US lays foundations of new hydrogen industry
The United States government has allocated $7 billion to build seven hydrogen hubs that many hope will help create the foundation of a new industry.
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The Department of Energy (DOE) says the Regional Clean Hydrogen Hubs (H2Hubs) program will kickstart a national network of clean hydrogen producers, consumers, and connective infrastructure while supporting the production, storage, delivery, and end-use of clean hydrogen.
The hubs, located across the country from California and Texas to West Virginia and the Gulf of Mexico, will together produce three million metric tons (MT) of hydrogen every year compared to a U.S.-wide production target of 10 MT by 2030, the DOE says.
The program will reduce CO2 emissions by up to 25 MT based on a directional comparison of the well-to-end use emissions from the hydrogen made in the hubs (i.e., production through offtake) and the business-as-usual emissions for the end-uses the hydrogen replaces, a DOE spokesperson explains.
The numbers were generated using the GREET full life cycle model and focus on operational emissions, they say, adding that all estimates will be updated throughout the preliminary and detailed design phases.
The $7 billion will be matched by recipients to leverage a total of nearly $50 billion in investment.
The money is a signal to investors that the U.S. government is serious about supporting the infant hydrogen industry and serves as an important base on which a new, clean hydrogen industry can be built, says Founder and President of the non-profit Green Hydrogen Coalition (GHC) Janice Lin.
“These are the pieces that needed to come together to stimulate private investment and it’s what we must do to start capital formation. There is a lot of private capital that's eager and ready to jump into the sector, as well as a lot of interest from other countries,” Lin says.
The announcement is a recognition that clean hydrogen represents an opportunity to reimagine the energy ecosystem and the hubs aim to bring everyone along for the ride, Lin says.
“It’s not the foundation, but it’s a critical catalyst for getting that foundation started.”
Counting the cost
Building a new clean hydrogen network and weaving it into existing infrastructure won’t be cheap.
“While $7 billion sounds like a lot of money, when you think about the infrastructure that needs to be built, the big picture, it's a fraction of what ultimately will be needed,” GHC’s Lin says.
For example, decarbonizing the iron and steel industry through hydrogen-based direct reduced iron (DRI) would alone need some $1.4 trillion in investment by 2050, according to a study by Wood Mackenzie.
The funding to the hubs begins with an initial $20 million over the next 12-18 months and then will be awarded incrementally as it completes different phases of development in the next eight to 12 years.
The $7 billion represents less than 10% of the government support for U.S. hydrogen production facility developers over the next two decades due to significant funds expected from the Inflation Reduction Act’s (IRA’s) Clean Hydrogen Tax Credit, according to a Wood Mackenzie analysis of the hub announcement.
“The real momentum is going to come from the $40 billion of private investment that is meant to be catalyzed by this initial funding from the DOE,” the group says.
The IRA will offer tiered tax credits to projects based on the levels of carbon dioxide created for every kilo of hydrogen produced.
The DOE’s other programs include $1 billion for a Clean Hydrogen Electrolysis Program and $500 million for Clean Hydrogen Manufacturing and Recycling RD&D Activities.
Announced and required direct investments into hydrogen until 2030 globally ($ billion)
(Click to enlarge)
Note: As of May 2022
Exhibit from “Five charts on hydrogen’s role in a net-zero future”, October 25, 2022, McKinsey & Company, www.mckinsey.com. Copyright (c) 2023 McKinsey & Company. All rights reserved. Reprinted by permission.
Project diversity
The diversity of the projects on offer, both geographically and technologically, has also won applause from the industry.
The Mid-Atlantic Hydrogen Hub (MACH2), which won $750 million, will repurpose oil infrastructure as well as build hydrogen production facilities from renewable and nuclear electricity, one of three projects that plans to use nuclear power alongside the Midwest Hydrogen Hub (MACHH2), which will receive up to $1 billion, and the Heartland Hydrogen Hub, with up to $925 million.
The Appalachian Hydrogen Hub (ARCH2), which won up to $925 million, and the Gulf Coast Hydrogen Hub, with up to $1.2 billion, will use the regions’ natural gas and carbon capture to produce low-emission hydrogen.
The California Hydrogen Hub (ARCHES), with up to $1.2 billion, will use renewables and biomass as a feedstock and will provide a blueprint for decarbonizing public transport, heavy duty trucking, and port operations.
The Heartland Hydrogen Hub, meanwhile, with up to $925 million, will use any energy resources available to examine the decarbonization of fertilizer production, electricity production, and cold climate space heating.
The multiple feedstocks and end uses posited by the winning hubs will help spread the risk across various new technologies that have not been fully field tested and as hydrogen systems are put to the test in real world scenarios out of the laboratories.
“I want to see a lot of diversity of input because we're not going to get everything right the first time,” says Executive Director at the Hydrogen Fuel Cell Partnership Bill Elrick.
The strategy will also help test different regulatory approaches to setting up a fully-functioning, clean hydrogen system.
“The different regions will look at it differently, they'll have different mental approaches. California and Texas will take very different approaches to regulation for example. A switch of just one variable, and we might find the technology develops very differently, and we learn something new,” says Elrick.
By Paul Day