as recycling of flue gases for oxy-fuelled configurations [e.g., blowers, induced and forced draft fans, pressure regulation and control devices, preheaters and mixers, burners]);
• combustion flue gas pollutant control and pre-treatment equipment (e.g., low-NOx burners, flue gas desulphurizers, selective catalytic and non-catalytic NOx removal equipment, particulate removal equipment);
• cooling equipment (e.g., economizers, intercoolers, aftercoolers, condensers, heat exchangers, cooling towers, closed loop cooling systems, air-cooled exchangers) that are used to
  • recover heat;
  • reduce stream temperatures (e.g., syngas cooler);
  • separate condensable components of streams (e.g., for water removal from syngas);
  • maintain the operating temperature of exothermic reactors, feed supply systems; and
  • cooling of product and effluent streams (e.g., cooling of steam methane reformer’s combustion flue gas and carbon dioxide-rich syngas streams prior to its transfer to raw carbon dioxide pre-treatment process of the CCUS facility);
• mechanical fluid circulation and pressurization equipment (e.g., blowers, induced draft fans, forced draft fans, compressors, pumps, interstage coolers, turbine drives [e.g., when compressors are driven by steam], motors when rotating equipment are driven by electricity, and associated filtering, demisters, knockout drums), to move process streams and fluids (e.g., natural gas fuel and feed, combustion air, recycling and pressurization of PSA tail gases), including water and steam recirculation systems (e.g., boiler feed water pumps) and flue gas recycling, where applicable;
• steam generation equipment necessary for the operation of the steam methane reforming process (e.g., fired heaters, boiler tubes, steam drums, electric boilers, deaerators) used to generate on-site steam for the reformer feed, water gas shift reactions, and to remove excess heat, including
  • integrated heat exchangers (e.g., isothermal shift reactors);
  • heat exchange surfaces (e.g., convective heat transfer sections of steam methane reformers);
  • standalone heat exchangers or boilers that also recover heat from high-temperature reactor exhaust streams (e.g., reformers and water gas shift reactors) or increase temperature of boiler feed water; and
  • associated pumps and pressure control equipment needed for the delivery and recirculation of water and steam at the desired conditions within the steam generation circuit;
• oxygen production equipment, where applicable (e.g., for steam methane reformers that utilize oxy-fuel combustion technology to meet the reforming process’s heat and power requirements)—see Section 2.3 of this Guide for details;
• hydrogen compression and on-site storage equipment—see Section 2.4 of this Guide for details; and
• other property that is described in the definition of eligible clean hydrogen property in relation to a steam methane reforming process in a qualified clean hydrogen project, including, but not limited to, ancillary equipment and system safety, integrity, control, or monitoring equipment listed respectively in Sections 1.5.1 and 1.5.2 of this Guide, as well as property used solely to convert another property to satisfy the description of equipment in subparagraphs (c)(ii), (c)(iv), or (c)(v) of the definition of eligible clean hydrogen property.

Certain property that supports a steam methane reforming process for hydrogen production, described in the definitions of dual-use electricity and heat equipment and project support equipment, may also be Eligible Property. See Sections 2.1 and 2.2 of this Guide for more information on the following property:

• equipment that generates heat energy in support of a qualified clean hydrogen project;
• equipment that generates electrical energy in support of a qualified clean hydrogen project excluding electricity generation equipment that supports the project indirectly by way of an electrical utility grid;
• equipment that generates a combination of electrical and heat energy in support of a qualified clean hydrogen project excluding electricity generation equipment that supports the project indirectly by way of an electrical utility grid;
• equipment that distributes electrical or heat energy in direct support of a qualified clean hydrogen project;
• equipment that directly transmits electrical energy in support of a qualified clean hydrogen project; and
• equipment that delivers, collects, recovers, treats, or recirculates water, or a combination of any of those activities, in direct support of a qualified clean hydrogen project.

4.1.3 Typical Excluded Property

Property used in the steam methane reforming process that is not Eligible Property is ineligible for the clean hydrogen tax credit. Examples of typical excluded property of a steam methane reforming process comprise excluded property listed in Section 1.6 of this Guide, and the following:

• equipment used in a steam methane reforming process that is also used in a non-clean hydrogen project (e.g., industrial processes, CCUS processes) and is therefore not used all or substantially all to produce clean hydrogen through eligible hydrocarbon reforming, unless it is dual-use electricity and heat equipment or project support equipment and their associated equipment described in any of the subparagraphs (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property and in Sections 2.1 and 2.2 of this Guide; and
• equipment used for processing of raw natural gas processing (e.g., gas plants) or for acid gas injection.

This list is not exhaustive and is meant to provide general guidance on typical property used in a steam methane reforming process that is not Eligible Property.

4.1.4 Typical Capital Costs of Eligible Property

Typical capital costs of constructing a steam methane reforming process would include costs for equipment categories that are provided in Table 4-1.

Table 4-1: Project costs for steam methane reforming processes

1	Feed supply, conditioning, and pre-treatment equipment for eligible hydrocarbons (e.g., hydrogenation reactors and catalytic sulphur removal beds, compressors, pressure control equipment)
2	Reforming equipment (e.g., pre-reformers, main steam methane reformers, catalytic shift reactors)
3	Hydrogen separation and purification equipment (e.g., pressure swing adsorption and desorption equipment, membrane separation equipment, methanation reactors, knockout drums)
4	Fuel supply system equipment (e.g., blowers, pressure control equipment)
5	Heat generation, pre-heating, and heat recovery equipment (e.g., combustors, electric heaters, heat exchangers, combustion flue gas pollutant control and pre-treatment equipment), including dual-use heat generation equipment and heat distribution equipment—see Section 2.2 of this Guide for details
6	Cooling equipment (e.g., condensing economizers, intercoolers, condensers, cooling towers, heat exchangers, cooling towers, air-cooled exchangers), including utility cooling system equipment
7	Mechanical fluid circulation and pressurization equipment (e.g., compressors, blowers, fans, pumps)
8	Pressure control equipment (e.g., pressure regulation and control devices, compressors, blowers)
9	Steam generation equipment and heat recovery equipment (e.g., boilers, boiler feed water heat exchangers, pumps, recirculation equipment)
10	Water delivery, collection, recovery, treatment, or recirculation equipment (or a combination of these)—see Section 2.1 of this Guide for details
11	Hydrogen compression and on-site storage equipment—see Section 2.4 of this Guide for details
12	Heat distribution equipment—see Section 2.2 of this Guide for details
13	Electricity generation equipment—see Section 2.2 of this Guide for details
14	Equipment that distributes electrical energy—see Section 2.2 of this Guide for details
15	Equipment that transmits electrical energy—see Section 2.2 of this Guide for details
16	Electrical system equipment
17	Liquid delivery and distribution system equipment
18	Process material storage and handling and distribution system equipment (e.g., on-site holding tanks, conditioning equipment, fluid transfer equipment, piping)
19	Process venting system equipment
20	Process waste management system equipment
21	Compressed utility air or nitrogen distribution system equipment
22	Complete monitoring and process control systems, including gas monitoring and leak detection and air emissions monitoring equipment
23	Process safety equipment
24	Flow control and containment equipment
25	Equipment for conversion of existing property into Eligible Property

4.1.5 Schematic for Eligible Property in Steam Methane Reforming Process

Some typical elements of a clean hydrogen project using a steam methane reforming process that can produce clean hydrogen using an eligible hydrocarbon (e.g., natural gas), heat, and electricity are shown in Figure 4-1. Process boundaries described here are for a typical steam methane reforming process with carbon dioxide captured as a representative example.

The specific property that is used in a steam methane reforming process for hydrogen production may depend on the specific application, technology, and process configuration used in the clean hydrogen project. Whether particular property is an Eligible Property will depend on its function within the clean hydrogen project.

Additional equipment not listed may still be Eligible Property and can include other technologies or process configurations of reformation and shift reactors, such as integration of partial oxidation reactors with steam methane reformers.

For notes on the boundaries of this schematic, as well as other schematics in Section 4, refer to Section 4.4 of this Guide. Not all notes apply to each schematic.

Figure 4-1: Example of a steam methane reforming process for hydrogen production

Click for larger image

Table Data

Equipment Identifier	Equipment Type	Equipment Description
B-101	Blower	Reformer Combustion Air Blower
C-101	Compressor	Hydrogen Recycle Compressor
E-101	Heat Exchanger	Natural Gas Feed Heater 1
E-102	Heat Exchanger	Natural Gas Feed Heater 2
E-103	Heat Exchanger	Boiler Feed Water Heater 1
E-104	Heat Exchanger	Steam Generation Boiler Tubes
E-105	Heat Exchanger	Steam Superheater
E-106	Heat Exchanger	Syngas Cooler/Waste Heat Boiler Feed Water Heater 2
E-107	Heat Exchanger	Shifted Gas Cooler1/Waste Heat Boiler Feed Water Heater 1
E-108	Heat Exchanger	Waste Heat Boiler
E-109	Heat Exchanger	Air Preheater
F-101	Reactor/Filter	Flue Gas Pollutant Removal (Selective Catalytic NOx Removal)
P-101	Pump	Boiler Feed Water Pump
P-102	Pump	Syngas Cooler Water Pump/Waste Heat Boiler Feed Water Pump
R-101	Reactor	Hydrogenation Reactor
R-102	Reactor	Sulphur Removal Reactor
R-103	Reactor	Natural Gas Catalytic Pre-reformer
R-104	Reactor	Main Catalytic Reformer
R-105	Reactor	High Temperature (HT) Water Gas Shift Catalytic Reactor
R-106	Reactor	Low Temperature (LT) Water Gas Shift Catalytic Reactor
V-101	Deaerator	Boiler Feed Water Deaerator
V-102	Separator	Steam Drum
V-103	Condenser Separator	Hydrogen Water Knockout Drum
V-104	Packed Vessel	Pressure Swing Adsorption (PSA) Package

Stream Number	Stream Description
1	Natural Gas Header
2	Feed Natural Gas
3	Feed Natural Gas and Hydrogen
4	Hydrogenated Feed Natural Gas
5	Treated (Sulphur Removed) Natural Gas Feed
6	Treated Water from Water Treatment plant
7	Treated Deaerated Water for Reforming
8	Steam to Steam Drum
9	Steam to Superheater
10	Superheated Reforming Steam Header
11	Partially Reformed Natural Gas
12	Reformer Feed Gas Inlet
13	Reformer Combustion Air
14	Preheated Reformer Combustion Air
15	Reformer Combustion Natural Gas
16	Reformer Syngas Outlet
17	HT Water Shift Gas Reactor Outlet
18	LT Water Shift Gas Reactor Outlet
19	Syngas Condenser Outlet
20	Pre-Treated Syngas to CO2 Capture Unit
21	Low-Purity Hydrogen Return from CO2 Capture Plant
22	PSA Pure Hydrogen Outlet
23	Hydrogen Recycle to Hydrogenation Reactor
24	PSA Tail Gas
25	Reformer Flue Gas to CO2 Pre-Treatment Unit
26	Shifted Syngas Condensate
27	Cooling Water Supply
28	Cooling Water Return
29	Waste Heat Boiler Feed Water
30	Waste Heat Recovery Steam

Reference Identifier	Referenced Plant Section	CH-ITC Technical and Equipment Guidance Section
REF-01	Water Treatment and Use	2.1
REF-02	Raw CO2 Pre-Treatment Processes *	-
REF-03	CO2 Capture Processes *	-
REF-04	Hydrogen Compression and On-site Storage	2.4
REF-05	Electricity and Heat	2.2

Note (1): the asterisk (*) included for Referenced Plant Section Raw CO₂ Pre-Treatment Processes indicates that such a process is not expected to be necessary for CO₂ capture from syngas produced from steam methane reforming processes for hydrogen production in most cases.

Note (2): the asterisk (*) included for Referenced Plant Section CO₂ Capture Processes indicates that in this schematic, the REF-03 block represents two CO₂ capture plants.

Text version

Diagram illustrating the boundaries of steam methane reforming process for hydrogen production from eligible hydrocarbons, with carbon dioxide captured using a CCUS process. The boundary begins at RS-3, after natural gas enters the facility, and includes equipment such as steam methane reformer combustor and reactors, sulphur removal and water gas shift reactors, heat exchangers, boilers, filters, blowers, compressors, pumps, reactors, deaerators, steam drums, and separator vessels. The boundary ends at RS-10, which is where shifted syngas is sent to the CO₂ pre-treatment and capture processes. The auto-thermal reforming process boundary resumes at RS-11, after the cleaned syngas (with its CO₂ removed) returns from the CO₂ capture process, and includes hydrogen purification equipment, such as adsorption and regeneration pressure swing separation columns. The boundary ends at RS-6, which is where the boundary of the hydrogen compression and on-site storage process begins. Boundaries on secondary streams within the steam methane reforming process boundary include RS-7 for steam, RS-8 and RS-9 for water, and RS-12 for combustion flue gas.

4.2 Auto-Thermal Reforming of Eligible Hydrocarbons with Carbon Dioxide Captured Using a CCUS Process

4.2.1 Auto-Thermal Reforming Processes with Carbon Dioxide Captured Using a CCUS Process

4.2.2 Pertinent Eligible Property

This section lists equipment related to an auto-thermal reforming process that may qualify as Eligible Property. While this list is intended to include key equipment examples, recognizing the variability in processes and equipment configurations for clean hydrogen production, property will be evaluated on a case-by-case basis. The equipment described in this section must meet the conditions of Section 4.2.1 above. Whether a particular property is Eligible Property within a qualified clean hydrogen project will be based on the definitions set out in the Act and determined by this Guide.

Examples of Eligible Property for an auto-thermal reforming process could include, but are not limited to

• eligible hydrocarbon feed supply equipment, including conditioning and pre-treatment equipment (e.g., hydrogenation reactors and catalytic beds for sulphur removal, pressurization and pressure control equipment [e.g., compressors and their associated interstage heat exchangers, aftercoolers, knockout drums, pumps, high-pressure valves, actuators]), to deliver a polished hydrocarbon feed stream at appropriate operating conditions to the auto-thermal reforming equipment;
• eligible hydrocarbon reforming equipment, such as
  • catalytic pre-reformers and auto-thermal reformers to convert higher hydrocarbons in the feed to methane as well as steam and methane to syngas;
  • associated coupled reformers for improved heat integration; and
  • low-, medium-, and high-temperature adiabatic and isothermal water gas shift reactors (e.g., fixed bed catalytic reactors with or without integrated temperature control provisions) to increase the conversion of CO to CO₂ and generate additional hydrogen using steam;
• hydrogen separation and purification equipment, such as
  • PSA equipment (e.g., fixed bed adsorbers using multi-bed configurations for the separation of hydrogen from other gases and surge drums that are used for the collection of tail gases);
  • membrane separation equipment (e.g., permselective membranes and associated pressurization, pressure containment and control equipment);
  • methanation equipment (e.g., methanation reactors for exothermic conversion of CO and CO₂ to CH₄ and associated heat recovery and water knockout equipment);
• fuel supply system equipment, including fuel compression and pressure control equipment (e.g., compressors, blowers, pressure control valves, actuators, knockout drums) to deliver the fuel at required conditions to the points of use on site;
• heat generation, pre-heating, and heat recovery equipment (e.g., fired heaters, electric heaters, heat exchangers, condensers, economizers, and associated equipment that
  • enable the delivery of heat and containment of pressure and combustion flue gases and improve heat utilization [e.g., immersion heaters and their shells, combustion chambers, integrated heat exchange and heat recovery equipment];
  • enable the adjustment of temperature, pressure, and control of combustor streams as well as recycling of flue gases for oxy-fuelled configurations [e.g., blowers, induced and forced draft fans, pressure regulation and control devices, preheaters, mixers, burners]);
• combustion flue gas pollutant control and pre-treatment equipment (e.g., low-NOx burners, flue gas desulphurizers, selective catalytic and non-catalytic NOx removal equipment, particulate removal equipment);
• cooling equipment (e.g., economizers, intercoolers, aftercoolers, condensers, heat exchangers, cooling towers, closed loop cooling systems, air-cooled exchangers) that are used to
  • recover heat;
  • reduce stream temperatures (e.g., syngas cooler);
  • separate condensable components of streams (e.g., for water removal from syngas);
  • maintain the operating temperature of exothermic reactors, feed supply systems; and
  • cooling of product and effluent streams (e.g., cooling of fired heater combustion flue gas and carbon dioxide-rich syngas prior to its transfer to raw carbon dioxide pre-treatment process of the CCUS facility);
• mechanical fluid circulation and pressurization equipment (e.g., blowers, forced draft fans, induced draft fans, compressors, pumps, interstage coolers, turbine drives [e.g., when compressors are driven by steam], motors when rotating equipment are driven by electricity, and associated filtering, demisters, knockout drums), to move process streams and fluids (e.g., natural gas fuel and feed, combustion air), including water and steam recirculation system (e.g., boiler feed water pumps) and flue gas recycling, where applicable;
• steam generation equipment necessary for the operation of the auto-thermal reforming process (e.g., fired heaters, boiler tubes, steam drums, electric boilers, deaerators) used to generate on-site steam for the reformer feed, water gas shift reaction, and to remove excess heat, including
  • integrated heat exchangers (e.g., isothermal shift reactors);
  • heat exchange surfaces (e.g., integral boiler tubes);
  • standalone heat exchangers or boilers that also recover heat from high-temperature reactor exhaust streams (e.g., reformers and water gas shift reactors) or increase temperature of boiler feed water; and
  • associated pumps and pressure control equipment needed for the delivery and recirculation of water and steam at the desired conditions within the steam generation circuit;
• oxygen production equipment—see Section 2.3 of this Guide for details;
• hydrogen compression and on-site storage equipment—see Section 2.4 of this Guide for details; and
• other property that is described in the definition of eligible clean hydrogen property in relation to an auto-thermal reforming process in a qualified clean hydrogen project, including, but not limited to, ancillary equipment and system safety, integrity, control, or monitoring equipment listed respectively in Sections 1.5.1 and 1.5.2 of this Guide, as well as property used solely to convert another property to satisfy the description of equipment in subparagraphs (c)(ii), (c)(iv), or (c)(v) of the definition of eligible clean hydrogen property.

Certain property that supports an auto-thermal reforming process for hydrogen production, described in the definitions of dual-use electricity and heat equipment and project support equipment, may also be Eligible Property. See Sections 2.1 and 2.2 of this Guide for more information on the following property:

• equipment that generates heat energy in support of a qualified clean hydrogen project;
• equipment that generates electrical energy in support of a qualified clean hydrogen project excluding electricity generation equipment that supports the project indirectly by way of an electrical utility grid;
• equipment that generates a combination of electrical and heat energy in support of a qualified clean hydrogen project excluding electricity generation equipment that supports the project indirectly by way of an electrical utility grid;
• equipment that distributes electrical or heat energy in direct support of a qualified clean hydrogen project;
• equipment that directly transmits electrical energy in support of a qualified clean hydrogen project; and
• equipment that delivers, collects, recovers, treats, or recirculates water, or a combination of any of those activities, in direct support of a qualified clean hydrogen project.

4.2.3 Typical Excluded Property

Property used in the auto-thermal reforming process that is not Eligible Property is ineligible for the clean hydrogen tax credit. Examples of typical excluded property of an auto-thermal reforming process comprise excluded property listed in Section 1.6 of this Guide, and the following:

• equipment used in an auto-thermal reforming process that is also used in a non-clean hydrogen project (e.g., industrial processes, CCUS processes) and is therefore not used all or substantially all to produce clean hydrogen through eligible hydrocarbon reforming, unless it is dual-use electricity and heat equipment or project support equipment and their associated equipment described in any of the subparagraphs (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property and in Sections 2.1 and 2.2 of this Guide; and
• equipment used for processing of raw natural gas processing (e.g., gas plants) or for acid gas injection.

This list is not exhaustive and is meant to provide general guidance on typical property used in an auto-thermal reforming process that is not Eligible Property.

4.2.4Typical Capital Costs of Eligible Property

Typical capital costs of constructing an auto-thermal reforming process would include costs for equipment categories that are provided in Table 4-2.

Table 4-2: Project costs for auto-thermal reforming processes

1	Feed supply, conditioning, and pre-treatment equipment for eligible hydrocarbons (e.g., hydrogenation reactors and catalytic sulphur removal beds, compressors, pressure control equipment)
2	Reforming equipment, including pre-reformer, auto-thermal reformer, and catalytic water gas shift reactors
3	Hydrogen separation and purification equipment (e.g., pressure swing adsorption and desorption equipment, membrane separation equipment, methanation reactors, knockout drums)
4	Fuel supply system equipment (e.g., blowers, pressure control equipment)
5	Heat generation, pre-heating, and heat recovery equipment (e.g., fired heaters, electric heaters, heat exchangers, combustion flue gas pollutant control and pre-treatment equipment), including dual-use heat generation equipment and heat distribution equipment—see Section 2.2 of this Guide for details
6	Cooling equipment (e.g., condensing economizers, intercoolers, condensers, cooling towers, heat exchangers, cooling towers, air-cooled exchangers), including utility cooling system equipment
7	Mechanical fluid circulation and pressurization equipment (e.g., compressors, blowers, fans, pumps)
8	Pressure control equipment (e.g., pressure regulation and control devices, compressors, blowers)
9	Steam generation equipment and heat recovery equipment (e.g., boiler feed water heat exchangers, pumps, recirculation system equipment)
10	Water delivery, collection, recovery, treatment, or recirculation (or a combination of those activities) equipment—see Section 2.1 of this Guide for details
11	Hydrogen compression and on-site storage equipment—see Section 2.4 of this Guide for details
12	Heat distribution equipment—see Section 2.2 of this Guide for details
13	Electricity generation equipment—see Section 2.2 of this Guide for details
14	Equipment that distributes electrical energy—see Section 2.2 of this Guide for details
15	Equipment that transmits electrical energy—see Section 2.2 of this Guide for details
16	Electrical system equipment
17	Liquid delivery and distribution system equipment
18	Process material storage and handling and distribution system equipment (e.g., on-site holding tanks, conditioning equipment, fluid transfer equipment, piping)
19	Process venting system equipment
20	Process waste management system equipment
21	Compressed utility air or nitrogen distribution system equipment
22	Complete monitoring and process control systems, including gas monitoring and leak detection and air emissions monitoring equipment
23	Process safety equipment
24	Flow control and containment equipment
25	Equipment for conversion of existing property into Eligible Property

4.2.5 Schematic for Eligible Property in Auto-Thermal Reforming Process

Some typical elements of a clean hydrogen project using an auto-thermal reforming process that can produce clean hydrogen using an eligible hydrocarbon (e.g., natural gas), heat, and electricity are shown in Figure 4-2. Process boundaries described here are for a typical auto-thermal reforming process with carbon dioxide captured as a representative example.

The specific property that is used in auto-thermal reforming processes for hydrogen production may depend on the specific application, technology, and process configuration used in the clean hydrogen project. Whether particular property is Eligible Property will depend on its function within the clean hydrogen project.

Additional equipment not listed may still be Eligible Property and can include other types or configurations of partial oxidation, reformation, and water gas shift reactors, such as integration of reactors for improved heat integration.

For notes on the boundaries of this schematic, as well as other schematics in Section 4, refer to Section 4.4 of this Guide. Not all notes apply to each schematic.

Figure 4-2: Example of an auto-thermal reforming process for hydrogen production

Click for larger image

Table Data

Equipment Identifier	Equipment Type	Equipment Description
B-101	Blower	Fired Heater Combustion Air Blower
C-101	Compressor	Hydrogen Recycle Compressor
C-102	Compressor	Pressure Swing Adsorber Tail Gas Recycle Compressor
E-101	Heat Exchanger	Natural Gas Feed Heater 1
E-102	Heat Exchanger	Natural Gas Feed Heater 2
E-103	Heat Exchanger	Boiler Feed Water Heater (Shifted Syngas Cooler)
E-104	Heat Exchanger	Steam Generation Boiler Tubes
E-105	Heat Exchanger	Steam Superheater
E-106	Heat Exchanger	Syngas Cooler/Waste Heat Boiler
E-107	Heat Exchanger	High Temperature Shift Reactor Outlet Syngas Cooler
E-108	Heat Exchanger	Combustion Air Pre-Heater
F-101	Reactor/Filter	Pollutant Removal Unit (Selective Catalytic NOx Removal)
H-101	Heater	Fired Heater
P-101	Pump	Reforming Steam Boiler Feed Water Pump
P-102	Pump	Waste Heat Boiler Feed Water Pump
R-101	Reactor	Hydrogenation Reactor
R-102	Reactor	Sulphur Removal Reactor
R-103	Reactor	Natural Gas Catalytic Pre-reformer
R-104	Reactor	Auto-Thermal Catalytic Reformer
R-105	Reactor	High Temperature (HT) Water Gas Shift Catalytic Reactor
R-106	Reactor	Low Temperature (LT) Water Gas Shift Catalytic Reactor
S-101	Stack	Combusted Tail Gas Stack
V-101	Separator	Boiler Feed Water Deaerator
V-102	Separator	Steam Drum
V-103	Condenser Separator	Hydrogen Water Knockout Drum
V-104	Packed Vessel	Pressure Swing Adsorption (PSA) Package

Stream Number	Stream Description
1	Feed Natural Gas
2	Feed Natural Gas and Hydrogen
3	Hydrogenated Feed Natural Gas
4	Treated (Sulphur Removed) Natural Gas Feed
5	Treated Water from Water Treatment Plant
6	Reforming Boiler Feed Water
7	Steam to Steam Drum
8	Steam to Superheater
9	Superheated Reforming Steam
10	Partially Reformed Natural Gas
11	Feed Oxygen to Reformer
12	Reformer Syngas Outlet
13	HT Water Shift Gas Reactor Outlet
14	LT Water Shift Gas Reactor Outlet
15	Syngas to CO2 Pre-treatment Unit
16	Pre-Treated Syngas to CO2 Capture Unit
17	Low Purity Hydrogen Return from CO2 Capture Plant
18	PSA Pure Hydrogen Outlet
19	H2 Recycle to Hydrogenation Reactor
20	PSA Tail Gas
21	PSA Recycled Tail Gas
22	PSA Tail Gas to Fired Heater
23	Fired Heater Combustion Air
24	Fired Heater Combustion Flue Gas
25	Shifted Syngas Condensate
26	Cooling Water Supply
27	Cooling Water Return
28	Waste Heat Boiler Feed Water
29	Waste Heat Recovery Steam

Reference Identifier	Referenced Plant Section	CH-ITC Technical and Equipment Guidance Section
REF-01	Water Treatment and Use	2.1
REF-02	Oxygen and Nitrogen Production	2.3
REF-03	Raw CO2 Pre-Treatment Process *	-
REF-04	CO2 Capture Process	-
REF-05	Hydrogen Compression and On-site Storage	2.4
REF-06	Electricity and Heat	2.2

Note: The asterisk (*) included in the Referenced Plant Section indicates that a raw CO₂ pre-treatment process is not expected to be necessary in most cases for CO₂ capture from syngas produced from auto-thermal reforming processes for hydrogen production.

Text version

Diagram illustrating the boundaries of auto-thermal reforming process for hydrogen production from eligible hydrocarbons, with carbon dioxide captured using a CCUS process. The boundary begins at RS-3, after natural gas enters the facility, and includes equipment such as fired-heaters, auto-thermal reformation, sulphur removal and water gas shift reactors, heat exchangers, boilers, filters, blowers, compressors, pumps, reactors, deaerators, steam drums, and separator vessels. The boundary ends at RS-10, which is where shifted syngas is sent to the CO₂ pre-treatment and capture processes. The auto-thermal reforming process boundary resumes at RS-11, after the cleaned syngas (with its CO₂ removed) returns from the CO₂ capture process, and includes hydrogen purification equipment, such as adsorption and regeneration pressure swing separation columns. The boundary ends at RS-6, which is where the boundary of the hydrogen compression and on-site storage process begins. Boundaries on secondary streams within the auto-thermal reforming process boundary include RS-5 for pure oxygen, RS-7 for steam, and RS-8 and RS-9 for water.

Note: The asterisk (*) included in the Referenced Plant Section indicates that a raw CO₂ pre-treatment process is not expected to be necessary in most cases for CO₂ capture from syngas produced from auto-thermal reforming processes for hydrogen production.

4.3 Partial Oxidation of Eligible Hydrocarbons with Carbon Dioxide Captured Using a CCUS Process

4.3.1 Partial Oxidation Processes with Carbon Dioxide Captured Using a CCUS Process

4.3.2 Pertinent Eligible Property

This section lists equipment related to a partial oxidation process that may qualify as Eligible Property. While this list is intended to include key equipment examples, recognizing the variability in processes and equipment configurations for clean hydrogen production, property will be evaluated on a case-by-case basis. The equipment described in this section must meet the conditions of Section 4.3.1 above. Whether a particular property is Eligible Property within a qualified clean hydrogen project will be based on the definitions set out in the Act and determined by this Guide.

Examples of Eligible Property for a partial oxidation process could include, but are not limited to

• eligible hydrocarbon feed supply equipment, including conditioning and pre-treatment equipment (e.g., hydrogenation reactors and catalytic beds for sulphur removal, pressurization and pressure and temperature control equipment [e.g., compressors and their associated interstage heat exchangers, aftercoolers, knockout drums, pumps, high-pressure valves, actuators]), to deliver a polished hydrocarbon feed stream at appropriate operating conditions to the steam reforming equipment;
• eligible hydrocarbon partial oxidation equipment, such as
  • oxygen-blown non-catalytic high-pressure and high-temperature partial oxidation reactors to produce raw syngas;
  • low-, medium-, and high-temperature adiabatic and isothermal water gas shift reactors (e.g., fixed bed catalytic reactors with or without integrated temperature control provisions) to increase the conversion of CO to CO₂ and generate additional hydrogen using steam;
• separation equipment (e.g., wash columns, scrubbers) to remove partial oxidation reactor pollutants from the raw syngas;
• hydrogen separation and purification equipment, such as
  • PSA equipment (e.g., fixed bed adsorbers using multi-bed configurations for the separation of hydrogen from other gases and surge drums that are used for the collection of tail gases);
  • membrane separation equipment (e.g., permselective membranes and associated pressurization, pressure containment and control equipment);
  • methanation equipment (e.g., methanation reactors for exothermic conversion of CO and CO₂ to CH₄ and associated heat recovery and water knockout equipment);
• fuel supply system equipment, including fuel compression and pressure control equipment (e.g., compressors, blowers, pressure control valves, actuators, knockout drums) to deliver the fuel at the required conditions to the points of use on site;
• heat generation, pre-heating, and heat recovery equipment (e.g., fired heaters, electric heaters, heat exchangers, condensers, economizers, and associated equipment that
  • enable the delivery of heat and containment of pressure and combustion flue gases and improve heat utilization [e.g., immersion heaters and their shells, combustion chambers, integrated heat exchange and heat recovery equipment];
  • enable the adjustment of temperature, pressure, and control of combustor streams as well as recycling of flue gases for oxy-fuelled configurations [e.g., blowers, induced and forced draft fans, pressure regulation and control devices, preheaters, mixers, burners]);
• combustion flue gas pollutant control and pre-treatment equipment (e.g., low-NOx burners, flue gas desulphurizers, selective catalytic and non-catalytic NOx removal equipment, particulate removal equipment);
• cooling equipment (e.g., economizers, intercoolers, aftercoolers, condensers, heat exchangers, cooling towers, closed loop cooling systems, air-cooled exchangers) that are used to
  • recover heat;
  • reduce stream temperatures (e.g., syngas cooler);
  • separate condensable components of streams (e.g., for water removal from syngas);
  • maintain the operating temperature of exothermic reactors, feed supply systems; and
  • cooling of product and effluent streams (e.g., cooling of fired heater combustion flue gas and carbon dioxide-rich syngas prior to its transfer to raw carbon dioxide pre-treatment process of the CCUS facility);
• mechanical fluid circulation and pressurization equipment (e.g., blowers, forced draft fans, induced draft fans, compressors, pumps, interstage coolers, turbine drives [e.g., when compressors are driven by steam], motors when rotating equipment are driven by electricity, and associated filtering, demisters, knockout drums), to move process streams and fluids (e.g., natural gas fuel and feed, combustion air), including water and steam recirculation system (e.g., boiler feed water pumps) and flue gas recycling, where applicable;
• steam generation equipment necessary for the operation of the partial oxidation process (e.g., waste heat boilers, fired heaters, boiler tubes, steam drums, electric boilers, deaerators) used to generate on-site steam for partial oxidation reactors, water gas shift reactors, and to remove excess heat, including
  • integrated heat exchangers (e.g., isothermal shift reactors);
  • heat exchange surfaces (e.g., integral boiler tubes);
  • standalone heat exchangers or boilers that also recover heat from high-temperature reactor exhaust streams (e.g., partial oxidation reactors and water gas shift reactors) or increase temperature of boiler feed water; and
  • associated pumps and pressure control equipment needed for the delivery and recirculation of water and steam at the desired conditions within the steam generation circuit;
• oxygen production equipment—see Section 2.3 of this Guide for details;
• hydrogen compression and on-site storage equipment—see Section 2.4 of this Guide for details; and
• other property that is described in the definition of eligible clean hydrogen property in relation to a partial oxidation process in a qualified clean hydrogen project, including, but not limited to, ancillary equipment and system safety, integrity, control, or monitoring equipment listed respectively in Sections 1.5.1 and 1.5.2 of this Guide, as well as property used solely to convert another property to satisfy the description of equipment in subparagraphs (c)(ii), (c)(iv), or (c)(v) of the definition of eligible clean hydrogen property.

Certain property that supports partial oxidation processes for hydrogen production, described in the definitions of dual-use electricity and heat equipment and project support equipment, may also be Eligible Property. See Sections 2.1 and 2.2 of this Guide for more information on the following property:

• equipment that generates heat energy in support of a qualified clean hydrogen project;
• equipment that generates electrical energy in support of a qualified clean hydrogen project, excluding electricity generation equipment that supports the project indirectly by way of an electrical utility grid;
• equipment that generates a combination of electrical and heat energy in support of a qualified clean hydrogen project, excluding electricity generation equipment that supports the project indirectly by way of an electrical utility grid;
• equipment that distributes electrical or heat energy in support of a qualified clean hydrogen project;
• equipment that directly transmits electrical energy in support of a qualified clean hydrogen project; and
• equipment that delivers, collects, recovers, treats, or recirculates water, or a combination of any of those activities, in direct support of a qualified clean hydrogen project.

4.3.3 Typical Excluded Property

Property used in the partial oxidation hydrogen production process that is not Eligible Property is ineligible for the clean hydrogen tax credit. Examples of typical excluded property of a partial oxidation process comprise excluded property listed in Section 1.6 of this Guide, and the following:

• equipment used in a partial oxidation process that is also used in a non-clean hydrogen project (e.g., CCUS processes, industrial processes) and is therefore not used all or substantially all to produce clean hydrogen through eligible hydrocarbon reforming, unless it is dual-use electricity and heat equipment or project support equipment and their associated equipment described in any of the subparagraphs (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property and in Sections 2.1 and 2.2 of this Guide; and
• equipment used for processing of raw natural gas processing (e.g., gas plants) or for acid gas injection.

This list is not exhaustive and is meant to provide general guidance on typical property used in a partial oxidation process that is not Eligible Property.

4.3.4 Typical Capital Costs of Eligible Property

Typical capital costs of constructing a partial oxidation process would include costs for equipment categories that are provided in Table 4-3.

Table 4-3: Project costs for partial oxidation processes

1	Feed supply, conditioning, and pre-treatment equipment for eligible hydrocarbons (e.g., hydrogenation reactors and catalytic sulphur removal beds, compressors, pressure control equipment)
2	Partial oxidation equipment (e.g., non-catalytic partial oxidation and catalytic water gas shift reactors)
3	Separation equipment (e.g., wash columns, scrubbers, equipment to remove partial oxidation reactor pollutants from the raw syngas)
4	Hydrogen separation and purification equipment (e.g., pressure swing adsorption and desorption equipment, membrane separation equipment, methanation reactors, knockout drums)
5	Fuel supply system equipment (e.g., compressors, pressure control equipment)
6	Heat generation, pre-heating, and heat recovery equipment (e.g., fired heaters, electric heaters, heat exchangers, and combustion flue gas pollutant control and pre-treatment equipment), including dual-use heat generation equipment and heat distribution equipment—see Section 2.2 of this Guide for details
7	Cooling equipment (e.g., condensing economizers, intercoolers, condensers, cooling towers, heat exchangers, cooling towers, closed loop cooling systems, air-cooled exchangers), including utility cooling system equipment
8	Mechanical fluid circulation and pressurization equipment (e.g., compressors, blowers, fans, pumps)
9	Pressure control equipment (e.g., pressure regulation and control devices, compressors, blowers)
10	Steam generation equipment and heat recovery equipment (e.g., boiler feed water heat exchangers, pumps, recirculation systems)
11	Water delivery, collection, recovery, treatment, or recirculation equipment (or a combination of those activities)—see Section 2.1 of this Guide for details
12	Hydrogen compression and on-site storage equipment—see Section 2.4 of this Guide for details
13	Heat distribution equipment—see Section 2.2 of this Guide for details
14	Electricity generation equipment—see Section 2.2 of this Guide for details
15	Equipment that distributes electrical energy—see Section 2.2 of this Guide for details
16	Equipment that transmits electrical energy—see Section 2.2 of this Guide for details
17	Electrical system equipment
18	Liquid delivery and distribution system equipment
19	Process material storage and handling and distribution system equipment (e.g., on-site holding tanks, conditioning equipment, fluid transfer equipment, piping)
20	Process venting system equipment
21	Process waste management system equipment
22	Compressed utility air or nitrogen distribution system equipment
23	Complete monitoring and process control systems, including gas monitoring and leak detection and air emissions monitoring equipment
24	Process safety equipment
25	Flow control and containment equipment
26	Equipment for conversion of existing property into Eligible Property

4.3.5 Schematic for Eligible Property in Partial Oxidation Process

Some typical elements of a clean hydrogen project using a partial oxidation process that can produce clean hydrogen using an eligible hydrocarbon (e.g., natural gas), heat, and electricity are shown in Figure 4-3. Process boundaries described here are for a typical partial oxidation process with carbon dioxide captured as a representative example.

The specific property that is used in partial oxidation processes for hydrogen production may depend on the specific application, technology, and process configuration used in the clean hydrogen project. Whether particular property is Eligible Property will depend on its function within the clean hydrogen project.

Additional equipment not listed may still be Eligible Property and can include other types or configurations of partial oxidation and shift reactors, such as integration of reactors for improved heat integration.

For notes on the boundaries of this schematic, as well as other schematics in Section 4, refer to Section 4.4 of this Guide. Not all notes apply to each schematic.

Figure 4-3: Example of a partial oxidation process for hydrogen production

Click for larger image

Table Data

Equipment Identifier	Equipment Type	Equipment Description
B-101	Blower	Fired Heater Combustion Air Blower
C-102	Compressor	Feed Natural Gas and Hydrogen Compressor
C-103	Compressor	Hydrogen Recycle Compressor
C-101	Compressor	Pressure Swing Adsorber Tail Gas Recycle Compressor
E-101	Heat Exchanger	Natural Gas Feed Heater 1
E-102	Heat Exchanger	Natural Gas Feed Heater 2
E-103	Heat Exchanger	Oxygen Pre-heater
E-104	Heat Exchanger	Waste Heat Boiler
E-105	Heat Exchanger	HT Shift Reactor Outlet Cooler/Boiler Feed Water Heater 2
E-106	Heat Exchanger	LT Shift Reactor Outlet Cooler/Boiler Feed Water Heater 1
E-107	Heat Exchanger	Combustion Air Pre-Heater
F-101	Reactor/Filter	Pollutant Removal Unit (Selective Catalytic NOx Removal)
H-101	Heater	Fired Heater
P-101	Pump	Boiler Feed Water Pump
R-101	Reactor	Hydrogenation Reactor
R-102	Reactor	Sulphur Removal Reactor
R-103	Reactor	Partial Oxidation Reactor
R-104	Reactor	High Temperature (HT) Water Gas Shift Catalytic Reactor
R-105	Reactor	Low Temperature (LT) Water Gas Shift Catalytic Reactor
S-101	Stack	Combusted Tail Gas Stack
V-101	Separator	Boiler Feed Water Deaerator
V-102	Scrubber	Raw Syngas Scrubber
V-103	Condenser Separator	Hydrogen Water Knockout Drum
V-104	Packed Vessel	Pressure Swing Adsorption (PSA) Package

Stream Number	Stream Description
1	Feed Natural Gas
2	Feed Natural Gas and Hydrogen
3	Hydrogenated Feed Natural Gas
4	Treated (Sulphur Removed) Natural Gas Feed
5	Oxygen from Air Separation Unit
6	Raw Syngas from Partial Oxidation Reactor
7	Treated Water from Water Treatment Plant
8	Deaerated Water Header
9	Waste Heat Boiler Feed Water
10	Waste Heat Boiler Recirculating Water
11	Cooled Raw Syngas
12	Syngas Scrubber Feed Water
13	Cooled Scrubbed Syngas
14	High Pressure Steam to Water Gas Shift Reactor
15	HT Water Gas Shift Reactor Outlet
16	LT Water Gas Shift Reactor Outlet
17	Syngas to CO2 Pre-treatment Unit
18	Pre-Treated Syngas to CO2 Capture Unit
19	Low Purity Hydrogen Return from CO2 Capture Plant
20	PSA Pure Hydrogen Outlet
21	H2 Recycle to Hydrogenation Reactor
22	PSA Tail Gas Header
23	PSA Tail Gas Recycle
24	PSA Tail Gas to Fired Heater
25	Fired Heater Combustion Air
26	Fired Heater Combustion Flue Gas
27	Shifted Syngas Condensate
28	Cooling Water Supply
29	Cooling Water Return
30	Steam to Electricity and Heat Process
31	Scrubber Blowdown

Reference Identifier	Referenced Plant Section	CH-ITC Technical and Equipment Guidance Section
REF-01	Water Treatment and Use	2.1
REF-02	Oxygen and Nitrogen Production	2.3
REF-03	Raw CO2 Pre-Treatment Process *	-
REF-04	CO2 Capture Process	-
REF-05	Hydrogen Compression and On-site Storage	2.4
REF-06	Electricity and Heat	2.2

Note: The asterisk (*) included in the Referenced Plant Section indicates that a raw CO₂ pre-treatment process is not expected to be necessary in most cases for CO₂ capture from syngas produced from partial oxidation processes for hydrogen production.

Text version

Diagram illustrating the boundaries of a partial oxidation process for hydrogen production from eligible hydrocarbons, with carbon dioxide captured using a CCUS process. The boundary begins at RS-3, after natural gas enters the facility, and includes equipment such as fired-heaters, sulphur removal, partial oxidation and water gas shift reactors, scrubbers, heat exchangers, boilers, filters, blowers, compressors, pumps, reactors, deaerators, steam drums, and separator vessels. The boundary ends at RS-10, which is where shifted syngas is sent to the CO₂ pre-treatment and capture processes. The partial oxidation process boundary resumes at RS-11, after the cleaned syngas (with its CO₂ removed) returns from the CO₂ capture process, and includes hydrogen purification equipment, such as, adsorption and regeneration pressure swing separation columns. The boundary ends at RS-6, which is where the boundary of the hydrogen compression and on-site storage process begins. Boundaries on secondary streams within the partial oxidation process boundary, include RS-5 for pure oxygen, RS-7 for steam, RS-8 and RS-9 for water, and RS-13 for wastewater.

Note: The asterisk (*) included in the Referenced Plant Section indicates that a raw CO₂ pre-treatment process is not expected to be necessary in most cases for CO₂ capture from syngas produced from partial oxidation processes for hydrogen production.

4.4 Notes on Schematics of Hydrogen Production from Eligible Hydrocarbon Reforming or Partial Oxidation Processes

Notes on the schematic boundaries are provided here, including the definition of process boundaries for producing clean hydrogen through eligible hydrocarbon reforming or partial oxidation processes.

RS-1	For descriptions of Eligible Property included within this process boundary, see Sections 4.1.2, 4.2.2, and 4.3.2 of this Guide.
RS-2	For descriptions of ineligible property within the process, see Sections 4.1.3, 4.2.3, and 4.3.3 of this Guide.
RS-3	The fuel/feed eligible hydrocarbon supply system used for producing clean hydrogen through eligible hydrocarbon reforming or partial oxidation is described in clauses (c)(iv)(B) and (c)(iv)(C) of the definition of eligible clean hydrogen property. This system includes piping and components used solely to deliver fuel/feed eligible hydrocarbon to the hydrogen production equipment, described in subparagraph (c)(ii) of the definition of eligible clean hydrogen property. Its process boundary begins at and includes the first control valve that is used by the reforming or partial oxidation clean hydrogen production process. Where there is no control valve, the boundary for the eligible hydrocarbon reforming process begins where the piping for the clean hydrogen project physically connects to the Eligible Property described in subparagraph (c)(ii) of the definition of eligible clean hydrogen property. The process boundary ends where the piping for the clean hydrogen project physically connects to the Eligible Property described in subparagraph (c)(ii) of the definition of eligible clean hydrogen property.
RS-5	The process material storage and handling and distribution system used for on-site transport and delivery of oxygen is described in clause (c)(iv)(F) of the definition of eligible clean hydrogen property. The process boundary for oxygen transfer piping, from Eligible Property used for oxygen production to Eligible Property in reforming or partial oxidation hydrogen production, begins at and includes the first control valve along the piping that is used solely to deliver oxygen. Where there is no control valve, the process boundary begins at the point where the piping used solely to transfer the oxygen starts, immediately upstream of the last oxygen production Eligible Property, described in subparagraph (c)(ii) of the definition of eligible clean hydrogen property. The boundary includes downstream piping and components, up to the point where the oxygen supply piping physically connects to other Eligible Property in reforming and partial oxidation hydrogen production, described in subparagraph (c)(ii) of the definition of eligible clean hydrogen property.
RS-6	The process material storage and handling and distribution system used for on-site transport and delivery of hydrogen is described in clause (c)(iv)(F) of the definition of eligible clean hydrogen property. The process boundary of hydrogen transfer piping, from Eligible Property in reforming or partial oxidation hydrogen production process to Eligible Property used for hydrogen compression and on-site storage, begins at the fitting that is used solely to transport hydrogen from Eligible Property in the reforming or partial oxidation process. The boundary includes downstream piping and components, up to but excluding, the first control valve used by the Eligible Property used for hydrogen compression and on-site transport, described in subparagraph (c)(ii) of the definition of eligible clean hydrogen property. Where there is no control valve, the process boundary ends where the hydrogen piping physically connects to the Eligible Property used for hydrogen compression and on-site transport as described in subparagraph (c)(ii) of the definition of eligible clean hydrogen property.
RS-7	The electrical energy or heat energy distribution systems used for producing clean hydrogen through eligible hydrocarbon reforming are described in paragraph (b) of the definition of project support equipment. The process boundary of steam transfer piping, from Eligible Property in the reforming or partial oxidation process to dual-use electricity and heat generation Eligible Property, begins at the fitting that is used solely to transfer the steam from the last reforming or partial oxidation Eligible Property. The boundary includes downstream piping and components, up to but excluding the first control valve used by Eligible Property used for electricity and heat generation, described in subparagraph (a) of the definition of dual-use electricity and heat equipment. When there is no control valve, the process boundary ends where the steam piping physically connects to the dual-use electricity and heat generation Eligible Property, described in subparagraph (a) of the definition of dual-use electricity and heat equipment.
RS-8	The water delivery, collection, recovery, treatment, and recirculation system, as part of a water use process that supports clean hydrogen production equipment, is described in paragraph (c) of the definition of project support equipment. The process boundary related to the water use system begins at and includes the first control valve along the piping used solely to transfer water from Eligible Property used for water treatment and use to Eligible Property in the reforming or partial oxidation process. In the absence of the control valve, the process boundary begins at the fitting that is used solely to supply water to the Eligible Property used for the reforming or partial oxidation process, described in subparagraph (c)(ii) of the definition of eligible clean hydrogen property. The boundary includes downstream piping and components, up to the point where the piping for the water use process physically connects to Eligible Property in the reforming or partial oxidation process.
RS-9	The water delivery, collection, recovery, treatment, and recirculation system, as part of a water use process that supports clean ammonia equipment, is described in paragraph (c) of the definition of project support equipment. The process boundary related to water return used solely to transfer water from reforming or partial oxidation Eligible Property to water treatment and use Eligible Property begins at the fitting that is used solely to transfer the water from Eligible Property used for reforming or partial oxidation, described in subparagraph (c)(ii) of the definition of eligible clean hydrogen property. The boundary ends at and excludes the first control valve along the piping that is used by water treatment and use Eligible Property, described in subparagraph (c)(ii) of the definition of eligible clean hydrogen property. In the absence of a control valve, the process boundary ends where the piping for the water return physically connects to the water treatment and use Eligible Property.
RS-10	The process material storage and handling and distribution system, as it pertains to the on-site transport of syngas (i.e., raw carbon dioxide- and hydrogen-rich stream) for carbon dioxide removal within eligible hydrocarbon reforming or partial oxidation, is described in clause (c)(iv)(F) of the definition of eligible clean hydrogen property. The process boundary ends at the syngas production and treatment equipment, described in subparagraph (c)(ii) of the definition of eligible clean hydrogen property, and excludes the first control valve that is used solely by property described in Class 57 clause (a)(i)(A). Where there is no control valve, the process boundary ends where the piping physically connects to the on-site property described in Class 57 clause (a)(i)(A).
RS-11	The process material storage and handling and distribution system, as it pertains to the on-site hydrogen supply piping returning from carbon dioxide capture plant for eligible hydrocarbon reforming or partial oxidation, is described in clause (c)(iv)(F) of the definition of eligible clean hydrogen property. The process boundary begins at the connection to the property described in Class 57 clause (a)(i)(A) immediately upstream of the Eligible Property. The boundary includes piping and components that are used to carry the hydrogen-rich return stream. The boundary ends where the piping physically connects to the hydrogen production equipment as described in subparagraph (c)(ii) of the definition of eligible clean hydrogen property.
RS-12	The process material storage and handling and distribution system, as it pertains to the flue gas piping used to transfer the combustion flue gas produced in clean hydrogen production for carbon dioxide capture, is described in clause (c)(iv)(F) of the definition of eligible clean hydrogen property. The process boundary begins at the hydrogen production equipment generating the flue gas, as described in subparagraph (c)(ii) of the definition of eligible clean hydrogen property, and excludes, the first control valve that is used solely by property described in Class 57 clause (a)(i)(A). Where there is no control valve, the process boundary ends at the point where the clean hydrogen process’s combustion flue gas piping physically connects to the property described in Class 57 clause (a)(i)(A).
RS-13	The process waste management system used to transfer wastewater from eligible hydrocarbon reforming or partial oxidation is described in clause (c)(iv)(H) of the definition of eligible clean hydrogen property. It includes piping and components that are used solely to deliver waste streams coming from the clean hydrogen process to plant boundary. The process boundary of an eligible hydrocarbon reforming or partial oxidation process, related to the process waste management system, begins at the point where the piping for the process waste management system physically connects to Eligible Property described in subparagraph (c)(ii) of the definition of eligible clean hydrogen property. The boundary includes downstream piping, up to, and including, the last control valve before the point where the waste is removed from the plant loading areas. Where there is no control valve, the process boundary ends at the last fitting used to transfer the wastewater that also directly connects to the reforming or partial oxidation Eligible Property, described in subparagraph (c)(ii) of the definition of eligible clean hydrogen property.

4.4.1 Additional Eligible Property Not Shown on the Schematics of Hydrogen from Eligible Hydrocarbon Reforming or Partial Oxidation Processes

There are additional properties and systems ancillary to eligible hydrocarbon reforming or partial oxidation processes for hydrogen production that are not explicitly shown in the schematic but are still part of the clean hydrogen project.

• The cooling system used by an eligible hydrocarbon reforming process is described in clause (c)(iv)(E) of the definition of eligible clean hydrogen property and includes piping and components that are used solely to deliver cooling fluid (e.g., cooling water, air, glycol) to and from the Eligible Property. The process boundary related to the cooling system begins at and includes the first control valve along the piping or ducting system that is used solely by the Eligible Property. The boundary includes downstream piping or ducting, up to and including, the last control valve along the piping or ducting system that is used solely by the Eligible Property described in subparagraphs (c)(ii) and (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property. If the whole cooling system is used solely by Eligible Property, all piping and components are within the process boundaries of these processes.
• The utility air or nitrogen distribution system used by a hydrocarbon reforming or partial oxidation process is described in clause (c)(iv)(I) of the definition of eligible clean hydrogen property. It includes piping, equipment, and components that are used solely to supply utility air or nitrogen for the operation of equipment (e.g., pneumatic) and control systems (e.g., actuators) that is Eligible Property. The eligible hydrocarbon reforming process boundary related to the utility air or nitrogen distribution system begins at and includes the first control valve along the piping system that is used solely by the Eligible Property. The boundary includes downstream piping, up to the point where the piping for the utility air or nitrogen system physically connects to other property described in subparagraph (c)(ii) and (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property. If the whole utility air or nitrogen distribution system is used solely by Eligible Property, all piping and components are within the boundaries of these processes.
• The electrical system used by a hydrocarbon reforming or partial oxidation process is described in clause (c)(iv)(A) of the definition of eligible clean hydrogen property. It includes wiring and components that are used solely to supply electrical energy for the operation of equipment that is Eligible Property. The eligible hydrocarbon reforming process boundary related to the electrical system begins at and includes the first isolation switch along the wiring system that is used solely by Eligible Property. The boundary includes downstream wiring, up to the point where the wiring for the electrical system physically connects to other property described in subparagraphs (c)(ii) and (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property.
• The power distribution system that supports a hydrocarbon reforming or partial oxidation process is described in clause (c)(iii)(D) of the definition of eligible clean hydrogen property. The hydrocarbon reforming process boundary related to the power distribution system begins at and includes the master substation breaker for a power distribution substation along the power distribution system that is used by the Eligible Property described in subparagraphs (c)(ii) and (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property. The boundary includes downstream power lines, up to the point where the power lines for the power distribution system physically connects to the property described in subparagraph (c)(ii) of the definition of eligible clean hydrogen property. If the power distribution substation is not used by the Eligible Property, the process boundary related to the power distribution system begins at and includes the first master breaker along the power distribution system that is used by the Eligible Property. Where there is no master breaker, the power distribution system is not within the boundary of the eligible hydrocarbons reforming or partial oxidation process.

5.0 Production of Ammonia

5.1 Ammonia from Hydrogen

5.1.1 Ammonia-from-Hydrogen Processes

5.1.2 Pertinent Eligible Property

This section lists equipment related to an ammonia-from-hydrogen process that may qualify as Eligible Property. While this list is intended to include key equipment examples, recognizing the variability in processes and equipment configurations for clean hydrogen and clean ammonia production, property will be evaluated on a case-by-case basis. The equipment described in this section must meet the conditions of Section 5.1.1 above. Whether a particular property is Eligible Property within a qualified clean hydrogen project will be based on the definitions set out in the Act and determined by this Guide.

Examples of Eligible Property for an ammonia-from-hydrogen process could include, but are not limited to

• on-site nitrogen storage equipment (e.g., cryogenic storage tanks) to store nitrogen to be used as feedstock for ammonia synthesis;
• hydrogen and nitrogen feed supply equipment, including conditioning equipment (e.g., nitrogen vaporizers, cryogenic pumps, compressors, buffer tanks), to deliver hydrogen and nitrogen at the appropriate operating conditions;
• ammonia syngas compression equipment (e.g., single- or multi-stage centrifugal compressors, reciprocating compressors, compressor suction and interstage separators, interstage coolers) to bring process gas (e.g., feed gas, syngas, recycle gas) to the necessary pressure for ammonia synthesis;
• ammonia synthesis equipment (e.g., ammonia synthesis reactors and associated equipment, such as internal and external coolers, reactor start-up heaters) to convert the syngas into ammonia;
• cooling and ammonia condensing equipment (e.g., gas-gas heat exchangers, water coolers, air coolers, ammonia chillers, condensers) to cool down process streams, condense ammonia, and recover heat;
• ammonia separation equipment (e.g., ammonia separation vessels, letdown vessels, flash vessels) to separate condensed ammonia from syngas;
• ammonia purification equipment (e.g., lube oil separation equipment) to remove contaminants from ammonia;
• on-site ammonia storage equipment (e.g., liquid ammonia storage tanks, ammonia boil-off gas compression and condensing systems) to store ammonia and recover boil-off gas;
• purge gas equipment (e.g., chillers, ammonia separators) to prevent the buildup of inert gases in the refrigeration system and ammonia synthesis loop;
• ammonia recovery equipment (e.g., scrubbers, absorption and stripping systems) to recover ammonia from purge gases, such as high-pressure purge gas, letdown gas, and inert gas vent;
• hydrogen recovery equipment (e.g., PSA systems, membrane separation systems, adsorbers, cryogenic distillation systems) to recover hydrogen from purge gases;
• on-site refrigeration equipment (e.g., refrigeration compressors, ammonia chillers, refrigerant flash drums, water coolers, refrigerant circulation pumps) to provide the refrigeration load for ammonia condensing;
• process-integrated heat generation, recovery, and conversion equipment (e.g., electric heaters, heat exchangers, boiler feed water preheaters, waste heat boilers, steam drums, steam superheaters, turbines, condensers) to recover heat from hot process streams or generate heat and steam and convert heat to mechanical energy;
• mechanical fluid circulation and pressurization equipment (e.g., pumps, blowers, expansion valves) to pressurize, depressurize, and move process streams, such as air, cooling water, boiler feed water, refrigerant, ammonia, purge gases, recovered hydrogen and ammonia from purge gases, and tail gases; and
• other property that is described in the definition of eligible clean hydrogen property in relation to an ammonia-from-hydrogen process in a qualified clean hydrogen project, including, but not limited to, ancillary equipment and system safety, integrity, control, or monitoring equipment listed respectively in Sections 1.5.1 and 1.5.2 of this Guide, as well as property used solely to convert another property to satisfy the description of equipment in clause (c)(iii)(A) or subparagraphs (c)(iv) or (c)(v) of the definition of eligible clean hydrogen property.

Certain property that supports an ammonia-from-hydrogen process, described in the definitions of dual-use electricity and heat equipment and project support equipment, may also be Eligible Property. See Sections 2.1 and 2.2 of this Guide for more information on the following property:

• equipment that generates heat energy in support of a qualified clean hydrogen project;
• equipment that generates electrical energy in support of a qualified clean hydrogen project excluding electricity generation equipment that supports the project indirectly by way of an electrical utility grid;
• equipment that generates a combination of electrical and heat energy in support of a qualified clean hydrogen project excluding electricity generation equipment that supports the project indirectly by way of an electrical utility grid;
• equipment that distributes electrical or heat energy in direct support of a qualified clean hydrogen project;
• equipment that directly transmits electrical energy in support of a qualified clean hydrogen project; and
• equipment that delivers, collects, recovers, treats, or recirculates water, or a combination of any of those activities, in direct support of a qualified clean hydrogen project.

A nitrogen generation process is often integrated with ammonia production processes, and certain property described in paragraph (c) of the definition of clean ammonia equipment may be Eligible Property. Refer to Section 2.3 for more information on Eligible Property in the nitrogen generation process.

5.1.3 Typical Excluded Property

Property used in the ammonia-from-hydrogen process that is not Eligible Property is ineligible for the clean hydrogen tax credit. Examples of typical excluded property of an ammonia-from-hydrogen process comprise excluded property listed in Section 1.6 of this Guide, and the following:

• equipment used in an ammonia-from-hydrogen process where the hydrogen feed is not clean hydrogen;
• equipment used in an ammonia-from-hydrogen process that is also used in a non-clean hydrogen project (e.g., CCUS processes, industrial processes), and is therefore not used solely to produce clean ammonia, unless it is dual-use electricity and heat equipment or project support equipment and their associated equipment described in any of the subparagraphs (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property and in Sections 2.1 and 2.2 of this Guide, such as
  • equipment used to convert clean ammonia into other products, such as fertilizer;
  • a refrigeration system that uses clean ammonia as a refrigerant in another industrial process; or
  • a steam turbine for electricity production that uses steam from the waste heat boiler of an ammonia-from-hydrogen process where the electricity produced is not used in the clean hydrogen project; and
• equipment used to handle and store oxygen other than venting equipment.

This list is not exhaustive and is meant to provide general guidance on typical property used in an ammonia-from-hydrogen process that is not Eligible Property.

5.1.4 Typical Capital Costs of Eligible Property

Typical capital costs of constructing an ammonia-from-hydrogen process would include costs for equipment categories that are provided in Table 5-1.

Table 5-1: Project costs for ammonia-from-hydrogen processes

1	On-site nitrogen storage equipment (e.g., cryogenic storage tanks)
2	Hydrogen and nitrogen feed supply and conditioning equipment (e.g., nitrogen vaporizers, cryogenic pumps, compressors, buffer tanks)
3	Ammonia syngas compression equipment (e.g., single- or multi-stage centrifugal compressors, reciprocating compressors, compressor suction and interstage separators, interstage coolers)
4	Ammonia synthesis equipment (e.g., ammonia synthesis reactors and associated equipment, such as internal and external coolers, reactor start-up heaters)
5	Cooling and ammonia condensing equipment (e.g., gas-gas heat exchangers, water coolers, air coolers, ammonia chillers, condensers)
6	Ammonia separation equipment (e.g., ammonia separation vessels, letdown vessels, flash vessels)
7	Ammonia purification equipment (e.g., lube oil separation equipment)
8	On-site ammonia storage equipment (e.g., liquid ammonia storage tanks, ammonia boil-off gas compression and condensing systems)
9	Purge gas equipment (e.g., chillers, ammonia separators)
10	Ammonia recovery from purge gases equipment (e.g., scrubbers, absorption and stripping systems)
11	Hydrogen recovery from purge gases equipment (e.g., PSA systems, membrane separation systems, adsorbers, cryogenic distillation systems)
12	On-site refrigeration equipment (e.g., refrigeration compressors, ammonia chillers, refrigerant flash drums, water coolers, refrigerant circulation pumps)
13	Process-integrated heat generation, recovery, and conversion equipment (e.g., electric heaters, heat exchangers, boiler feed water preheaters, waste heat boilers, steam drums, steam superheaters, turbines, condensers)
14	Mechanical fluid circulation and pressurization equipment (e.g., pumps, blowers, expansion valves)
15	Heat distribution equipment—see Section 2.2 of this Guide for details
16	Electricity generation equipment—see Section 2.2 of this Guide for details
17	Equipment that distributes electrical energy—see Section 2.2 of this Guide for details
18	Equipment that transmits electrical energy—see Section 2.2 of this Guide for details
19	Electrical system equipment
20	Liquid delivery and distribution system equipment
21	Process material storage and handling and distribution system equipment (e.g., holding tanks, conditioning equipment, fluid transfer equipment, piping)
22	Process venting system equipment
23	Process waste management system equipment
24	Compressed utility air or nitrogen distribution system equipment
25	Complete monitoring and process control systems, including gas monitoring and leak detection and air emissions monitoring equipment
26	Process safety equipment
27	Flow control and containment equipment
28	Equipment for conversion of existing property into Eligible Property

5.1.5 Schematic for Eligible Property in an Ammonia-from-Hydrogen Process

Some typical elements of a clean hydrogen project that can be used for ammonia production from hydrogen are shown in Figure 5-1. Process boundaries described here are for a typical ammonia-from-hydrogen process as a representative example.

The specific property that is used in an ammonia-from-hydrogen process may depend on the specific application, technology, and process configuration used in the clean hydrogen project. Whether particular property is Eligible Property will depend on its function within the clean hydrogen project.

For notes on the process boundaries on this schematic, as well as other schematics in Section 5, refer to Sections 4.4 and 5.3 of this Guide. Not all notes apply to each schematic.

Figure 5-1: Example of an ammonia-from-hydrogen process

Click for larger image

Table Data

Equipment Identifier	Equipment Type	Equipment Description
C-101	Compressor	Makeup Syngas Compressor First Stage
C-102	Compressor	Makeup Syngas Compressor Second Stage
C-103	Compressor	Recycle Gas Compressor
C-104	Compressor	Refrigeration Compressor
E-101	Heat Exchanger	Syngas Compressor Interstage Cooler
E-102	Heat Exchanger	Waste Heat Boiler
E-103	Heat Exchanger	Synthesis Loop Hot Gas Heat Exchanger
E-104	Heat Exchanger	Synthesis Loop Gas Cooler
E-105	Heat Exchanger	Synthesis Loop Cold Gas Heat Exchanger
E-106	Heat Exchanger	Synthesis Loop First Chiller
E-107	Heat Exchanger	Synthesis Loop Second Chiller
E-108	Heat Exchanger	HP Purge Gas Chiller
E-109	Heat Exchanger	Inert Vent Gas Chiller
E-110	Heat Exchanger	Refrigerant Condenser
H-101	Heater	Ammonia Converter Start-up Heater
P-101	Pump	Refrigerant Circulation Pump
P-102	Pump	Refrigerant Circulation Pump
P-103	Pump	Ammonia Product Pump
P-104	Pump	Boiler Feed Water Pump
R-101	Reactor	Ammonia Converter
S-101	Stack Flare	Ammonia Stack Flare
T-101	Tank	Ammonia Storage Tank
V-101	Gas-Liquid Separator	Syngas Compressor Suction Separator
V-102	Gas-Liquid Separator	Syngas Compressor Interstage Separator
V-103	Gas-Liquid Separator	Ammonia Separator
V-104	Gas-Liquid Separator	Letdown Vessel
V-105	Gas-Liquid Separator	HP Purge Gas Separator
V-106	Deaerator	Boiler Feed Water Deaerator
V-107	Gas-Liquid Separator	Ammonia Flash Drum
V-108	Gas-Liquid Separator	Refrigerant Flash Drum
V-109	Gas-Liquid Separator	Refrigerant Accumulator
V-110	Gas-Liquid Separator	Inert Vent Gas Separator

Stream Number	Stream Description
1	Ammonia Production Nitrogen Supply
2	Ammonia Production Hydrogen Supply
3	Ammonia Syngas Feed
4	Compressed Syngas
5	Makeup Syngas and Recycle Gas
6	Ammonia Converter Feed
7	Ammonia Converter Outlet
8	Liquid Ammonia from Ammonia Separator
9	High Pressure Purge Gas
10	Cooling/Demin Water
11	Deaerator Feed Water
12	Waste Heat Boiler Feed Water
13	Generated Steam
14	Deaerator Steam Supply
15	Recovered Cooling Water
16	Letdown Gas
17	Liquid Ammonia from Letdown Vessel
18	Product Ammonia to Storage
19	Product Ammonia to Export
20	Vapor Ammonia (Boil-Off Gas)
21	Vapor Ammonia to Refrigeration Compressor
22	Ammonia Vent
23	Liquid Ammonia (Refrigerant)
24	Vapor Ammonia (Refrigerant)
25	Compressed Vapor Ammonia (Refrigerant)
26	Liquid Ammonia (Refrigerant)
27	Inert Vent Gas

Reference Identifier	Referenced Plant Section	CH-ITC Technical and Equipment Guidance Section
REF-01	Oxygen and Nitrogen Generation	2.3
REF-02	Hydrogen Compression and On-site Storage	2.4
REF-03	Water Treatment and Use	2.1
REF-04	Electricity and Heat	2.2

Text version

Diagram illustrating the boundaries of an ammonia production process using hydrogen from electrolysis. The boundary begins at AS-4, after hydrogen compression and storage (see Section 2.4 of this Guide), and includes equipment such as syngas compressors, ammonia synthesis reactors, ammonia condensers, ammonia separators, coolers, pumps, refrigeration compressors, chillers, and tanks. The boundary ends at AS-9, which is where the ammonia product is removed from the plant boundary for off-site transportation. Boundaries on secondary streams within the boundary of the ammonia from hydrogen process include AS-3 for nitrogen supply, AS-5 for cooling water supply, AS-6 for cooling water return, AS-7 for purge water streams, and AS-8 for steam supply and export.

5.2 Ammonia from an Integrated Clean Hydrogen Project

5.2.1 Ammonia from an Integrated Process

5.2.2 Pertinent Eligible Property

This section lists equipment related to an integrated ammonia process that may qualify as Eligible Property. While this list is intended to include key equipment examples, recognizing the variability in processes and equipment configurations for clean hydrogen production, property will be evaluated on a case-by-case basis. The equipment described in this section must meet the conditions of Section 5.2.1 above. Whether a particular property is Eligible Property within a qualified clean hydrogen project will be based on the definitions set out in the Act and determined by this Guide.

Examples of Eligible Property for an integrated ammonia process could include, but are not limited to

• on-site nitrogen storage equipment (e.g., cryogenic storage tanks) to store nitrogen that will be feedstock for the integrated ammonia process;
• hydrogen, nitrogen, and ammonia syngas feed supply equipment, including conditioning equipment (e.g., nitrogen vaporizers, compressors, buffer tanks, liquid nitrogen wash), to deliver hydrogen, nitrogen, and ammonia syngas at the appropriate operating conditions;
• ammonia syngas compression equipment (e.g., single- or multi-stage centrifugal compressors, reciprocating compressors, compressor suction and interstage separators, interstage coolers) to bring process gas (e.g., feed gas, syngas, recycle gas) to the necessary pressure for ammonia synthesis;
• ammonia synthesis equipment (e.g., ammonia synthesis reactors and associated equipment such as internal and external coolers, reactor start-up heaters) to convert the syngas into ammonia;
• cooling and ammonia condensing equipment (e.g., gas-gas heat exchangers, water coolers, air coolers, ammonia chillers, condensers) to cool down process streams, condense ammonia, and recover heat;
• ammonia separation equipment (e.g., ammonia separation vessels, letdown vessels, flash vessels) to separate condensed ammonia from syngas;
• ammonia purification equipment (e.g., lube oil separation equipment) to remove contaminants from ammonia;
• on-site ammonia storage equipment (e.g., liquid ammonia storage tanks, ammonia boil-off gas compression and condensing systems) to store ammonia and recover boil-off gas;
• purge gas equipment (e.g., chillers, ammonia separators) to prevent the buildup of inert gases in the refrigeration system and ammonia synthesis loop;
• ammonia recovery equipment (e.g., scrubbers, absorption and stripping systems) to recover ammonia from purge gases, such as high-pressure purge gas, letdown gas, and inert gas vent;
• hydrogen recovery equipment (e.g., PSA systems, membrane separation systems, adsorbers, cryogenic distillation systems) to recover hydrogen from purge gases;
• on-site refrigeration equipment (e.g., refrigeration compressors, ammonia chillers, refrigerant flash drums, water coolers, refrigerant circulation pumps) to provide the refrigeration load for ammonia condensing;
• process-integrated heat generation, recovery, and conversion equipment (e.g., electric heaters, heat exchangers, boiler feed water preheaters, waste heat boilers, steam drums, steam superheaters, turbines, condensers) to recover heat from hot process streams or generate heat or steam and convert heat to mechanical energy;
• mechanical fluid circulation and pressurization equipment (e.g., pumps, blowers, expansion valves) to pressurize, depressurize, and move process streams, including air, cooling water, boiler feed water, refrigerant, ammonia, purge gases, recovered hydrogen and ammonia from purge gases, and tail gases; and
• other property that is described in the definition of eligible clean hydrogen property in relation to an integrated ammonia process in a qualified clean hydrogen project, including, but not limited to, ancillary equipment and system safety, integrity, control, or monitoring equipment listed respectively in Sections 1.5.1 and 1.5.2 of this Guide, as well as property used solely to convert another property to satisfy the description of equipment in clause (c)(iii)(A) or subparagraphs (c)(iv) or (c)(v) of the definition of eligible clean hydrogen property.

Certain property that supports an integrated ammonia process, described in the definitions of dual-use hydrogen and ammonia equipment, dual-use electricity and heat equipment, and project support equipment, may also be Eligible Property. See Sections 2.1 and 2.2 of this Guide for more information on the following property:

• equipment that generates heat energy in support of a qualified clean hydrogen project;
• equipment that generates electrical energy in support of a qualified clean hydrogen project excluding electricity generation equipment that supports the project indirectly by way of an electrical utility grid;
• equipment that generates a combination of electrical and heat energy in support of a clean hydrogen project excluding electricity generation equipment that supports the project indirectly by way of an electrical utility grid;
• equipment that distributes electrical or heat energy that directly supports a qualified clean hydrogen project;
• equipment that directly transmits electrical energy in support of a qualified clean hydrogen project; and
• equipment that delivers, collects, recovers, treats, or recirculates water, or a combination of any of those activities, in direct support of a qualified clean hydrogen project.

A nitrogen generation process is often integrated with ammonia production processes, and certain property described in paragraph (c) of the definition of clean ammonia equipment may be Eligible Property. Refer to Section 2.3 for more information on Eligible Property in the nitrogen generation process.

5.2.3 Typical Excluded Property

Property used in the integrated ammonia process that is not Eligible Property is ineligible for the clean hydrogen tax credit. Examples of typical excluded property of an integrated ammonia process comprise excluded property listed in Section 1.6 of this Guide, and the following:

• equipment used in an integrated ammonia process where the hydrogen feed is not clean hydrogen;
• equipment used in an integrated ammonia process that is also used in a non-clean hydrogen project (e.g., CCUS processes, industrial processes), and is therefore not used solely to produce clean ammonia, unless it is dual-use electricity and heat equipment or project support equipment and their associated equipment described in any of the subparagraphs (c)(iv) to (c)(vi) of the definition eligible of clean hydrogen property and in Sections 2.1 and 2.2 of this Guide, such as
  • equipment used to convert clean ammonia into other products, such as fertilizer;
  • a refrigeration system that uses clean ammonia as a refrigerant in another industrial process; or
  • a steam turbine for electricity production that uses steam from the waste heat boiler of an integrated ammonia process where the electricity produced is not used in the clean hydrogen project; and
• equipment used to handle and store oxygen other than venting equipment.

This list is not exhaustive and is meant to provide general guidance on typical property used in an integrated ammonia process that is not Eligible Property.

5.2.4 Typical Capital Costs of Eligible Property

Typical capital costs of constructing an integrated ammonia process would include costs of equipment categories that are provided in Table 5-2.

Table 5-2: Project costs for an integrated ammonia process

1	On-site nitrogen storage equipment (e.g., cryogenic storage tanks)
2	Hydrogen, nitrogen, and ammonia syngas feed supply and conditioning equipment (e.g., nitrogen vaporizers, compressors, buffer tanks, liquid nitrogen wash)
3	Ammonia syngas compression equipment (e.g., single- or multi-stage centrifugal compressors, reciprocating compressors, compressor suction and interstage separators, interstage coolers)
4	Ammonia synthesis equipment (e.g., ammonia synthesis reactors and associated equipment, such as internal and external coolers, reactor start-up heaters)
5	Cooling and ammonia condensing equipment (e.g., gas-gas heat exchangers, water coolers, air coolers, ammonia chillers, condensers)
6	Ammonia separation equipment (e.g., ammonia separation vessels, letdown vessels, flash vessels)
7	Ammonia purification equipment (e.g., lube oil separation equipment)
8	On-site ammonia storage equipment (e.g., liquid ammonia storage tanks, ammonia boil-off gas compression and condensing systems)
9	Purge gas equipment (e.g., chillers, ammonia separators)
10	Ammonia recovery from purge gases equipment (e.g., scrubbers, absorption and stripping systems)
11	Hydrogen recovery from purge gases equipment (e.g., PSA systems, membrane separation systems, adsorbers, cryogenic distillation systems)
12	On-site refrigeration equipment (e.g., refrigeration compressors, ammonia chillers, refrigerant flash drums, water coolers, refrigerant circulation pumps)
13	Process-integrated heat generation, recovery, and conversion equipment (e.g., electric heaters, heat exchangers, boiler feed water preheaters, waste heat boilers, steam drums, steam superheaters, turbines, condensers)
14	Mechanical fluid circulation and pressurization equipment (e.g., pumps, blowers, expansion valves)
15	Heat distribution equipment—see Section 2.2 of this Guide for details
16	Electricity generation equipment—see Section 2.2 of this Guide for details
17	Equipment that distributes electrical energy—see Section 2.2 of this Guide for details
18	Equipment that transmits electrical energy—see Section 2.2 of this Guide for details
19	Electrical system equipment
20	Liquid delivery and distribution system equipment
21	Process material storage and handling and distribution system equipment (e.g., holding tanks, conditioning equipment, fluid transfer equipment, piping)
22	Process venting system equipment
23	Process waste management system equipment
24	Compressed utility air or nitrogen distribution system equipment
25	Complete monitoring and process control systems, including gas monitoring and leak detection and air emissions monitoring equipment
26	Process safety equipment
27	Flow control and containment equipment
28	Equipment for conversion of existing property into Eligible Property

5.2.5 Schematic for Eligible Property in Ammonia Production from an Integrated Process

Some typical elements of a clean hydrogen project that can be used for ammonia production from an integrated process are shown in Figure 5-2. Process boundaries described here are for a typical integrated ammonia process using an auto-thermal reforming process as a representative example.

The specific property that is used in an integrated ammonia process may depend on the specific application, technology, and process configuration used in the clean hydrogen project. Whether particular property is Eligible Property will depend on its function within the clean hydrogen project.

For notes on the process boundaries on this schematic, as well as other schematics in Section 5, refer to Sections 4.4 and 5.3 of this Guide. Not all notes apply to each schematic.

Figure 5-2: Example of an integrated ammonia process using an auto-thermal reforming process

Click for larger image

Table Data

Equipment Identifier	Equipment Type	Equipment Description
B-101	Blower	Fired Heater Combustion Air Blower
C-101	Compressor	Pressure Swing Adsorber Tail Gas Recycle Compressor
C-102	Compressor	Hydrogen Recycle Compressor
C-103	Compressor	Makeup Syngas Compressor
C-104	Compressor	Recycle Gas Compressor
C-105	Compressor	Refrigeration Compressor
E-101	Heat Exchanger	Natural Gas Feed Heater 1
E-102	Heat Exchanger	Natural Gas Feed Heater 2
E-103	Heat Exchanger	Boiler Feed Water Heater (Shifted Syngas cooler)
E-104	Heat Exchanger	Steam Generation Boiler Tubes
E-105	Heat Exchanger	Steam Superheater
E-106	Heat Exchanger	Syngas Cooler/waste heat boiler
E-107	Heat Exchanger	High Temperature Shift Reactor Outlet Syngas Cooler
E-108	Heat Exchanger	Combustion Air Pre-Heater
E-109	Heat Exchanger	Waste Heat Boiler
E-110	Heat Exchanger	Synthesis Loop Hot Gas Heat Exchanger
E-111	Heat Exchanger	Synthesis Loop Gas Cooler
E-112	Heat Exchanger	Synthesis Loop Cold Gas Heat Exchanger
E-113	Heat Exchanger	Synthesis Loop First Chiller
E-114	Heat Exchanger	Synthesis Loop Second Chiller
E-115	Heat Exchanger	HP Purge Gas Chiller
E-116	Heat Exchanger	Inert Vent Gas Chiller
E-117	Heat Exchanger	Refrigerant Condenser
F-101	Reactor/Filter	Pollutant Removal Unit (Selective Catalytic NOx Removal)
H-101	Heater	Fired Heater
H-102	Heater	Ammonia Converter Start-up Heater
P-101	Pump	Reforming Steam Boiler Feed Water Pump
P-102	Pump	Waste Heat Boiler Feed Water Pump
P-103	Pump	Refrigerant Circulation Pump
P-104	Pump	Refrigerant Circulation Pump
P-105	Pump	Ammonia Product Pump
P-106	Pump	Boiler Feed Water Pump
R-101	Reactor	Hydrogenation Reactor
R-102	Reactor	Sulphur Removal Reactor
R-103	Reactor	Natural Gas Catalytic Pre-reformer
R-104	Reactor	Auto-thermal Catalytic Reformer
R-105	Reactor	High Temperature (HT) Water Gas Shift Catalytic Reactor
R-106	Reactor	Low Temperature (LT) Water Gas Shift Catalytic Reactor
R-107	Reactor	Ammonia Converter
S-101	Stack	Combusted Tail Gas Stack
S-102	Stack Flare	Ammonia Stack Flare
T-101	Tank	Ammonia Storage Tank
V-101	Separator	Boiler Feed Water Deaerator
V-102	Separator	Steam Drum
V-103	Condenser Separator	Hydrogen Water Knockout Drum
V-104	Packed Vessel	Pressure Swing Adsorption (PSA) Package
V-105	Gas-Liquid Separator	Syngas Compressor Suction Separator
V-106	Gas-Liquid Separator	Ammonia Separator
V-107	Gas-Liquid Separator	Letdown Vessel
V-108	Gas-Liquid Separator	HP Purge Gas Separator
V-109	Deaerator	Boiler Feed Water Deaerator
V-110	Gas-Liquid Separator	Ammonia Flash Drum
V-111	Gas-Liquid Separator	Refrigerant Flash Drum
V-112	Gas-Liquid Separator	Refrigerant Accumulator
V-113	Gas-Liquid Separator	Inert Vent Gas Separator

Stream Number	Stream Description
1	Feed Natural Gas
2	Feed Natural Gas and Hydrogen
3	Hydrogenated Feed Natural Gas
4	Treated (Sulphur Removed) Natural Gas Feed
5	Treated Water from Water Treatment Plant
6	Reforming Boiler Feed Water
7	Steam to Steam Drum
8	Steam to Superheater
9	Superheated Reforming Steam
10	Partially Reformed Natural Gas
11	Feed Oxygen to Reformer
12	Reformer Syngas Outlet
13	HT Water Shift Gas Reactor Outlet
14	LT Water Shift Gas Reactor Outlet
15	Syngas to CO2 Pre-treatment Unit
16	Pre-Treated Syngas to CO2 Capture Unit
17	Hydrogen Return from CO2 Capture Plant
18	PSA Pure Hydrogen outlet
19	H2 Recycle to hydrogenation Reactor
20	PSA Tail Gas
21	PSA Recycled Tail Gas
22	PSA Tail Gas to Fired Heater
23	Fired Heater Combustion Air
24	Fired Heater Combustion Flue Gas
25	Shifted Syngas Condensate
26	Cooling Water Supply
27	Cooling Water Return
28	Waste Heat Boiler Feed Water
29	Waste Heat Recovery Steam
30	Ammonia Production Nitrogen Supply
31	Ammonia Production Hydrogen Supply
32	Ammonia Syngas Feed
33	Compressed Syngas
34	Makeup Syngas and Recycle Gas
35	Ammonia Converter Feed
36	Ammonia Converter Outlet
37	Liquid Ammonia from Ammonia Separator
38	High Pressure Purge Gas
39	Cooling/Demin Water
40	Deaerator Feed Water
41	Waste Heat Boiler Feed Water
42	Generated Steam
43	Recovered Cooling Water
44	Letdown Gas
45	Liquid Ammonia from Letdown Vessel
46	Product Ammonia to Storage
47	Product Ammonia to Export
48	Vapor Ammonia (Boil-Off Gas)
49	Vapor Ammonia to Refrigeration Compressor
50	Ammonia Vent
51	Liquid Ammonia (Refrigerant)
52	Vapor Ammonia (Refrigerant)
53	Compressed Vapor Ammonia (Refrigerant)
54	Liquid Ammonia (Refrigerant)
55	Inert Vent Gas
56	Tail Gas to Fired Heater

Reference Identifier	Referenced Plant Section	CH-ITC Technical and Equipment Guidance Section
REF-01	Water Treatment and Use	2.1
REF-02	Oxygen and Nitrogen Generation	2.3
REF-03	Raw CO2 Pre-Treatment Process *	-
REF-04	CO2 Capture and Storage Process	-
REF-05	Hydrogen Compression and On-site Storage	2.4
REF-06	Electricity and Heat	2.2

Note: The asterisk (*) included in the Referenced Plant Section indicates that a raw CO₂ pre-treatment process is not expected to be necessary in most cases for CO₂ capture from syngas produced from auto-thermal reforming processes for hydrogen production.

Text version

Diagram illustrating the boundaries of an integrated ammonia production process using hydrogen from natural gas auto-thermal reforming. The boundary begins at AS-4, after hydrogen compression and storage (see Section 2.4 of this Guide), and includes equipment such as syngas compressors, ammonia synthesis reactors, ammonia condensers, ammonia separators, coolers, pumps, refrigeration compressors, chillers, and tanks. The boundary ends at AS-9, which is where ammonia product is removed from the plant boundary for off-site transportation. Boundaries on secondary streams within the boundary of the integrated ammonia process include AS-3 for nitrogen supply, AS-5 for cooling water supply, AS-6 for cooling water return, AS-7 for purge water streams, AS-8 for steam supply and export, and AS-10 for tail gases transfer (from the ammonia production process to the hydrogen production process).

5.3 Notes on Schematics of Ammonia Production Processes

Notes on the schematic boundaries are provided here, including the definition of process boundaries for producing clean ammonia through eligible ammonia production processes.

AS-1	For descriptions of Eligible Property included within this process boundary, see Sections 5.1.2 and 5.2.2 of this Guide.
AS-2	For descriptions of ineligible property within the process, see Sections 5.1.3 and 5.2.3 of this Guide.
AS-3	The nitrogen supply piping that is used by an ammonia synthesis process is described in clause (c)(iv)(F) of the definition of eligible clean hydrogen property. The ammonia synthesis process boundary begins at and includes the first control valve along the piping that is used solely by the Eligible Property described in clause (c)(iii)(A) of the definition of eligible clean hydrogen property. Where there is no control valve, the boundary begins at the point where the piping connects to the nitrogen generation equipment. The boundary includes downstream piping and components and ends at the point where the nitrogen supply piping physically connects to the Eligible Property described in clause (c)(iii)(A) of the definition of eligible clean hydrogen property.
AS-4	The hydrogen supply piping that is used by an ammonia process is described in clause (c)(iv)(F) of the definition of eligible clean hydrogen property. The ammonia synthesis boundary begins at and includes the first control valve along the piping that is used solely by the Eligible Property described in clause (c)(iii)(A) of the definition of eligible clean hydrogen property. Where there is no control valve, the boundary begins at the point where the piping physically connects to the hydrogen compression equipment. The boundary includes downstream piping and components and ends at the point where the hydrogen supply piping physically connects to the Eligible Property described in clause (c)(iii)(A) of the definition of eligible clean hydrogen property.
AS-5	The water delivery, collection, recovery, treatment, and recirculation system, as part of a water use process that supports clean ammonia equipment, is described in paragraph (c) of the definition of project support equipment. The ammonia process boundary related to the water use system begins at and includes the first control valve along the piping that is used solely by clean ammonia equipment. In the absence of a control valve, the boundary begins at the fitting that it is used solely to supply water to the ammonia process. The boundary includes downstream piping and components and ends at the point where the piping for the water use process physically connects to the Eligible Property described in clause (c)(iii)(A) of the definition of eligible clean hydrogen property.
AS-6	The water delivery, collection, recovery, treatment, and recirculation system, as part of a water use process that supports clean ammonia equipment, is described in paragraph (c) of the definition of project support equipment. The process boundary related to water return used solely to transfer water from Eligible Property used for ammonia production to Eligible Property used for water treatment and use begins at the fitting that is used solely to transfer the water from Eligible Property used for ammonia production, described in clause (c)(iii)(A) of the definition of eligible clean hydrogen property. The boundary ends at and excludes the first control valve along the piping that is used by water treatment and use Eligible Property, described in paragraph (c) of the definition of project support equipment. Where there is no control valve, the process boundary ends where the piping for the water return physically connects to the Eligible Property used for water treatment and use, described in paragraph (c) of the definition of project support equipment.
AS-7	The process waste management system, used by an ammonia process, is described in clause (c)(iv)(H) of the definition of eligible clean hydrogen property. It includes piping and components that are solely used to deliver waste streams coming from Eligible Property to loading areas. The ammonia process boundary related to the waste management system begins at the point where the piping for the process waste management system physically connects to the Eligible Property described in clause (c)(iii)(A) of the definition of eligible clean hydrogen property. The boundary includes downstream piping, and components, up to and including, the last control valve before the point where the waste is removed from the plant boundary.
AS-8	The heat distribution system that supports an ammonia process is described in paragraph (b) of the definition of project support equipment. The process boundary related to steam supply to Eligible Property used for ammonia production from other Eligible Property begins at and includes the first control valve that is used solely by ammonia production equipment, described in clause (c)(iii)(A) of the definition of eligible clean hydrogen property. Where there is no control valve, the boundary begins at the first fitting solely used to supply steam to the Eligible Property described in clause (c)(iii)(A) of the definition of eligible clean hydrogen property. The boundary includes piping and components downstream and ends at the point where the heat distribution piping physically connects to the Eligible Property described in clause (c)(iii)(A) of the definition of eligible clean hydrogen property. The process boundary related to steam supply from ammonia production Eligible Property to other Eligible Property begins at the first fitting that is used solely to transfer the steam. It ends at, and excludes, the first control valve along the piping that is used solely by other Eligible Property. Where there is no control valve, the boundary does not include the piping and components used to transfer steam.
AS-9	The on-site refrigeration, transportation, and storage equipment for clean ammonia is described in paragraph (e) of the definition of clean ammonia equipment. It includes piping and components that are solely used to deliver clean ammonia from Eligible Property described in clause (c)(iii)(A) of the definition of eligible clean hydrogen property to loading areas. The process boundary for the ammonia delivery system begins at the point where the piping for the ammonia physically connects to the Eligible Property described in paragraph (e) of the definition of clean ammonia equipment. The boundary includes downstream piping, up to and excluding, the last control valve and components used for off-site transportation before ammonia is removed from the plant boundary.
AS-10	The process material storage and handling and distribution system, as it pertains to the transport of tail gases produced in the ammonia process to the process for hydrogen production through reforming or partial oxidation of eligible hydrocarbons, is described in clause (c)(iv)(F) of the definition of eligible clean hydrogen property. It includes piping and components that are solely used for tail gas transport from the ammonia process to Eligible Property described in subparagraph (c)(ii) of the definition of eligible clean hydrogen property. The ammonia process boundary related to the transport of tail gases begins at the point where the piping for the tail gas transport physically connects to the Eligible Property described in clause (c)(iii)(A) of the definition of eligible clean hydrogen property. The boundary includes downstream piping up to and excluding the last control valve before the point where the tail gases are removed from the plant boundary.

5.3.1 Additional Eligible Property Not Shown on the Schematics of Ammonia Production Processes

There are additional properties and systems ancillary to ammonia processes that are not explicitly shown in the schematics but are still part of the clean hydrogen project.

• The cooling system used by an ammonia process is described in clause (c)(iv)(E) of the definition of eligible clean hydrogen property. It includes piping and components that are used solely to deliver cooling fluid (e.g., cooling water, air, glycol) to and from the Eligible Property. The ammonia process boundary related to the cooling system begins at and includes the first control valve or damper along the piping or ducting system that is used solely by the Eligible Property. The boundary includes downstream piping or ducting, up to and including, the last control valve or damper along the piping or ducting system that is used solely by the Eligible Property described in clause (c)(iii)(A) and subparagraphs (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property. If the whole cooling system is used solely by Eligible Property, all piping and components are within the process boundaries of these processes.
• The utility air or nitrogen distribution system used by an ammonia process is described in clause (c)(iv)(I) of the definition of eligible clean hydrogen property. It includes piping and components that are used solely to supply utility air or nitrogen for the operation of equipment (e.g., pneumatic) and control systems (e.g., actuators) that are Eligible Property. The ammonia process boundary related to the utility air or nitrogen system begins at and includes the first control valve along the piping system that is used solely by the Eligible Property. The boundary includes downstream piping, up to the point where the piping for the utility air or nitrogen distribution system physically connects to the property described in clause (c)(iii)(A) of the definition of eligible clean hydrogen property. If the whole utility air or nitrogen distribution system is used solely by Eligible Property described in clause (c)(iii)(A) and subparagraphs (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property, all piping and components are within the process boundaries of these processes.
• The electrical system used by an ammonia process is described in clause (c)(iv)(A) of the definition of eligible clean hydrogen property. It includes wiring and components that are used solely to supply electrical energy for the operation of equipment that is Eligible Property. The ammonia process boundary related to the electrical system begins at and includes the first isolation switch along the wiring system that is used solely by an Eligible Property. The boundary includes downstream wiring up to the point where the wiring for the electrical system physically connects to other property described in clause (c)(iii)(A) and subparagraphs (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property.
• The power distribution system that supports an ammonia process is described in clause (c)(iii)(D) in the definition of eligible clean hydrogen property. The ammonia process boundary related to the power distribution system begins at and includes the master substation breaker for a power distribution substation along the power distribution system that is used by the Eligible Property described in subparagraphs (c)(iii)(A) and (c)(iv) to (c)(vi) of the definition of eligible clean hydrogen property. The boundary includes downstream power lines, up to the point where the power lines for the power distribution system physically connects to the property described in subparagraph (c)(iii)(A) of the definition of eligible clean hydrogen property. If the power distribution substation is not used by the Eligible Property, the process boundary related to the power distribution system begins at and includes the first master breaker along the power distribution system that is used by the Eligible Property. Where there is no master breaker, the power distribution system is not within the boundary of the ammonia process.

6.0 Glossary of Useful Terms

Certain terms used in this Guide or within the project evaluation process are explained below. Terms in bold are included in subsection 127.48(1) of the Act. Text quoted directly from the Act is shown in italics.

Alkaline electrolyser	Refers to electrolysers that operate via transport of hydroxide ions (OH-) through the electrolyte, from the cathode to the anode, with hydrogen being generated on the cathode side.
All or substantially all	The term “all or substantially all” in this Guide is commonly used in the Income Tax Act and is understood to mean at least 90%.
Ammonia from hydrogen	Refers to ammonia production processes in which high purity hydrogen is reacted with nitrogen to produce ammonia using a Haber-Bosch process.
Ammonia from an integrated clean hydrogen project	Refers to ammonia production processes in which reforming or partial oxidation of eligible hydrocarbons with carbon dioxide captured using a CCUS process is integrated to react the produced hydrogen with nitrogen in a Haber-Bosch process.
Ammonia synthesis reactor	Refers to a catalytic reactor (commonly including multiple beds) used in a Haber-Bosch process to convert nitrogen and hydrogen into ammonia. It is also known as an ammonia converter.
Auto-thermal reforming	Refers to the process of combining partial oxidation and steam methane reforming processes for the production of syngas. The auto-thermal reforming process takes advantage of the exothermic reaction of the hydrocarbon feed with oxygen and the endothermic reaction of the hydrocarbon feed with steam, such that the requirement for major external heat addition, as in the conventional steam methane reforming processes, is significantly reduced or eliminated.
Carbon dioxide equivalent	Means the carbon dioxide emissions that would be required to produce a warming effect equivalent to the emissions of any specified greenhouse gas, as determined in accordance with the Clean Hydrogen Investment Tax Credit—Carbon Intensity Modelling Guidance Document published by the Government of Canada over an assessment period of 100 years.
Carbon intensity	Means the quantity in kilograms of carbon dioxide equivalent per kilogram of hydrogen produced.
CCUS process	Means the process of carbon capture, utilization and storage that includes the capture of carbon dioxide that would otherwise be released into the atmosphere, or directly from the ambient air; and storage or use of the captured carbon.
Clean ammonia	Means ammonia produced from clean hydrogen.
Clean ammonia equipment	Means equipment that is used solely for the purpose of producing ammonia, including equipment for converting hydrogen into ammonia; heat recovery and conversion; nitrogen generation; feed storage (unless the feed is stored hydrogen) and feed compression; and on-site refrigeration, transportation and storage of ammonia.
Clean hydrogen	Means hydrogen produced, whether solely or in conjunction with other gases, that has a carbon intensity of less than four.
Clean hydrogen project	Of a taxpayer means a project involving the operation of eligible clean hydrogen property; the production of clean hydrogen; and if applicable, the production of clean ammonia that uses a feedstock of clean hydrogen produced by the project.
Clean hydrogen project plan	Means a plan for a clean hydrogen project for a taxpayer that includes a front-end engineering design study (or an equivalent study as determined by the Minister of Natural Resources) for the project; sets out the expected source of electricity to be consumed in connection with the project, including sources described in any eligible power purchase agreements; sets out the expected carbon intensity of the hydrogen to be produced by the project determined in accordance with subsection 127.48(6) of the Act and supported by a report prepared by a qualified validation firm in respect of the project that includes attestations by the firm that the assumptions in the modelling of the expected carbon intensity are reasonable, and the expected carbon intensity has been determined in accordance with the Clean Hydrogen Investment Tax Credit—Carbon Intensity Modelling Guidance Document published by the Government of Canada; if the project is intended to produce clean ammonia, demonstrates that the project can reasonably be expected to have sufficient hydrogen production capacity to satisfy the needs of the taxpayer’s ammonia production facility, and if the taxpayer’s hydrogen production facility and its ammonia production facility are not co-located, the feasibility of transporting hydrogen between the facilities; contains any information required in guidelines published by the Minister of Natural Resources, including the Clean Hydrogen Investment Tax Credit—Validation and Verification Guidance Document; and is filed by the taxpayer with the Minister of Natural Resources, in the form and manner determined by the Minister of Natural Resources.
Clean hydrogen tax credit	Of a qualifying taxpayer for a taxation year means the total of all amounts, each of which is the specified percentage of the capital cost to the taxpayer of an eligible clean hydrogen property that is acquired by the taxpayer in the year; and the total of all amounts required by subsection 127.48 (12) of the Act to be added in computing the taxpayer’s clean hydrogen tax credit at the end of the year.
Conditioning equipment	Refers to equipment that is used to pre-treat feedstock to meet the requirements (e.g., pressure, temperature, purity) of the production processes.
Cogeneration	Refers to the use of a heat engine or power station to generate electricity and useful heat at the same time. It is also referred to as combined electricity and heat equipment.
Distribution equipment	Refers to equipment used for on-site distribution of heat, electricity, and materials, such as nitrogen, oxygen, and water.
Dual-use hydrogen and ammonia equipment	Means equipment that is part of a clean hydrogen project and that is used for the generation of oxygen or nitrogen to be used all or substantially all in hydrogen and ammonia production for the project.
Dual-use electricity and heat equipment	Means equipment that is part of a clean hydrogen project (excluding electricity generation equipment that supports the project indirectly by way of an electrical utility grid), that supports the production of hydrogen from eligible hydrocarbons and that generates electrical energy, heat energy or a combination of electrical and heat energy, and more than 50% of either the electrical energy or heat energy that is expected to be produced over the first 20 years of the project’s operations, based on the most recent clean hydrogen project plan, is expected to support a qualified CCUS project, unless the equipment uses fossil fuels and emits carbon dioxide that is not subject to capture by a CCUS process, or a qualified clean hydrogen project, unless the equipment uses fossil fuels and emits carbon dioxide that is not subject to capture by a CCUS process; or is equipment that directly transmits electrical energy from equipment described in paragraph (a) to a qualified clean hydrogen project and more than 50% of the electrical energy to be transmitted by the equipment over the first 20 years of the project’s operations, based on the most recent clean hydrogen project plan, is expected to support the qualified CCUS project or qualified clean hydrogen project.
Dual-use factor	Refers to the percentage of the total amount of electricity or heat expected that is expected to be used in a qualified clean hydrogen project or a qualified CCUS project over the first 20 years of the clean hydrogen project’s operations. A dual-use factor for dual-use electricity and heat equipment must exceed 50%, based on the project’s most recent clean hydrogen project plan.
Electrolysis	Refers to the process of using electricity to split water into hydrogen and oxygen.
Eligible clean hydrogen property	Means property, other than excluded property, that is acquired by a qualifying taxpayer and becomes available for use in respect of a qualified clean hydrogen project of the taxpayer in Canada on or after March 28, 2023, determined without reference to subsection 127.48(5) of the Act; has not been used, or acquired for use or lease, by any person or partnership for any purpose whatever before it was acquired by the taxpayer; and is property situated in Canada that is used all or substantially all to produce hydrogen through electrolysis of water, including electrolysers, rectifiers, purification equipment, water treatment and conditioning equipment and equipment used for hydrogen compression and storage, that is used all or substantially all to produce hydrogen from eligible hydrocarbons, including pre-reformers, auto-thermal reformers, steam methane reformers, pre-heating equipment, syngas coolers, shift reactors, purification equipment, fired heaters, water treatment and conditioning equipment, equipment used in hydrogen compression and storage of hydrogen, oxygen production equipment and methanators, that is clean ammonia equipment, dual-use electricity and heat equipment, dual-use hydrogen and ammonia equipment, or project support equipment, that is physically and functionally integrated with equipment described in any of subparagraphs (i) to (iii) and that is ancillary equipment used solely to support the functioning of equipment described in any of subparagraphs (i) to (iii) within a hydrogen or ammonia production process as part of an electrical system, a feed supply system, a fuel supply system, a liquid delivery and distribution system, a cooling system, a process material storage and handling and distribution system, a process venting system, a process waste management system, or a utility air or nitrogen distribution system, that is equipment used for system safety and integrity, or as part of a control or monitoring system, solely to support equipment described in any of subparagraphs (i) to (iv), or that is property used solely to convert another property that would not otherwise be described in subparagraphs (i) to (v) if the conversion causes the other property to satisfy the description in any of subparagraphs (i) to (v).
Eligible electricity generation source	Means, at any time, an electricity generation source that is wind; solar; hydro; nuclear; or geothermal or tidal, if, at that time, a technology-specific input carbon intensity for the generation source is available in the Fuel LCA Model, and guidance in respect of the generation source is included in the Clean Hydrogen Investment Tax Credit—Carbon Intensity Modelling Guidance Document published by the Government of Canada.
Eligible hydrocarbon	Means, at any time, natural gas; a substance sourced all or substantially all from raw natural gas; an eligible renewable hydrocarbon; or a substance that is a by-product from processing one or more substances described in paragraph (a) or (b), and included in the Clean Hydrogen Investment Tax Credit—Carbon Intensity Modelling Guidance Document published by the Government of Canada at that time.
Eligible pathway	Means the production of hydrogen from electrolysis of water; or from the reforming or partial oxidation of eligible hydrocarbons, with carbon dioxide captured using a CCUS process.
Eligible Property	See the definition of “Eligible clean hydrogen property.”
Excluded property	Means property that is included in Class 57 or 58 of Schedule II to the Income Tax Regulations; equipment used for the off-site transmission, transportation or distribution of hydrogen or ammonia; equipment used to prepare hydrogen for transport, including liquefaction equipment and equipment used to compress hydrogen to levels suitable for transportation; an automotive vehicle or related refuelling or charging equipment; a building or other structure; construction equipment, furniture or office equipment; or equipment used for off-site storage.
Expected carbon intensity	Means the carbon intensity of hydrogen that is expected to be produced by a particular clean hydrogen project of a taxpayer, as documented in the taxpayer’s clean hydrogen project plan in respect of the project.
Feedstock	Refers to any material that is transformed into hydrogen or ammonia, such as water and natural gas or other eligible hydrocarbons.
Flue Gases	Refers to gases produced by combustion of a fuel that are normally emitted to the atmosphere. Common flue gas components are nitrogen, oxygen, carbon dioxide, water, and argon.
Haber-Bosch process	Refers to a high-temperature and high-pressure industrial process for the catalytic synthesis of ammonia from hydrogen and nitrogen.
Integrated ammonia process	See the definition of “Ammonia from an integrated clean hydrogen project.”
Oxy-fuel	Refers to combustion processes that typically use pure oxygen as the oxidizer to combust hydrocarbon fuel and flue gas recycling for combustion temperature moderation. Oxy-fuel combustion creates a flue gas with a high concentration of carbon dioxide.
Partial oxidation	Refers to a process or reaction in which an eligible hydrocarbon is partially oxidized at high temperatures and pressures, typically with pure oxygen, to produce syngas.
Preliminary clean hydrogen work activity	Means an activity that is preliminary to the acquisition, construction, fabrication or installation by or on behalf of a taxpayer of eligible clean hydrogen property in respect of the taxpayer’s clean hydrogen project including, but not limited to, a preliminary activity that is obtaining permits or regulatory approvals; performing front-end design or engineering work, including front-end engineering design studies (or equivalent studies as determined by the Minister of Natural Resources) but excluding detailed design or engineering work in relation to eligible clean hydrogen property; conducting feasibility studies or pre-feasibility studies (or equivalent studies as determined by the Minister of Natural Resources); conducting environmental assessments; or clearing or excavating land.
Project support equipment	Means equipment that directly supports a qualified clean hydrogen project by transmitting electrical energy from on-site electrical generation equipment directly to the project; distributing electrical energy or heat energy; or delivering, collecting, recovering, treating or recirculating water, or a combination of those activities.
Proton exchange membrane electrolyser	Refers to an electrolyser in which the electrolyte is a solid specialty plastic material. Water reacts at the anode to form oxygen and positively charged hydrogen ions (protons). The electrons flow through an external circuit and the hydrogen ions selectively move across the PEM to the cathode. At the cathode, hydrogen ions combine with electrons from the external circuit to form hydrogen gas.
Purge gas	In the context of ammonia production processes, refers to a gaseous stream that needs to be removed to prevent the buildup of inert gases in the ammonia synthesis loop and the ammonia refrigeration system. Purge gas streams typically contain unreacted nitrogen and hydrogen, ammonia, methane, and argon.
Qualified clean hydrogen project	Means a clean hydrogen project of a taxpayer, as described in the taxpayer’s clean hydrogen project plan, where the Minister of Natural Resources has confirmed in writing that the hydrogen will be produced from an eligible pathway; the expected carbon intensity contained in the taxpayer’s most recent clean hydrogen project plan is determined in accordance with subsection 127.48(6) of the Act, and can reasonably be expected to be achieved based on the project design; and if the project is intended to produce clean ammonia, the taxpayer has demonstrated that the project can reasonably be expected to have sufficient hydrogen production capacity to satisfy the needs of the taxpayer’s ammonia production facility, and if the taxpayer’s hydrogen production facility and its ammonia production facility are not co-located, the feasibility of transporting hydrogen between the facilities.
Qualifying taxpayer	Means a taxable Canadian corporation.
Recycle gas	In the context of ammonia production processes, refers to the unreacted syngas that is recovered from the liquid ammonia separation vessel. Recycle gas is typically mixed with the makeup syngas and recycled back into the ammonia converter to increase the yield of the ammonia production process.
Reforming	Refers to chemical processes in which an eligible hydrocarbon reacts with steam, oxygen, or both, to produce syngas.
Shift reactor	Refers to a reactor that is commonly fixed bed, catalytic, and adiabatic or isothermal, that is operated at different temperatures for exothermic water gas shift reaction of carbon monoxide (CO) and water (H2O) that is present in syngas. This results in additional hydrogen (H2) and carbon dioxide (CO2) based on the reaction known as the water gas shift reaction: CO + H2O = H2 + CO2.
Shifted syngas	Refers to syngas leaving the shift reactor(s) with a higher H2 and lower CO content than the raw syngas leaving the reforming or partial oxidation reactors.
Solid oxide electrolyser	Refers to electrolysers that use a solid ceramic material as the electrolyte that selectively conducts negatively charged oxygen ions at elevated temperatures. Steam at the cathode combines with electrons from the external circuit to form hydrogen gas and negatively charged oxygen ions. The oxygen ions pass through the solid ceramic membrane and react at the anode to form oxygen gas and generate electrons for the external circuit.
Specified percentage	Means in respect of the capital cost of an eligible clean hydrogen property (other than equipment described in paragraph (b)) that is acquired by a qualifying taxpayer for use in a clean hydrogen project, if the expected carbon intensity of the hydrogen to be produced by the project is less than 0.75 and the property is acquired before 2034, 40%, in 2034, 20%, and after 2034, 0%, if the expected carbon intensity of the hydrogen to be produced by the project is 0.75 or greater and less than two and the property is acquired before 2034, 25%, in 2034, 12.5%, and after 2034, 0%, if the expected carbon intensity of the hydrogen to be produced by the project is two or greater and less than four and the property is acquired before 2034, 15%, in 2034, 7.5%, and after 2034, 0%, and if the expected carbon intensity of the hydrogen to be produced by the project is four or greater, 0%; and in respect of the capital cost of eligible clean hydrogen property that is clean ammonia equipment or equipment described in any of subparagraphs (c)(iv) to (vi) of the definition eligible clean hydrogen property in this subsection that is used solely in connection with clean ammonia equipment acquired by a qualifying taxpayer for use in a clean hydrogen project, subject to subparagraph (ii), if the equipment is acquired before 2034, 15%, in 2034, 7.5%, and after 2034, 0%, if the expected carbon intensity of the hydrogen to be produced by the project and used in the production of ammonia is four or greater, 0%.
Steam methane reformer	A steam methane reformer is a reactor that uses steam, heat, pressure in the presence of a catalyst to convert methane into syngas.
Steam methane reforming	Refers to a process used for the production of hydrogen from eligible hydrocarbons, in which the eligible hydrocarbon is typically mixed with steam and fed into catalytic pre-reformers and reformers to produce syngas.
Syngas (synthesis gas)	In the context of hydrogen production through reforming and/or partial oxidation of eligible hydrocarbons, refers to the mixture of hydrogen, carbon monoxide, carbon dioxide, water, and lesser amounts of other gaseous components, such as methane, that are produced in processes involving reforming or partial oxidation of hydrocarbons. In the context of ammonia production processes, refers to the mixture of nitrogen and hydrogen that is used for ammonia synthesis.
Tail gas	In the context of hydrogen production through reforming and/or partial oxidation of eligible hydrocarbons, refers to a waste gas produced from hydrogen purification processes (e.g., from regeneration of adsorber beds of pressure swing adsorption processes), which contains impurities such as carbon monoxide, carbon dioxide, methane, as well as inert gases argon and nitrogen. In the context of ammonia production processes, refers to a gaseous stream from the process of purge gases treatment for ammonia and/or hydrogen recovery, commonly containing the unrecovered ammonia, hydrogen, methane, argon, and other inert gases. Tail gases are typically burned in a fired heater to recover their energy content.
Transmission equipment	Refers to equipment (e.g., transformers, power lines) that is used to transfer electricity from the generation source to a distribution network or end use. In the context of this clean hydrogen tax credit, such equipment is expected to directly transmit more than 50% of the electrical energy from a generation equipment to a qualified clean hydrogen project or qualified CCUS project over the first 20 years of the project’s operations.
Venting system	Refers to equipment and piping used to safely relieve excess pressure in the process; and safely handle unwanted gases from process vessels, such as tanks, to avoid accumulation. Venting systems may incorporate equipment to capture or control emissions and minimize environmental impact.

7 Key to Symbols Used in Schematics