By: Concentric Staff Writer
Published: October 30, 2023
The U.S. Department of Energy (DOE) is putting billions of dollars into the development of “clean hydrogen” around the country to attract in-kind private investment, but the resource remains controversial even as state-backed regional groups prepare to launch a new era of hydrogen production with federal money.
DOE on Oct. 13 announced it awarded an unprecedented $7 billion for seven regional Clean Hydrogen Hubs to accelerate the deployment of commercial-scale hydrogen production for energy production and other uses, which the agency said is one of the largest investments in clean manufacturing and jobs in history. The initiative, funded by the 2021 Bipartisan Infrastructure Act, is meant to spur a national network of clean hydrogen production and attract a total of $50 billion in public-private partnerships.
The hubs “will kickstart a national network of clean hydrogen producers, consumers, and connective infrastructure while supporting the production, storage, delivery, and end-use of clean hydrogen,” DOE said. The new funding for the burgeoning energy resource follows the release of a hydrogen strategy and roadmap in June.
Clean hydrogen can be produced with zero or near-zero carbon dioxide emissions, and the future hubs are expected to produce 3 million metric tons of hydrogen annually, about a third of the 2030 U.S. hydrogen production target. Hydrogen is seen as a method to lower emissions from industrial sectors that are difficult to de-carbonize, which DOE said represent 30 percent of total U.S. carbon emissions.
The hubs in Appalachia, California, the Gulf Coast, the Mid-Continent, the Pacific Northwest, the Mid-Atlantic, and the Midwest (see sidebar) range in funding between $750 million and $1.2 billion apiece and target resources and industries from various regions, including renewables, natural gas, biomass and nuclear to produce hydrogen for industries such as power production, transportation and agriculture.
“Unlocking the full potential of hydrogen—a versatile fuel that can be made from almost any energy resource in virtually every part of the country—is crucial to achieving President Biden’s goal of American industry powered by American clean energy, ensuring less volatility and more affordable energy options for American families and businesses,” Secretary of Energy Jennifer Granholm said in a written statement.
One state where hydrogen production is creating controversy is California. A group known as Alliance for Renewable Clean Hydrogen Energy Systems (ARCHES) is set to develop the new hydrogen hub in that state with up to $1.2 billion in DOE funding. ARCHES is a partnership between Gov. Gavin Newsom’s Office of Business and Economic Development (GO-Biz), the University of California Office of the President, The State Building and Construction Trades Council, and Renewables 100 Policy Institute.
“These hubs will accelerate the decarbonization of hard-to-reach sectors, improve our energy security, establish good-paying green jobs, and help communities benefit from clean energy investments,” ARCHES said in comments to the Internal Revenue Service It added that renewable clean hydrogen must be part of the state’s strategy to achieve carbon neutrality by 2045. The hydrogen development partnership said it strongly supports the development of hydrogen hubs as well the 45V tax credit for clean hydrogen production included in the 2022 Inflation Reduction Act.
ARCHES, in its comments to DOE, said that the 45V clean hydrogen tax credit will help establish a level playing field for hydrogen and other technologies. But the comments added that requirements such as mandating the location of a renewable power source to be matched with hydrogen production facilities will add costs and inhibit developers from placing renewable energy production and hydrogen production in the best locations. Hydrogen producers should also be allowed to use annual matching versus hourly tracking to have similar applicability for other technologies such as batteries, pumped hydro, compressed air and others, the comments said. Hourly tracking refers to an hourly verification of hydrogen production as meeting clean-energy standards rather than on an annual basis or other timeframe.
The University of California is a participant in ARCHES, and one signatory to the letter is Scott Brandt, Associate Vice President for Research & Innovation at the University of California Office of the President.
But faculty from the university are unhappy with that endorsement. In response to the ARCHES comments, 29 faculty members from the university wrote the Office of the President, urging it to rescind the letter. ARCHES encourages too much flexibility in the way hydrogen will be produced, and it represents California ham-stringing federal climate action rather than bolstering it, the letter says.
The 45V tax credits are the largest subsidy for clean hydrogen production in the world and are expected to deliver more than $100 billion in taxpayer dollars to hydrogen production by the mid-2040s. The lower the carbon intensity of a project the more generous the credit, but accurately determining the carbon intensity of hydrogen is difficult, the faculty letter says, and producing hydrogen from electrolysis is extremely energy-intensive, requiring large amounts of electricity. When fossil fuels are used to produce hydrogen, the carbon intensity of the resulting hydrogen can also be very high, the letter says, alleging it is too high to be an effective decarbonization tool.
“Careful policy design, including rigorous carbon accounting standards, is required to ensure that power-intensive projects like electrolytic hydrogen do not directly or indirectly expand the use of fossil-fueled electricity generation,” the faculty letter says. The letter calls for “vigorously” accounting for the source, location and time of the electricity driving the hydrogen production and says that only clean resources should be used for hydrogen production. The faculty members said the recommendations would drive carbon emissions, cause cost increases and undermine climate goals.
Additionally, on Oct. 13, a coalition of public-interest groups wrote DOE, saying it is concerned about the transparency of the hydrogen hub selection process. The groups, including Communities for a Better Environment, California Environmental Justice Alliance, Asian Pacific Environmental Network and others say they represent low-income communities that would be disproportionally affected by hydrogen production facilities.
The groups say that throughout the application development process, ARCHES has disregarded environmental justice concerns and the need for an inclusive public process. The hydrogen hubs application received no vetting from environmental justice organizations or the communities they represent, according to the letter, which urged DOE to withhold any additional funding for ARCHES until it changes course in key areas, including requiring ARCHES to eliminate non-disclosure agreement requirements that were required for organizations to have access to project details.
The groups also charge that ARCHES leadership requested signatures on a memorandum of commitment that would have indicated they support the hydrogen project. The groups said they negotiated for 10 months with ARCHES leadership to come to a solution to the requirements, leading ARCHES to issue an NDA in July that removed certain clauses and allowed signatories to share information with community members. The updated requirements would still be harmful to grassroots organizations and make them legally liable, the groups say. The environmental justice groups also requested DOE require ARCHES to amend its governance structure to maximize opportunities for impacted communities to be represented and enforce community-engagement best practices.
Separately, three U.S. Senators—Sheldon Whitehouse (D-RI), Jeff Merkley (D-OR), and Martin Heinrich (D-NM) —called on the U.S. Treasury to swiftly implement rules regarding the 45V tax credits for clean hydrogen production. “Truly clean hydrogen has enormous potential to deliver emissions reductions beyond the reach of other decarbonization technologies, but today those ambitions are undercut by a market that overwhelmingly favors dirty hydrogen. The robustness of 45V can bridge these economics until our decarbonized grid can support a competitive clean hydrogen industry,” the senators said in the letter.
Many dynamics are swirling around hydrogen technology and its implementation in the U.S., along with many differing opinions. But there is no doubt this elemental technology is enjoying strong support at federal, state, and business levels.
The seven hubs to receive $7 billion in federal funds include:
Appalachian Hydrogen Hub (up to $925 million): Known as the Appalachian Regional Clean Hydrogen Hub, it is a joint project between West Virginia, Ohio, and Pennsylvania and is a project to use natural gas to create low-cost hydrogen and permanently store the carbon emissions through a series of hydrogen pipelines, multiple hydrogen fueling stations and CO2 storage facilities. It is expected to bring jobs to coal communities, including 18,000 construction jobs and 3,000 permanent jobs.
California Hydrogen Hub (up to $1.2 billion): A project of the Alliance for Renewable Clean Hydrogen Energy Systems (ARCHES) made from renewable energy and biomass and will provide a blueprint for decarbonizing public transportation, heavy-duty trucking and port operations, which are primary drivers of emissions and air pollution in the state. The hub has committed to requiring Project Labor Agreements– — for all projects connected to the hub and is expected to create 130,00 construction jobs and 90,000 permanent jobs.
Gulf Coast Hydrogen Hub (up to $1.2 billion) The HyVelocity hub in Texas will be near Houston and will include large-scale hydrogen production using both natural gas with carbon capture and renewables-powered electrolysis in an effort to lower the cost of hydrogen production.
Heartland Hydrogen Hub (up to $925 million) An initiative between Minnesota, North Dakota, and South Dakota, the hub aims to decarbonize fertilizer production in the agriculture industry, decrease the cost of regional hydrogen, and advance the usage of hydrogen for power production and cold climate space heating. The hub will offer equity ownership opportunities to tribal communities, local farmers, and farmer cooperatives through a private-sector partnership that will lower the prices of clean fertilizer for farmers.
Mid-Atlantic Hydrogen Hub (up to $750 million): A partnership between Pennsylvania, Delaware, and New Jersey, the hub will explore hydrogen-driven decarbonization using historic oil infrastructure and existing right-of-ways. It will develop renewable hydrogen facilities from renewables and nuclear power using both established and more innovative electrolyzer technologies. The hub plans to negotiate project labor agreements and provide close to $14 million for regional workforce development boards to develop community college training and pre-apprenticeships. It is expected to create 14,4000 construction jobs and 6,400 permanent jobs.
Midwest Hydrogen Hub (up to $1 billion): The Midwest Alliance for Clean Hydrogen is a partnership between Illinois, Indiana, and Michigan that will enable decarbonization through using hydrogen for steel and glass production, power generation, refining, heavy-duty transportation using renewable energy, natural gas, and nuclear energy.
Pacific Northwest Hydrogen Hub (up to $1 billion): The hub is a project between Washington, Oregon, and Montana and plans to use renewable resources to produce hydrogen through electrolysis, aimed at reducing the cost of electrolysis, making the technology more widespread, and reducing the cost of hydrogen production. It has committed to inking Project Labor Agreements for all projects of more than $1 million and investing in joint labor-management/state-registered apprenticeship programs. It is expected to create 8,050 construction jobs and 350 permanent jobs.
All views expressed by the author are solely the author’s current views and do not reflect the views of Concentric Energy Advisors, Inc., its affiliates, subsidiaries, related companies, or clients. The author’s views are based upon information the author considers reliable at the time of publication. However, neither Concentric Energy Advisors, Inc., nor its affiliates, subsidiaries, and related companies warrant the information’s completeness or accuracy, and it should not be relied upon as such.