New details are emerging about the Biden administration’s landmark plans to build out a U.S. clean hydrogen industry.
On Friday, the Department of Energy named the seven winners of $7 billion in federal funds to establish regional hydrogen hubs. The hubs — funded through the infrastructure law — are part of the administration’s efforts to jump-start an industry it sees as key to achieving climate goals. The aim is to demonstrate everything from the production and storage of hydrogen to its transport and consumption.
“All across the country, from coast to coast, in the heartland, we’re building a clean energy future here in America, not somewhere else,” President Joe Biden said while announcing the hubs in Philadelphia on Friday.
From 79 initial proposals, DOE chose the following: the Mid-Atlantic Hydrogen Hub, Appalachian Hydrogen Hub, California Hydrogen Hub, Gulf Coast Hydrogen Hub, Heartland Hydrogen Hub, Midwest Hydrogen Hub and Pacific Northwest Hydrogen Hub.
Many of the winning proposals are backed by state government leaders and industry partners. The Midwest hub, for example, is a coalition of Illinois, Indiana and Michigan — supported by politicians like Illinois Gov. J.B. Pritzker (D), as well as such companies as Air Liquide, Ameren Illinois and Atlas Agro. The mid-Atlantic hub is supported by Democratic members of Congress representing the region, including Delaware Sens. Chris Coons and Tom Carper and Rep. Lisa Blunt Rochester.
The administration hopes the hubs will produce 10 million metric tons of “clean” hydrogen annually by 2030. But much about the projects remains unknown — and dependent on negotiations with DOE.
In interviews with E&E News, hub leaders shared additional details about how the networks might operate and what to expect going forward.
A win for ‘blue’ hydrogen?
Nearly all hydrogen created in the U.S. today is extracted from natural gas through steam methane reformation. The emissions-intensive process produces what is known as “grey” hydrogen — or “blue” hydrogen when combined with carbon capture and storage.
Four recipients — the Appalachian, Gulf Coast, Heartland and Midwest hydrogen hubs — include blue hydrogen in their plans, though the infrastructure law only mandated one.
That has drawn the ire of environmentalists, who argue blue hydrogen is not emissions-free, partly because of the potential for methane leaks during the production process.
“This is worse than expected,” Clean Energy Group President Seth Mullendore said after the recipients were announced Friday. “The fact that more than half the hubs will be using fossil gas is outrageous.”
Critics have also pointed out that many of the industry partners backing the hub projects include oil and gas companies. The coalitions are a mix of private-sector groups — often including renewable energy developers — and government stakeholders. Proposals have also looped in universities, utilities, environmental groups, community organizations, labor unions and tribal nations, among others.
“The massive build out of hydrogen infrastructure is little more than an industry ploy to rebrand fracked gas,” said Food & Water Watch Policy Director Jim Walsh in a statement Friday. “In a moment when every political decision that we make must reject fossil expansion, the Biden administration is going in the opposite direction.”
The White House has emphasized that roughly two-thirds of the $7 billion pot is “associated” with the production of “green” hydrogen, which uses electricity from renewable sources. Two of the chosen proposals — in California and the Pacific Northwest — are making green hydrogen their focus, while three other hubs plan to include green hydrogen alongside hydrogen made with natural gas (blue) or nuclear energy (pink).
Many hubs plan to use several methods for hydrogen production, but the exact mix may change depending on which projects make it through the DOE negotiations process. The Midwest hub, for example, told E&E News it’s pursuing an “all-of-the-above” strategy and has projects for green, blue and “pink” hydrogen. The mid-Atlantic hub in southeastern Pennsylvania, Delaware and New Jersey will also generate hydrogen with nuclear reactors.
Energy Secretary Jennifer Granholm has described clean hydrogen as a fresh business opportunity, especially for the natural gas industry, which has supported the concept of sending hydrogen to market through its pipeline network. Lawmakers like Sen. Joe Manchin (D-W.Va.) — who said the Appalachian hub will make West Virginia the “new epicenter of hydrogen” — have pushed for continuing to use natural gas to make hydrogen in his state.
“Natural gas utilities are committed to exploring all options for emissions reduction as demonstrated by the 39 hydrogen pilot projects already underway and are eager to participate in a number of the hubs,” said American Gas Association President and CEO Karen Harbert in a statement Friday.
Green hydrogen also has faced criticism. Some groups argue that the renewable resources needed to produce green hydrogen are limited, so funding should be reserved for applications that cannot be easily electrified, mostly industrial processes. There also is uncertainty about how the Treasury Department will handle hydrogen made from grid electricity — which can include power from fossil fuel plants — in its upcoming guidance on the first-ever tax credit for clean hydrogen production.
“Even the cleanest forms of hydrogen present serious problems,” Walsh said. “As groundwater sources are drying up across the country, there is no reason to waste precious drinking water resources on hydrogen when there are cheaper, cleaner energy sources that can facilitate a real transition off fossil fuels.”
But Angelina Galiteva, CEO of the hub in drought-prone California, said hydrogen will enable the state “to increase renewable penetration to reach all corners of the economy.”
“Transitioning to renewable clean hydrogen will pose significantly less stress on water resources than remaining on the current fossil path,” she said.
How the hubs will use hydrogen
A goal of the hubs is to pinpoint the most promising end uses for produced hydrogen. The Biden administration sees the fuel as a way to decarbonize manufacturing and other hard-to-electrify industrial processes.
“The diversity of uses in the hubs is probably a good thing,” said Ben King, an associate director at the Rhodium Group, in an interview. “But we need to — as the industry further develops — take lessons from this and ensure that we’re being focused on the guiding star of decarbonization in making major investment decisions.”
The hubs span across 16 states, and each project appears to draw from the existing technology and infrastructure strengths in its region.
“It makes sense for DOE to test the waters in a bunch of different places, see how it goes,” said King. “Because there will be challenges that are geographically dependent.”
California — which will make green hydrogen with renewables and biomass — is planning to target transportation, the state’s largest driver of emissions, by testing out applications in areas like public transit, heavy-duty trucking and port operations. Galiteva said the hub expects to make the fastest progress in its initial focus areas of ports, power and transportation.
“California is the best place probably in the world to show that renewable hydrogen can work and do it in an economically sustainable way,” said Tyson Eckerle, an adviser for the hub representing the office of Gov. Gavin Newsom (D). He referenced the state’s low-carbon fuel standard, as well as its “abundance” of solar and wind assets.
Similarly, the Pacific Northwest hub is planning to harness low-emissions energy from the Columbia River Basin’s hydroelectric dams. The hub aims to use the hydrogen for heavy-duty transportation, long-term energy storage, ports, agriculture and industrial applications, according to project leaders.
“More than any other state in the entire country without question, we’ve got the most baseload firm hydropower backbone of our electrical grid,” Chris Green, the Pacific Northwest hub’s board chair, told E&E News. “That was always for us the motivation.”
In Appalachia, home to the gas-rich Marcellus Shale reservoir, the hub is poised to support ammonia production and hydrogen refueling stations, as well as industrial, manufacturing and transportation uses. The Midwest, historically the heart of U.S. manufacturing, will be home to a hub that aims to boost decarbonization of steel and glass production, as well as uses for power generation, refining, heavy-duty transportation and sustainable aviation fuel.
“There’s a lot of steel that’s manufactured in our region, and there is hydrogen already introduced into those processes,” said Neil Banwart, chief integration officer for the Midwest hub, in an interview. “Those heavy industries can move relatively quickly once we’re able to ramp up the supply of clean hydrogen.”
The Minnesota-based Heartland hub is eyeing hydrogen for electricity generation, fertilizer production and space heating in an area known for its frigid winters. And the mid-Atlantic recipient has identified the transportation and power sectors as likely adopters and partnered with three operational refineries intending to swap their industrial boiler and equipment fuel with hydrogen.
On the Gulf Coast, the Houston-centered hub will build on the nation’s most extensive hydrogen storage and pipeline network. The region boasts numerous oil refineries and chemical producers that already use hydrogen — which is largely made using natural gas.
Backed by oil giants Exxon Mobil and Chevron, the Gulf Coast hub is set to become the biggest site for blue hydrogen. Many of its projects have been advancing with private financing for years — which the hub says provides “the opportunity to be much larger and perhaps go faster than some of the other projects” nationwide.
“The hub funding will basically accelerate the development of pieces and add new pieces to the equation — so add things like refueling stations, add pipeline capacity that wouldn’t have otherwise been built,” said Brett Perlman, CEO of Center for Houston’s Future, part of the Gulf Coast coalition. “We wanted to make the DOE funding complimentary and not make the projects dependent on the funding.”
Most hydrogen currently produced is used for oil refining and fertilizer production, according to the U.S. Energy Information Administration. The next big buyers on the horizon include the steel, cement and sustainable aviation fuel sectors.
EPA’s proposed power plant rule would also allow facilities to use hydrogen to comply with new carbon pollution standards.
What comes next
Friday’s awards are conditional on whether winners complete milestones set by DOE.
Some winning hubs told E&E News that their projects made key preparations and preliminary equipment purchases ahead of the official announcement, to ensure that they would be able to make the hubs operational.
“We were certainly cautiously optimistic. With respect to siting decisions and things of that nature, our project partners started to proceed down the path as if we were going to win,” Banwart from the Midwest hub said. “These checks take quite a while, and the lead time for some of this equipment is quite high.”
DOE expects negotiations will extend into next year and take several months to conclude. Until then, many hubs are keeping project details under wraps, choosing just to name partnering companies. Any estimates provided by the hubs on jobs created and emissions saved are likely to change during the process as well.
Several hub representatives said they will use the period to engage with the community and tell residents about their goals — a crucial aspect, as proposals have encountered opposition for lacking transparency. Green from the Pacific Northwest hub said the nature of a federal competition made advanced coordination with nearby proposals difficult, but the hub will now look to connect with efforts in California and Utah.
After negotiations, the hubs will enter a detailed planning phase lasting up to a year and a half. During that time, they will craft their hub architecture, establish additional offtake agreements, confirm site selections, and produce initial design estimates for their production and offtake facilities.
That initial phase will be followed by two to three years of project development, up to four years of construction and another two to four years for ramping up operations, according to DOE.
Biden outlined what some of those operations might look like Friday. In partnership with the mid-Atlantic hub, he said, companies will use the vacant Delaware City Refinery and a former jet fuel terminal in New Jersey to produce hydrogen from renewable energy like solar power. That hydrogen could travel through repurposed oil pipelines to Philadelphia, to be used as fuel for trucks.
The likely design of projects within hubs can also be gleaned by looking at the ongoing hydrogen initiatives from major hub partners. For example, Fidelis New Energy, an energy company and Appalachian hub partner, hopes to build a large blue hydrogen production facility in West Virginia that will start operations for its initial phase, the Mountaineer GigaSystem, in 2028 and eventually generate power for data centers.
But the success of such ventures is also tied to the outcome of the Inflation Reduction Act’s hydrogen tax credit, known as 45V. The Treasury Department’s guidance, expected before the end of the year, will define how to count emissions in meeting the qualifications for an award of up to $3 per kilogram of hydrogen produced.
The Rhodium Group’s King said some projects are “definitely going to need to wait and see how much of a tax credit they can claim, and if they want to get the full $3, what do they actually have to do to get there?”
But others, he said, “already have their economics penciled out.”
“They’ve got off-takers who are willing to pay a price premium for very, very low-carbon or zero-carbon hydrogen, and so in those situations, they may be a little less sensitive to exactly how 45V comes down,” King said.