The Contenders - Department of Energy Follows its Blueprint in Selection of Clean Hydrogen Hubs - RBN Energy

The Contenders - Department of Energy Follows its Blueprint in Selection of Clean Hydrogen Hubs | RBN Energy

If you’re vying for billions in federal dollars, a predictable selection process with measurable criteria is probably what you’re hoping to see. And while there was much speculation about what projects would be ultimately picked for the Department of Energy’s (DOE) regional clean hydrogen hubs initiative, H2Hubs, the selections made October 13 included no curve balls and matched the agency’s previous guidance. In today’s RBN blog, we’ll look at the selections and how they fit into the DOE’s stated criteria.

We’ve been following the discussions about hydrogen hubs since the DOE announced details around the hub initiative in a Funding Opportunity Announcement (FOA) published in September 2022 that defined a hub as “a network of clean hydrogen producers, potential clean hydrogen consumers, and connective infrastructure located in close proximity.” The FOA set out the overall goals of the program: the creation of six to 10 regional hubs that would receive up to $7 billion in federal funding to help meet the Biden administration’s targets of producing 10 million metric tons per annum (MMtpa) of clean hydrogen by 2030, 20 MMtpa by 2040, and 50 MMtpa by 2050.

Money for the hydrogen hubs was included in 2021’s Infrastructure, Investment and Jobs Act (IIJA), better known as the Bipartisan Infrastructure Law. Projects interested in receiving those federal dollars had to first submit a concept paper about their proposal, which was due in November 2022. Of the 79 projects to submit a concept paper, 33 received formal encouragement from the DOE in late 2022 to submit a full application by April 7, 2023. Each paper’s assessment was based on evaluation criteria that included qualifications, experience and capabilities; expected contributions toward a national hydrogen network; plans to develop production, end-use, and connective facilities; and community benefits. The full list of encouraged projects wasn’t released, but we were able to identify all of them in September. (We’re also pursuing the list of projects that submitted a full application to the DOE. When we get it, we’ll discuss it in our weekly

News about the hydrogen hubs has been pretty quiet since summertime, with few hints about when the DOE might make its decision on the hubs or which ones stood the best chance of selection, aside from our own analysis about which projects appeared to be the strongest. (The same quiet can be said of rules around the new tax credit for clean hydrogen. More on that in a bit.) To our thinking, hub projects that could contribute to a national network and produce hydrogen on a commercial scale; incorporate upstream, midstream and downstream considerations; and embrace environmental justice initiatives were likely to have the best odds. The DOE made its hydrogen hub selections on October 13, picking seven proposals with a variety of strategies and located across the U.S. Let’s look at how those picks match up with two key elements of the DOE’s criteria: feedstock diversity and end-use diversity.

The DOE said in its guidance that at least one hub will use natural gas to make clean hydrogen, another will use renewable power, while another will use nuclear power. Natural gas is the centerpiece of the Appalachian Regional Clean Hydrogen Hub (ARCH2; #2 and purple states in Figure 1 below), a collaborative involving more than 40 entities and which can leverage the region’s ample access to low-cost natural gas to produce clean hydrogen and permanently store most of the associated carbon emissions. The location of the hub and development of hydrogen pipelines, multiple hydrogen fueling stations, and permanent carbon dioxide (CO2) storage is designed to drive down the cost of hydrogen distribution and storage. (States included: Ohio, Pennsylvania, West Virginia. DOE support: Up to $925 million. Prime contractor: Batelle.)

Figure 1. Locations of U.S. Hydrogen Hubs. Source: Department of Energy

Note: Pennsylvania is shaded in purple and light blue because it is a part of two hub projects.

Renewables are the backbone of the proposal by the Alliance for Renewable Clean Hydrogen Energy Systems (ARCHES; #1 and light-green state in Figure 1), which aims to leverage California’s leadership in clean energy technology to produce hydrogen exclusively from renewable energy and biomass. It’s intended to provide a blueprint for decarbonizing public transportation, heavy-duty trucking, and port operations — key emissions drivers in the state and sources of air pollution that are among the hardest to decarbonize. (States included: California. DOE support: Up to $1.2 billion. Prime contractor: ARCHES.)

Like its neighbor to the south, the Pacific Northwest Hydrogen Hub (PNW H2; #7 and yellow states in Figure 1) plans to leverage the region’s abundant renewable resources to produce clean hydrogen exclusively via electrolysis. Its anticipated widescale use of electrolyzers is designed to help drive down electrolyzer costs, making the technology more accessible to other producers and reducing the cost of hydrogen production. (States included: Montana, Oregon, Washington. DOE support: Up to $1 billion. Contractor: Pacific Northwest Hydrogen Association.)

Nuclear power is part of the plan by the Midwest Alliance for Clean Hydrogen (MachH2; #6 and red states in Figure 1), which aims to enable decarbonization through strategic hydrogen uses including steel and glass production, power generation, refining, heavy-duty transportation, and sustainable aviation fuel (SAF). The hub plans to produce hydrogen by leveraging diverse and abundant energy sources, including renewable energy, natural gas, and nuclear energy. (States included: Indiana, Illinois, Michigan. DOE support: Up to $1 billion. Contractor: MachH2.)

The Mid-Atlantic Clean Hydrogen Hub (MACH2, #5 and light-blue states in Figure 1) also relies on nuclear power. The hub is intended to help unlock hydrogen-driven decarbonization in the region while repurposing historic oil infrastructure and using existing rights-of-way. It plans to develop hydrogen production facilities from renewable and nuclear electricity using both established and innovative electrolyzer technologies, where it can help reduce costs and drive further technology adoption. (States included: Delaware, New Jersey, Pennsylvania. DOE support: Up to $750 million. Contractor: Mid-Atlantic Hydrogen Hub Inc.)

The DOE also said end-use diversity would be another key part of the selection criteria, with at least one hub using clean hydrogen in the industrial sector, the electric power sector, the residential/commercial heating sector, and the transportation sector. That was a big selling point behind the proposal by HyVelocity (#4 and dark-green state in Figure 1), which we saw as a standout among the several proposals targeting the Gulf Coast and which aims to use hydrogen for fuel-cell electric trucks, industrial processes, ammonia, refineries and petrochemicals, and marine fuel. The hub would be centered in Houston and stretch across the Texas coast. The hub is intended to kickstart a clean hydrogen economy and drive large-scale hydrogen production using both natural gas with carbon capture and renewables-powered electrolysis, leveraging the region’s abundant renewable energy and natural gas supply to drive down the cost of hydrogen. (States included: Texas. DOE support: Up to $1.2 billion. Contractor: HyVelocity Inc.)

Another project with an industrial focus is the Heartland Hydrogen Hub (#3 and orange states in Figure 1), which plans to leverage the region’s abundant energy resources to help decarbonize the agricultural sector’s production of fertilizers, decrease the regional cost of clean hydrogen, and advance the use of clean hydrogen in power generation and space heating. (States included: Minnesota, North Dakota, South Dakota. DOE support: Up to $925 million. Contractor: Energy & Environmental Research Center.)

Figure 2. Regional Clean Hydrogen Hubs Sample Blueprint.

Source: Office of Clean Energy Demonstrations

The selections also satisfy the other three elements of the DOE’s criteria. The FOA indicated that at least two hubs would be placed in the parts of the U.S. with the greatest natural gas resources. The HyVelocity and ARCH2 projects check that box. The DOE also said it would give extra weight to proposals likely to create the most opportunities for skilled training and long-term employment. The DOE’s announcement makes sure to mention the number of jobs each project is forecast to create, both during construction and once a hub is operational. (The ARCHES plan offers the most optimistic assessment — 130,000 construction jobs and 90,000 permanent jobs.) With hubs in major regions across the U.S., the DOE’s emphasis on geographic diversity is also met, although there is no hub in the Southeast.

The DOE said the final proposals were evaluated in several key areas: 1) Technical merit and impact, including but not limited to the ability of the hub to deploy infrastructure and produce at least 50-100 metric tons (MT) of clean hydrogen per day and reduce greenhouse gas (GHG) emissions; 2) Financial and market viability, including growth potential and market competitiveness; 3) Work plan, including the speed at which the hub could begin operations and overall project management details; 4) Management team and project partners, including the ability to execute the plan with a high level of success; and 5) A community benefits plan, including an assessment of community and labor engagement, job creation and workforce development, diversity equity inclusion and accessibility, and the White House’s Justice40 Initiative, which pledges that at least 40% of overall benefits from federal investments in climate and clean energy will be delivered to disadvantaged communities.

DOE’s Office of Clean Energy Demonstrations (OCED) manages the H2Hubs program and will provide management oversight for the selected projects. The selection announcement also included some boilerplate wording common to federal funding: Before any money is issued, DOE and the applicants will undergo a negotiation process, and DOE may cancel negotiations and rescind the selection for any reason during that time.

The federal government’s support for the development of a clean hydrogen industry doesn’t begin and end with its hydrogen-hub money. (The DOE has another $1 billion in hydrogen-related funding it has set aside for demand-side initiatives.) In fact, a key driver behind the private sector’s efforts to build production facilities and other hydrogen-related assets is the 45V production tax credit (PTC) for clean hydrogen — which is worth up to $3 per kilogram of clean hydrogen produced — a creation of last year’s Inflation Reduction Act (IRA). Just as the market was waiting for news about hydrogen hubs, there’s equal (or more) interest in how the rules around the implementation of the PTC will be decided. The Internal Revenue Service (IRS) was supposed to publish its guidance in August, but it now seems likely that will come toward the end of the year. We’ll be watching to see how the hub projects advance and how they are impacted by the rules around the PTC.

“The Contenders” was written by Ray Davies and appears as the first song on side one of The Kinks’ eighth studio album, Lola Versus Powerman and the Moneygoround, Part One. The song features a memorable slide guitar hook from Dave Davies and great blues harp from Ray Davies. Personnel on the record were: Ray Davies (lead vocals, rhythm guitar, resonator guitar), Dave Davies (lead guitar, slide guitar, banjo, backing vocals), John Dalton (bass, backing vocals), Mick Avery (drums, percussion), and John Gosling (piano).

Lola Versus Powerman and the Moneygoround, Part One, was recorded between April and September 1970 at Morgan Studio in London with Ray Davies producing. Released in November 1970, the album went to #35 on the Billboard 200 Albums chart. The concept album offered a satirical look at the music industry. Hunter Thompson once said that “the music industry is a cruel and shallow money trench, a long plastic hallway where thieves and pimps run free and good men die like dogs. There’s also a negative side.” That pretty much sums up Ray Davies’s take on managers, song publishers, unions, the press, and life on the road reflected in the songs on the LP. Two singles, including the Top 10 hit, “Lola,” were released from the album.

The Kinks were an English rock band formed in London by brothers Ray and Dave Davies. Twelve members have passed through the band, with Ray and Dave Davies being the only original members in the band during the Kinks’ entire 33-year run. They released 24 studio albums, six live albums, 32 compilation albums, 10 EPs and 78 singles. They are members of the Rock and Roll Hall of Fame, and the UK Music Hall of Fame. The band gave its last public performance in 1996 and officially broke up in 1997 due to creative tensions between Ray and Dave Davies. Both brothers have gone on to successful solo careers recording and touring.