Hydrogen Hubs Distributed Across the Nation to Spur Energy Economy – Part 2

U. S. Dept. of Energy picks 7 ​‘clean hydrogen hubs’ for $7 billion federal boost

From the Article by Jeff St. John, Canary Media, October 13, 2023

The DOE’s hydrogen hub picks are scattered around the U.S. — a big first step on the challenging path to building a clean hydrogen economy.

The seven (7) winning hydrogen hubs nationwide

Each of the seven hubs chosen by the Biden administration will combine different hydrogen production technologies and end uses, DOE officials said. Here’s a list of the hubs, along with descriptions from Thursday’s briefing.

1. The Appalachian Regional Clean Hydrogen Hub (ARCH2), which encompasses parts of West Virginia, southeast Ohio and southwest Pennsylvania, will receive up to $925 million. The project is ​“one of the bigger hubs in terms of production” and ​“takes advantage of the bountiful natural gas that’s in the region,” a senior DOE official said. Consortium members include industrial gas giant Air Liquide, chemical producer Chemours, Virginia-based utility Dominion Energy, gas pipeline operator EQT, and hydrogen fuel-cell and electrolyzer manufacturer Plug Power.

2. California’s Alliance for Renewable Clean Hydrogen Energy Systems (ARCHES), a public-private consortium with more than 400 members, will receive up to $1.2 billion. It includes projects in the southern and northern parts of the state, including the major ports of Long Beach, Los Angeles and Oakland, where hydrogen can be used to fuel ships and drayage trucks, the official said.

3. The HyVelocity Gulf Coast Hydrogen Hub, which will receive up to $1.2 billion, is centered in Texas and includes Air Liquide, oil giant Chevron, energy company and offshore-wind-power developer Ørsted, and Sempra Infrastructure, the arm of energy company Sempra that develops fossil-gas pipelines and liquefied-natural-gas terminals. The Gulf Coast has by far the biggest existing network of hydrogen storage and pipeline infrastructure in the country, as well as a preponderance of refineries and ammonia and methanol producers now using hydrogen. It will be ​“the largest hub in terms of blue hydrogen,” or hydrogen made using fossil gas with carbon capture, a senior DOE official said — but ​“it’s also the largest in terms of green hydrogen. So we’re looking forward to working with our friends in Texas to show how much cost-down we can achieve by scaling the technology as much as possible.”

4. The Heartland Hydrogen Hub, which includes Minnesota and North Dakota, will receive up to $925 million. It includes Minnesota-based utility Xcel Energy and a joint venture of Marathon Petroleum and Canadian pipeline operator TC Energy, according to the Minneapolis Star Tribune. Xcel has stated it intends to produce hydrogen using electricity from the region’s ample wind farms as well as from its Prairie Island nuclear plant, and hub backers have put forward plans for tapping fossil gas for conversion into hydrogen. A senior DOE official said the hydrogen is slated for use in fertilizer production and power generation.

5. The Mid-Atlantic Clean Hydrogen Hub (MACH2), which will receive up to $750 million, encompasses southeastern Pennsylvania and parts of Delaware and New Jersey, and will center on feeding into the region’s industrial base, a senior DOE official said. The consortium includes Air Liquide, chemicals giant DuPont, oil pipeline company Enbridge, refinery company PBF Energy, Philadelphia’s fossil-gas utility, and public transit systems in Delaware and southeast Pennsylvania.

6. The Midwest Hydrogen Hub, which will receive up to $1 billion, arose from the merger of two groups — the Midwest Alliance for Clean Hydrogen (MachH2) and the Midwest Hydrogen Corridor Consortium (MHCC). It targets development in Illinois, Indiana, Michigan and Wisconsin. Consortium members include Air Liquide, steelmaker ArcelorMittal, U.K. oil giant bp, fuel-cell maker Bloom Energy, electric mobility company BorgWarner, energy company and gas and nuclear power plant owner Constellation, engine and electrolyzer manufacturers Cummins and Rolls-Royce, and utilities Ameren and NiSource. The hub has plans to use hydrogen for steel and glass production, power generation, refining, heavy-duty transportation and sustainable aviation fuel. Nuclear power will provide a significant share of the electricity to produce hydrogen from this hub, a senior DOE official said.

7. The Pacific Northwest Hydrogen Hub (PNWH2), which will receive up to $1 billion, encompasses parts of eastern Washington state, eastern Oregon and Montana, and intends to make hydrogen exclusively using renewable energy. Members include Amazon, bp America, Plug Power, Australian iron mining giant and hydrogen developer Fortescue, and a number of investor-owned and public utilities in the region. The consortium intends to use hydrogen for transportation and fertilizer production, a senior DOE official said.
It’s important to note that these hubs have a long way to go from this week’s selection to building the infrastructure they envision. ​“They’re not necessarily concrete entities at the moment,” said Bergman of Resources for the Future. ​“They’re a collection of letters of intent.”

DOE will put the hubs through multiple phases before investing the majority of the $7 billion earmarked for these projects. Design and planning are expected to take 12 to 18 months, followed by a development phase centered on pulling together commercial agreements and financing, which could last years. Only then will hubs move on to construction, which is when the majority of funding will be spent, a senior DOE official said.

Setting up those commercial agreements and financing structures is likely to be extraordinarily complex, Bergman said. Yet the challenge is expected to boil down to a relatively straightforward conflict between hydrogen producers and hydrogen consumers: ​“The producers are going to want long-term contracts for their offtakes, and the consumers are going to say, ​‘I don’t want to lock myself into high-price contracts.’”

But if major buyers, or ​“offtakers,” commit to purchasing a significant amount of the hydrogen produced at hubs — and get commitments from producers that there will be steady and predictable supplies — that could pave the way for smaller-scale purchasers to join in, said Patrick Molloy, a manager with the Climate-Aligned Industries Program at think tank RMI. (Canary Media is an independent affiliate of RMI.)

Finding ways to store and transport hydrogen at high volumes and low costs could be critical to scaling up this approach, he noted. A recent report from RMI on the plans of hydrogen producer Hy Stor Energy to store hydrogen in salt caverns — geological formations that are now used to store oil and natural gas in huge quantities — underscores the value of having this kind of resource.

“The one thing we get to consistently, once people get around conversations around pricing, is resilience,” he said. ​“We’re talking about consistency of supply at the timing and volume that the offtaker needs it.”

Providing that certainty ​“requires high volumes, at a consistent pace, at a consistent state,” he said. Hydrogen hubs with access to underground storage and preexisting pipeline networks — and a preexisting set of industries already using hydrogen — are better positioned to provide large-scale offtakers with what they need, while also allowing ​“every less-consistent volume offtaker to tap into that pipeline infrastructure,” he said.

At the same time, the DOE and the new hydrogen hubs are meant to do more with their hydrogen than feed it to existing industrial users, Bergman said. ​“If all these hubs did was deliver clean hydrogen to an ammonia manufacturer, I’d consider them a failure.”

Concerns about transparency, community impact and emissions

Hydrogen hubs also will not be considered a success if they run roughshod over the communities they’re built in, Bergman said.

The DOE requires hubs to engage with communities. A senior DOE official said Thursday that the seven hubs selected this week expect to invest a combined $1 billion to support community benefits plans — agreements to fund local employment, economic development and public works.

But environmental and community groups are worried about what they describe as a lack of transparency from DOE and hydrogen hub consortiums in the run-up to this week’s selection. ​“This is a lot of taxpayer money, and they have a right to know how the decisions were made, what the criteria were to make the decisions and what the DOE’s vision is going forward,” said Bergman.

The Environmental Defense Fund, an environmental group that often works with the business community, noted in an April blog post that DOE and hub developers are ​“failing” at being transparent about their plans.

“Because DOE has kept all applicant data confidential, there are few public details about the applicants and their proposed projects,” EDF wrote. ​“If ​‘community benefit plans’ move forward without real transparency and authentic outreach, dialogue and collaboration, they will be ​‘benefit plans’ in name only and result in no meaningful change from how industrial development occurred in the past.”

Chris Espinosa, legislative director for climate and energy at nonprofit Earthjustice, is also concerned about the lack of transparency. ​“There are a lot of gaps, and a lot of lack of clarity” in the hydrogen hub plans to date, he said in a Thursday interview. While DOE has pledged to open the hydrogen hub development process to public input, it remains unclear ​“whether there will be sufficient time for communities to provide public input within that process that actually has a meaningful opportunity to impact the decisions or trajectory of these projects,” he said.

“There are a lot of ways to produce hydrogen, but very few of those are truly clean. There’s a way to produce hydrogen with renewable energy sources in a manner that does not increase emissions at every stage of the production, transport and usage process. But most of the time, energy-intensive hydrogen production exponentially exacerbates emissions.”

In a Friday press release, DOE estimated that the hubs will eventually eliminate 25 million metric tons of carbon dioxide emissions from end uses per year, roughly equivalent to the annual emissions of over 5.5 million gasoline-fueled cars. A senior DOE official said Thursday that the agency has done a preliminary life-cycle assessment of each hydrogen hub application. It has also encouraged the hubs to follow ​“best practices” to reduce methane leakage from fossil-gas hydrogen production, as leaks can undermine the carbon-reduction benefits of carbon-capture systems.

But the regulatory framework for managing the emissions of these hubs remains unclear. DOE’s ongoing work on a Clean Hydrogen Production Standard, as called for by the Bipartisan Infrastructure Law, appears to be the sole public guidance on what standards the federal government will apply to limiting emissions from the hubs.

The draft guidance calls for limiting ​“clean” hydrogen to emitting no more than 2 kilograms of carbon dioxide equivalent per kilogram of hydrogen produced. Hydrogen with this level of emissions-intensity would earn 75 cents per kilogram under the Inflation Reduction Act’s 45V tax credit. But that’s well below the most lucrative rung of the tax credit, which offers $3 per kilogram for hydrogen produced with less than 0.45 kilograms of carbon dioxide equivalent per kilogram of hydrogen — an important subsidy to help achieve cost-effective green hydrogen production.

Bergman noted that many producers that plan to make hydrogen using fossil gas with carbon capture intend to take advantage of a different federal tax credit targeted at carbon-capture projects — the 45Q tax credit, which offers up to $85 per ton of carbon captured from point-source emitters such as hydrogen production facilities. That credit doesn’t rely on any assessment of the life-cycle emissions of the hydrogen being produced.

Nor does the text of the Bipartisan Infrastructure Law set any metric for measuring the emissions of projects funded by the hydrogen hub program, he noted. Instead, it states that the hubs must ​“demonstrably aid the achievement” of DOE’s clean hydrogen production standard — a definition that leaves much room for interpretation.

>>> Jeff St. John is director of news and special projects at Canary Media.