The Status of US Hydrogen Hubs

August 30, 2024

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by Bob Starkey (LEC Partners/Biofuels Digest) In October 2023 the Biden Administration announced a USD $7B investment in clean hydrogen production. This historic program, known as the Regional Clean Hydrogen Hubs (H2Hubs), selected 7 locations across the U.S. to develop clean hydrogen infrastructure. The H2Hub concept is important because it creates organized networks that bring together various stakeholders involved in the production, distribution, and utilization of clean hydrogen. These hubs are designed to accelerate the development and adoption of clean hydrogen by leveraging the advantages of industrial clustering (1). However, many in the hydrogen industry are still wondering when and how the money will be disbursed, when will they start adding hydrogen production to the economy, as well as key information regarding the participants and focus areas of each H2Hub.

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Show Us the Money

Once the initial excitement of the H2Hubs announcement had passed, the first question the industry asked was when will we see the money? The short answer to that is not immediately, but the longer answer requires some detail. Since the entire award period for the H2Hubs spans approximately 8 to 12 years, depending on the details and complexity of each cluster, some H2Hubs will receive their allocation sooner than others, but for most, not in this decade (See Figure 1 below for the basic information on each of the seven H2Hubs). As of July 2024, most H2Hubs are still waiting clarification on rules for receiving the funds (2). Currently, there is some confusion on structure and application of hydrogen production credits in another key piece of legislation, Section 45V of the Inflation Reduction Act (45V). Final 45V guidance is forthcoming from Treasury Department and should define which types of projects will be eligible for H2 production credits. The final guidance could have a significant impact on the viability of several H2Hubs projects and could result in the cancellation of any hydrogen projects dependent on nuclear energy.

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Outlining a Phased Approach

The final decision from the Treasury Department notwithstanding, before the bulk of the money to H2Hubs is distributed, the organizations leading the execution of each regional H2Hub must complete three of four phases. The first phase is the detailed initial planning phase for which the DOE will supply up to $20 million for each H2Hub to complete (3).

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Evaluating HUB Progress for further funding

DOE only initially authorizes funding for Phase I, with the granting of each subsequent phase of funding depending on progress made against the Hub’s planned goals. The H2Hub’s evaluation at each phase is designed to ensure successful implementation and create economic growth, while maintaining environmental sustainability that benefits communities within the Hub, depend on five key criteria (4):

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Phase I requires input from all the H2Hub’s regional stakeholders and a minimum of 50% non-federal cost share. Interested parties can join a H2Hub by contacting the Hub directly (most of the seven websites offer a sign-up tab).

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Many oil companies are also participating in H2Hubs, including ExxonMobil, PBF, Shell, British Petroleum, Canada’s Enbridge, and Denmark-based Orested. Notable utility companies participating in Hubs where they are active include Dominion Energy in Appalachian and Sempra Energy in California and the Gulf Coast.

Focus Areas of the H2Hubs

Given that there are several ways of producing low-carbon hydrogen, e.g. electrolysis from renewables, steam methane reforming with carbon capture, electrolysis from nuclear energy, etc., the seven regional H2Hubs have different focus areas that align with the resources and infrastructure that already exist within each region. Figure 4 below provides a short description of the focus areas for each of the H2Hubs, as well as the websites and primary contact information for each (5, 6).

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However, potential risks exist, such as technological challenges, market uncertainties, and the need for significant private investment to complement federal funding. For instance, the success of these hubs will partly depend on the terms of the Clean Hydrogen Production Tax Credit (Section 45V), which has sparked debate among industry stakeholders, environmental organizations, and policymakers regarding the qualifying criteria for “green” and “clean” hydrogen production. Despite these challenges, the H2Hubs program represents a significant step forward in creating a national clean hydrogen network, with the potential to substantially contribute to decarbonizing multiple sectors of the economy. READ MORE

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Excerpt from Canary Media: There’s little detail available on the $7B federal program to jump-start U.S. clean hydrogen, leaving environmental advocates concerned the projects may be off track. -- A year ago, the U.S. announced ambitious plans to build large-scale clean hydrogen hubs. Now, 12 months later, those plans have advanced little and are still shrouded in uncertainty.

Last October, the U.S. Department of Energy picked seven consortiums across the country to receive up to $7 billion in federal grants. The goal of this startup money? To help the hubs attract tens of billions more in private-sector investment to pay for construction costs. These projects, located around the country, aim to bring together a wide array of organizations to scale up the production, storage, and transport of low- and zero-carbon hydrogen, which some experts view as a way to replace fossil fuels in industries such as steelmaking and aviation.

There’s still little publicly available information to indicate whether these “clean hydrogen hubs” are likely to attract the needed private sector investment, however. Just as opaque are their potential community and climate impacts.

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The $7 billion in H2Hub awards is being doled out in phases, over the course of many years. It’s OCED’s job to make sure the hubs are hitting the technical, financial, and community-benefit milestones needed to earn these disbursements.

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Without the hubs, the U.S. may not be able to supply the tens of millions of tons per year of clean hydrogen needed to decarbonize key industries in the decades to come.

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The Natural Resources Defense Council reported in May that “environmental justice advocates and frontline communities have largely been kept in the dark on key details and basic information about many of these projects.”

Since then, relatively little additional information has emerged. “We’re still struggling at this point to understand what’s really going on with the hubs,” said Morgan Rote, director of U.S. climate at the Environmental Defense Fund, another nonprofit group that’s been tracking the disconnect between hydrogen hubs and communities.

“I don’t think DOE is sitting on a whole wealth of information they’re not sharing,” Rote said. “But that makes it even more challenging — and it’s no wonder communities feel like they don’t have information, if the DOE doesn’t have information.”

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To date, only three hubs have been awarded first-phase planning grants of about $30 million each: the ARCHES hub in California; the Pacific Northwest Hydrogen Association(PNWH2), which includes Oregon, Washington, and Montana; and the Appalachian Regional Clean Hydrogen Hub (ARCH2), which includes Ohio, Pennsylvania, and West Virginia. The remainder are still in the process of negotiating final approval for their first-phase funding.

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Right now, the two main methods for making low- or zero-carbon hydrogen are far more expensive than dirty hydrogen — and also untested at scale. Those include so-called “blue hydrogen,” which is made from fossil gas combined with carbon capture, and “green hydrogen,” which is made by splitting water in electrolyzers powered by zero-carbon electricity.

The hydrogen hubs need about $40 billion in private-sector investment to match DOE’s $7 billion. That’s a tough sell for investors, given the uncertain economics involved both for would-be clean hydrogen producers and for the industries that must invest in retrofitting facilities, building new infrastructure, and reconfiguring how they do business in order to use it.

What’s more, the rules for a subsidy that could make clean hydrogen cost-competitive with dirty hydrogen — the 45V production tax credits created by the Inflation Reduction Act — have yet to be finalized.

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In a May letter to DOE, U.S. Representatives Jamie Raskin (D-Maryland) and Donald S. Beyer Jr. (D-Virginia) complained that the agency has touted the potential for hydrogen made by the hubs to reduce carbon emissions by 25 million metric tons per year, but has “yet to publish the projected lifecycle emissions linked to the production of hydrogen.”

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The projects now must create public data reporting portals to share information as it’s finalized. They must develop community advisory structures that allow groups to provide feedback on plans as they’re developed. And they must “jointly evaluate or pursue negotiated agreements” on labor, workforce, health and safety, and community benefits plans.

“We’re really focused on three-way communication” between OCED, hub participants, and affected communities and other groups “to make sure anything we’re hearing back from the community is adequately addressed,” Cummins said. “That will determine whether we move forward to the next phase of the process.”

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“It’s definitely important for these hubs to have a solid plan for safety of operations.”

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In California, the ARCHES hub requires meeting participants to sign non-disclosure agreements barring them from sharing information about the hub’s activities under threat of legal penalties.

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In a report released this week, the Ohio River Valley Institute noted that several projects initially identified as part of the ARCH2 plan have since dropped out. Those include Canadian gas producer and pipeline owner TC Energy and industrial chemicals giant Chemours, which canceled plans to develop two green hydrogen production sites in West Virginia. READ MORE

Excerpt from Farm and Dairy: Underneath a dark, star-lit sky, chants rang out across the lawn of West Virginia State University: “No dirty hydrogen, we won’t pay with our health again.”

Environmental activists held a rally on Nov. 7 outside of the Appalachian Regional Hydrogen Hub’s Southern West Virginia open house to protest the hub and demand more public involvement in the project.

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The open house, one of three planned across the tri-state area of Ohio, Pennsylvania and West Virginia, presented activists and residents with their first opportunity to get long-held questions answered. Morgan King, one of the rally organizers, said activists got to ask questions but it was clear ARCH 2 organizers didn’t want public input.

“I hope it’s the start of more conversations with the developers, but to me it felt like a large propaganda event,” said King, climate and energy program manager at West Virginia Citizen Action.

ARCH 2 open house

The open house featured several stations where attendees could learn more information on the project, including a full list of involved partners like EQT, Battelle, CNX, Hope Gas, the Office of Clean Energy Demonstrations and more.

OCED and Hope Gas had tables set up explaining their involvement in the project, while the West Virginia Geological and Economic Survey staff demonstrated an experiment on how carbon capture and sequestration works and answered questions on the process. CCS, also known as Class VI wells, is the process of injecting carbon into the ground to reduce carbon emissions.

ARCH 2 leaders like Shawn Bennett, energy and resilience division manager for Battelle, were also present to answer specific questions on how a hydrogen hub works. Bennett said the open house aimed at answering questions and clearing the air on safety concerns.

“We wanted a chance to educate what this opportunity is, what ARCH 2 is and then hear any questions they have regarding what is hydrogen,” Bennett said. “We are trying to create that open dialogue with communities.”

ARCH 2 received its first tranche of money — $30 million — in July after completing negotiations with the Department of Energy. The money will go toward the project’s first phase which will consist of preliminary planning and development.

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The rally, organized by West Virginia Citizen Action and attended by other Appalachian environmental groups like the Ohio River Valley Institute, West Virginia Rivers Coalition and Mid Ohio Valley Climate Action, took place before the open house. Activists gathered to protest the lack of transparency in ARCH 2 negotiations.

The activists want ARCH 2 leaders to disclose site locations and necessary infrastructure and operations, as well as work with community members to develop an effective engagement structure. Information about locations and infrastructure remains unclear, even after the first open house.

The U.S. Department of Energy previously hosted two listening sessions for residents and activists to ask questions, but a letter sent by ORVI in May states the listening sessions have been one-sided, and questions were not answered.

A spokesperson from ARCH 2 previously told Farm and Dairy that community members will get “ample opportunity to shape our projects in ways that benefit all stakeholders while creating opportunity for the region.” He added the information activists want is still being determined.

The rally called upon leaders to halt the project and choose a different path for clean energy in Appalachia.

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Activists also say there hasn’t been enough research done on CCS wells, and the limited research available already shows problems. Two CCS projects were installed in Norway in 1996 and 2008, which, after a few years, saw CO2 quickly migrating to zones not intended for storage, despite studies and prior analysis for suitable rock formations.

Abandoned orphan wells in Appalachia could also pose a unique problem for the region and CCS storage. When left unplugged, orphan wells can leak harmful substances from the ground into the environment.

According to state agencies, Ohio has 20,000 orphan wells, Pennsylvania has 27,000 and West Virginia has 6,000, but some estimates put this number even higher.

At the open house, Philip Dinterman, deputy director for West Virginia Geological and Economic Survey, said orphan wells are a huge concern for CCS development in the area as they could leak carbon dioxide. However, developers are expected to survey the area and locate and plug orphan wells before a CCS project is installed.

He adds that WVGES has been mapping the locations of known orphan wells in West Virginia, which is available on its website, https://www.wvgs.wvnet.edu/. READ MORE