States Are Vying for Money to Start ‘Hydrogen Hubs.’ What Are They?

October 27, 2022

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by Robert Zullo (Wisconsin Examiner) Across the country, states are inking agreements with neighbors or striking out on their own to pursue billions in federal funding to set up “hydrogen hubs,” clustered centers for production, storage and use of the gas that many see as a crucial piece of the puzzle for decarbonizing the U.S. economy.

How broad a role it should play, however, is a matter of debate.

The U.S. Department of Energy is looking to dole out $7 billion from last year’s bipartisan infrastructure law that could fund up to 10 regional clean hydrogen hubs, defined as “a network of clean hydrogen producers, potential clean hydrogen consumers and connective infrastructure located in close proximity” to be sited across the country.

“The H2Hubs will be a central driver in helping communities across the country benefit from clean energy investments, good-paying jobs and improved energy security – all while supporting President Biden’s goal of a net-zero carbon economy by 2050,” the department said in a news release last month, calling the federal cash infusion one of the largest in the DOE’s history.

That pool of money joins provisions in the Inflation Reduction Act – which created a clean hydrogen production tax credit and enacted big changes in carbon capture tax credits – that could also boost hydrogen.

“Some states are going to be motivated by climate goals. Hydrogen is an important tool for achieving those climate goals,” said Bryan Willson, a professor of mechanical engineering and executive director of the Energy Institute at Colorado State University. “Others are really motivated by economic development and hydrogen represents a tremendous new business opportunity.”

Willson is also the director of the Rocky Mountain Alliance for Next Generation Energy, which is made up of universities and national labs from four western states that are providing technical support to the effort to create the Western Interstate Hydrogen Hub, a collaboration between Colorado, New Mexico, Utah and Wyoming, two red states and two blue ones.

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Similar hub agreements have been made between Louisiana, Oklahoma and Arkansas; Minnesota, Montana, North Dakota and Wisconsin and Connecticut, Massachusetts, New Jersey and New York. Minnesota and Wisconsin also have a separate memorandum of understanding with Illinois, Indiana, Kentucky, Michigan and Ohio aimed at “accelerating and improving” clean hydrogen production. And Oregon and Washington are also collaborating to create a Pacific Northwest hub.

Other states, like Pennsylvania and Georgia, have launched efforts to create hubs on their own.

“The hubs are trying to focus on areas where you have resources to produce it, resources to use it and resources to balance that supply and demand,” said Jeffery Preece, director of research and development at the Electric Power Research Institute.

“We’re still working on where and how to deploy hydrogen in a decarbonized future. It’s important to bring stakeholders together … to figure this out. Getting it focused in hubs helps to really find those ways where we’re challenged with limitations on infrastructure today.”

Why hydrogen?

There’s a consensus that hydrogen, which releases no carbon emissions when burned, could be a major part of addressing hard-to-decarbonize portions of the economy in which electrification isn’t feasible, including shipping, aviation, heavy ground transportation like rail and industry, such as steelmaking and cement. Hydrogen fuel cells can power heavy vehicles like long-haul tractor-trailers which need greater range than batteries can currently provide or hydrogen can be used to produce fuels compatible with existing internal combustion engines.

It can also be blended — up to a certain point currently — with natural gas to burn in gas turbines for electric generation. In what it called the largest test of its kind, Georgia Power reported in June that it was able to burn a 20% hydrogen blend in one of the turbines at its Plant McDonough-Atkinson natural gas power plant outside Atlanta, achieving a 7% reduction in CO2 emissions.

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Given that dynamic though, environmental groups worry that pushing to use hydrogen in scenarios in which renewable power and electrification (such as for home heating and appliances like stoves) make more sense could wind up prolonging the life of fossil fuels, particularly natural gas.

“In general when it comes to hydrogen we feel that there are some good opportunities there and there are also some very bad possibilities depending on how this is implemented,” said Patrick Drupp, the Sierra Club’s deputy legislative director for climate and clean air.

Drupp noted that the political wrangling over the infrastructure bill produced some constraints for the Department of Energy as it evaluates hydrogen hub proposals.

“Certain things were mandated in the legislation that we don’t agree with,” he said. “The DOE should focus on things where hydrogen has the best possible outcomes.”

For example, at least one hub must demonstrate the production of hydrogen from fossil fuels (with carbon capture), one must be from nuclear and one must be from renewable energy. They must also be located in different regions of the U.S. “and shall use energy resources that are abundant in that region, including at least two H2Hubs in regions with abundant natural gas resources,” DOE documents state.

Building out a large hydrogen economy, with its unique storage and transportation requirements, Drupp noted, will require expensive infrastructure like new pipelines to handle high concentrations of hydrogen being blendedinto the natural gas system.

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“There’s a lot of money out there,” Drupp said. “The gas industry sees the writing on the wall and sees this as an opportunity to prolong their industry.” READ MORE

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Excerpt from Office of Governor John Bel Edwards: Governors John Bel Edwards of Louisiana, Kevin Stitt of Oklahoma, and Asa Hutchinson of Arkansas announced their states have entered into a bipartisan three-state partnership to establish a regional hub for development, production, and use of clean hydrogen as fuel and manufacturing feedstock.

In entering the agreement, Louisiana, Oklahoma, and Arkansas intend to compete as a unit for funding established in the Infrastructure, Investment, and Jobs Act (IIJA) of 2021, in which the United States Department of Energy (DOE) is directed to seek out and select regional clean hydrogen hubs to fund. The act specifies that such hubs should be selected by DOE based on mix of feedstock available to produce hydrogen, available users of hydrogen, geographic locations, and potential effects on employment, among other considerations.

“The state of Louisiana, as well as our partner states in this effort, have a long history of producing and transporting fuels and feedstocks in liquid and gas forms, as well as significant population of industrial end users with potential to make use of hydrogen as fuel or as part of manufacturing processes,” Governor Edwards said. “This is an extension of Louisiana’s ongoing efforts in diversifying the makeup of our energy sources and ensuring an economically and environmentally balanced approach to cleaner use of traditional fuels and transition to new potential energy sources.”

“Oklahoma is honored to join in forming this partnership, not because of convenience, or necessity, but rather because we share a similar vision and goals for the production, use, and economic impact that can result from creating this hydrogen economy. Like our partners, we believe that creating as many end-use cases for commercialization with as many private partners is the quickest and best mechanism to spur real demand for this clean energy. The resources and opportunities in Oklahoma are complementary to our partners and tailor made for a diverse hub application to compete with others around the country,” said Governor Stitt.

“In Arkansas, we have a growing and diverse energy portfolio and natural resources vital to any successful regional hub. We are the proud home of prominent partners and companies critical to U.S. commerce with a strong history of environmental leadership and track records of reducing emissions. We are excited to partner with our neighbors in Louisiana and Oklahoma to put forward a winning application,” explained Governor Hutchinson.

Each governor appointed the following individuals from their respective state to serve as designee to the partnership: Louisiana Department of Natural Resources Secretary Thomas Harris; Oklahoma Secretary of Energy & Environment Kenneth Wagner; and Arkansas Secretary of Energy & Environment Becky W. Keogh. The designees will serve as the primary authority and point of contact for coordinating governmental, research, and private sector efforts to promote hydrogen development and use.

These states are perfectly situated to demonstrate the entire value chain of hydrogen and uniquely situated to tackle the hard-to-decarbonize sectors like industrial, manufacturing, and transportation. The partnership builds upon existing advantages, such as an inland seaport system that runs from Oklahoma through Arkansas and down the Mississippi River to the Gulf of Mexico in Louisiana, existing intermodal rail, existing pipeline infrastructure that runs from Oklahoma through Arkansas to the Gulf of Mexico, and some of the most valuable interstate freight highways in the United States. More importantly, hydrogen is already available for demonstration with new large clean hydrogen production hubs scheduled to come on line in the near future.

Hydrogen is presently used in many manufacturing processes and has increasingly gained interest as a clean-burning fuel source that could help reduce carbon emissions from manufacturing, heavy industry and long haul trucking. Currently, a great deal of hydrogen is produced in the partner states through separating methane into its components of hydrogen and carbon. While this process still produces waste carbon, the process can be made much cleaner by capturing the waste carbon and injecting it into permanent underground storage zones. There has also been growing interest and investment in making the electrolysis of water to release hydrogen more commercially available.

The three states have been focused on hydrogen as an additional resource in their all-of-the-above approach to a diversified and clean energy portfolio. In late 2021, a hydrogen-from-natural-gas project with carbon capture and sequestration was announced in Louisiana and a large electrolytic production hub was announced in Oklahoma.

“Here in Louisiana, we’ve already seen and participated in action to produce more hydrogen through cleaner processes, and with a partnership of our state with Arkansas and Oklahoma sharing information at the level of state government, between our research institutions, and between our industry groups, we expect to be able to accelerate progress in both the production and use of hydrogen,” Governor Edwards said.

“From our shared industrial base and established pipeline infrastructure to our shared history of providing fuel and feedstock to end users in our states, Louisiana and our partners in this effort have the potential to hold a strong leadership role in the future of hydrogen development and its part in transitioning from traditional fuels to what comes next,” Louisiana Secretary Harris said.

The agreement also includes provisions for:

Promoting investment in infrastructure for production and transportation of low-carbon hydrogen

Prioritizing direct capture of carbon for all phases of hydrogen development

Working with industry, transportation networks and ports to connect major facilities with high carbon footprints to hydrogen infrastructure for fuel blending and reduction of CO2 emissions Working to support hydrogen production to support all phases of industry that can use hydrogen as a fuel source READ MORE

Excerpt from Stillwater Associates: Joshuah Stolaroff : Josh co-founded Mote three years ago after spending eleven years with Lawrence Livermore National Laboratory where he led the Lab’s carbon capture program. After spending twenty years working in the sector, he concluded that sufficient incentives were in place and markets existed to support a viable commercial venture focused on the production of hydrogen by biomass gasification with carbon capture and storage. Based on his work at Livermore, this represented an opportunity to create a whole new category of climate mitigation. Josh believed that the opportunity represented the most compelling set of technologies he had studied. Mote’s approach was also appealing because its technologies were individually proven, although not demonstrated in the combination envisioned by Mote. The company is also developing a suite of new technologies for improving its processes.

Mote’s ARCHES Project

Mote’s first project, located in Kern County, has been included in the ARCHES DOE grant. The project’s scope encompasses sourcing biomass (primarily agricultural waste wood); designing, constructing, owning and operating a gasification plant; capturing and sequestering the produced CO2; and selling the produced hydrogen for primarily transportation purposes. Mote has identified a partner to transport and sequester the CO2 following its liquification.

The opportunity to join ARCHES occurred at an advantageous time during Mote’s development of both project sites. ARCHES ran a competitive process for the DOE grant funds. Mote submitted applications on behalf of both projects, and its Kern County site was subsequently selected for a “substantial” amount of funding from ARCHES. The ARCHES hub is being led by a public-private partnership that is currently negotiating a cooperative agreement with the DOE which will finalize the award with an expectation of completion this summer. ARCHES will subsequently execute similar arrangements with its members that have been awarded grants.

While the grant award and administrative processes are complex and time consuming, Mote believes its participation in the hub will be valuable beyond the funding, given the hub’s mission of advancing the hydrogen economy. Many hub members joined to become part of the mission without an expectation of receiving grant funding. Josh also cited the state’s commitment to streamline state permitting processes for hub members as a key reason to join the hub.

Project Status and Timeline

Mote’s Kern County project is prepared to start front end engineering design, having completed pre feed studies and site selection. Partners for the hydrogen offtake, CO2 storage and major vendors have also been identified. Discussions on CEQA (California environmental permitting) have been initiated. Josh reports that the Kern County Planning Commission has been very supportive and considers Mote as a key tenant in its planned carbon management business park which will consolidate CO2 storage, power supply and related activities under a master permitting plan. Mote is targeting construction to start in 2025 with commercial operations commencing in late 2027 or early 2028. Josh also reports that the community has been supportive given the expected job creation (especially the opportunity to redeploy oil and gas workers) and the project’s air quality benefits compared with other biomass disposal methods (such as field burning and combustion in power plants). Mote’s plant has minimal air emissions, although an air permit is required.

The project also plans to use hydrogen-fueled trucks to transport its wood feedstock and produced hydrogen rather than diesel-powered trucks, typical in today’s fleets which are a significant contributor to pollution in the Central Valley region. The Mote facility will not require municipal or fresh water for operation. Each Mote facility is expected to produce sixty tons of low carbon intensity hydrogen per day.

Project Funding

In addition to the DOE grant, project viability is dependent on the federal 45V (hydrogen) tax credit and California’s low carbon fuel standard (LCFS) programs. Both programs have recently issued proposed guidance (IRS) or modifications (CARB) for their programs which have generated strong feedback from interested parties. Stillwater asked about Mote’s views on the proposed guidance/regulation revisions. Mote supports the proposed 45V rules and believes the guidance is reasonable and within the spirit of the legislation. Mote’s gasification approach is not as sensitive to the IRS guidance for using renewable power compared with electrolyzer-produced hydrogen, a process that other renewable hydrogen developers are utilizing. Mote’s process uses about twenty-five percent of the power required to produce electrolyzer hydrogen, including the significant power requirements to liquify the CO2 produced from the process. As for the proposed LCFS revisions, Josh wishes CARB would get on with the process of finalizing the rules and thinks the revisions makes sense.

Broadening Beyond California

When asked whether the Mote process could be economic outside California, Josh responded that either additional enhancements to the federal program such as the ability to “stack” 45V (hydrogen) and 45Q (carbon sequestration) credits or a higher value 45Q credit like the direct air capture credit value would be necessary. Alternatively, the adoption by more states of programs similar to California’s LCFS program could make expansion beyond California feasible for hydrogen suppliers. The key to being competitive with electrolyzer hydrogen is being compensated for carbon removal.

Lessons Learned

When asked what has surprised him the most since joining Mote, Josh responded that he initially believed that the party that completes a project first would be advantaged, but his opinion has evolved to believing that all market participants benefit from a completed project. Josh added that he didn’t appreciate how hard it is to get any project over the finish line. Commenting on what has been the most rewarding, he cited how many people share a common vision for biomass carbon removal at scale among the government, university and industry communities. Josh expressed his belief that carbon removal remains essential to our shared fate, and that it would be hard to do it alone as a small company. He specifically cited CalFire, the California Department of Conservation, the U.S. Forest Service, the National Laboratories, Mote’s university and corporate partners and the DOE as having been especially supportive. READ MORE

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