Hydrogen Hubs Distributed Across Nation to Spur Energy Economy – Part 1
Hydrogen storage field in China, requires special metals and pipe fittings
From the Article by Jeff St. John, Canary Media, October 13, 2023
The DOE’s hub picks are scattered around the U.S. — a big first step on the challenging path to building a clean hydrogen economy.
After more than a year of evaluating competing proposals, the Biden administration has picked the parts of the country where it hopes to turn billions of dollars of federal investment into the seeds of a clean hydrogen economy.
On Friday, the Department of Energy announced the selection of seven “clean hydrogen hubs” — sets of projects that promise to combine big investments in low-carbon hydrogen production with big investments in preparing industries to use that hydrogen to reduce their carbon emissions.
The hubs are scattered around the nation — from the Pacific Northwest and California to the Midwest, and from the Gulf Coast to the East Coast. The consortia behind the hubs — groups of state governments, private companies and research organizations — are now eligible to receive up to a cumulative $7 billion in federal funds over the coming years.
That money won’t all be spent at once. Most will be released only after each hub has met key design and viability milestones, and it’s possible that some hubs may not advance to full-scale construction and operation. But if they do come to fruition, they’re expected to lead to more than $40 billion in follow-on investment from the companies involved.
The $7 billion to be spent on the hubs makes up the majority of $9.5 billion in hydrogen incentives authorized by the 2021 Bipartisan Infrastructure Law. Nearly 80 consortiums initially applied for the funding, and 22 projects competed for the final selection.
Details on the specific plans of individual consortia have been kept largely confidential. DOE officials revealed a bit of information during a Thursday press event, including the fact that all seven hubs will produce at least some hydrogen using renewable energy. But three will also use nuclear power, and most will also convert fossil gas to hydrogen and use carbon-capture technology to limit resulting emissions, they said.
The industries expected to use the hydrogen range from chemicals and fertilizer production to shipping, trucking and power generation, according to DOE officials. Some of these industries have few options beyond hydrogen to reduce their carbon emissions — steelmaking and chemical manufacturing are prime examples — while others may have more economically viable options that offer greater certainty of reducing carbon emissions, such as electrification via renewable power.
The Bipartisan Infrastructure Law requires that at least one of the hydrogen hubs uses nuclear power and one uses fossil fuels with carbon capture and storage, and the law calls for the hubs to serve a variety of end uses. But many climate and environmental groups are concerned that the funding could go toward building an industrial base that doesn’t help reduce greenhouse gas emissions.
Friday’s announcement about the hubs is not tied to a forthcoming Biden administration decision on which projects will be eligible for lucrative low-carbon hydrogen production tax credits created by the Inflation Reduction Act. But DOE officials pointed out that hydrogen producers involved in the hubs will doubtless seek to maximize the value of those tax credits by conforming to the regulations, which are expected to be released later this month.
The tax credits are seen as vital to bringing down the cost of clean hydrogen, which is now about three times higher than the cost of fossil-fuel-derived hydrogen. Currently, the vast majority of the roughly 10 million metric tons of hydrogen produced annually in the U.S. is made with fossil gas. The Biden administration has set a goal of producing an equivalent amount of hydrogen annually via zero-carbon or near-zero-carbon methods by 2030, and the seven hubs are expected to produce 3 million metric tons per year, according to DOE.
Building a hydrogen economy means building hydrogen demand
But if hydrogen is going to be able to help reduce carbon emissions from key sectors of the economy, it will require more than cutting costs and scaling up production, industry experts say. It will also require tens of billions of dollars of investment into the storage and transportation networks needed to deliver it to end users, as well as equivalent amounts of investment in transforming the industries that intend to use it.
“In my mind, the hubs are less about how much emissions will be reduced by the individual hubs and more about demonstrating new technologies,” said Aaron Bergman, a fellow at nonprofit research group Resources for the Future who previously worked at DOE and the White House. “I see the role of the hubs as providing government funds to guide the development of these technologies so that the private sector can take on the risk of investing in them.”
Today, the plans for expanding clean hydrogen production capacity in the U.S. far outpace the plans for using that clean hydrogen. Two DOE reports released this year — Pathways to Commercial Liftoff: Clean Hydrogen and the U.S. National Clean Hydrogen Strategy and Roadmap — identified a lack of long-term clean hydrogen purchasing commitments as a key barrier to scaling up the industry.
A February report from the Energy Futures Initiative, a not-for-profit research group run by former Energy Secretary Ernest Moniz, also emphasizes this demand gap. The hydrogen hub program is “one of the only active programs targeting demand-side market activators,” the report says.
The issue of “how to activate demand is extremely challenging,” said Alex Kizer, senior vice president of research and analysis at the Energy Futures Initiative. “Our question is, who’s going to use this stuff? Where’s the demand? This is where the regional hubs come in: a huge opportunity to sort through some of the demand-side challenges.”
The cost for industries to switch from using fossil fuels to using hydrogen can be daunting, he said. Even fertilizer production, which converts fossil gas to hydrogen before processing it into ammonia, will require significant investments to start using pure hydrogen delivered via pipelines. And beyond the Gulf Coast region, where hydrogen is produced and used at large scales for oil refining and chemical production, little if any hydrogen storage and pipeline infrastructure now exists in the U.S.
“If you look just at sweet spots in the country — where it has the best clean energy resource, maybe it’s next to a refinery or someone who we think could be on the low-cost end of that cost to switch…and you don’t have to build much pipeline infrastructure, and everything’s going your way — the economics of those projects really pencil out,” Kizer said. “But to scale beyond all the sweet spots is going to take a lot more work.”
The challenge is much greater for industries that don’t already use hydrogen, he said. “You have to get stuff built. You have to get regulatory structures aligned. You have to create some certainty for the users.”
Hydrogen hubs could become the places where this cross-industry alignment happens. That’s certainly the hope of David Crane, DOE’s under secretary for infrastructure and former head of the department’s Office of Clean Energy Demonstrations, which is managing the hydrogen hub program.
“I’d say the single greatest failure I would have at this job is if in 20 years we looked at the hydrogen hubs we helped incent with our grants, and they all looked like Summer Olympics sites…ghost towns,” Crane told Canary Media in a 2022 interview.“The key to success is that these things will be thriving 10 to 20 years from now.”
THIS ARTICLE WILL BE CONTINUED TOMORROW …..