From many applicants, the Biden administration has chosen seven winners to become hydrogen hubs across the United States. Here’s a comprehensive, concise, and useful summary of the winning hubs—and recommendations for next steps in the process.
After much anticipation, the Biden administration last Friday, October 13, announced the winners of its multibillion-dollar competition to establish hydrogen “hubs” that are intended to, in the words of the Infrastructure Investment and Jobs Act, “demonstrate the production, processing, delivery, storage, and end-use of clean hydrogen.”
In this blog post, we evaluate how the administration meets the congressional requirements for the hub choices and how the “winners” compare to those not selected. We also discuss how, for each of these winners, this announcement is only the start of a long path to receiving any money and actually producing hydrogen. Finally, we detail our concerns about transparency going forward and discuss how to think about the impacts of establishing new hubs in terms of carbon dioxide emissions and jobs. We conclude with some thoughts about the hydrogen hubs program in the context of the need to achieve net-zero greenhouse gas emissions.
Meeting Congressional Requirements
The Infrastructure Investment and Jobs Act requires that the collection of chosen hubs incorporate the use of at least three feedstocks to make hydrogen: fossil fuels, renewable energy, and nuclear energy. Among the seven winners (Table 1), all three of these feedstocks are represented, and most of the selected hubs will use multiple feedstocks. According to the White House, two thirds of the $50 billion in private and public investments will go toward producing electrolytic hydrogen from renewables and nuclear power. Only the Appalachian Regional Clean Hydrogen Hub does not seem to include electrolytic hydrogen production. Among the 22 encouraged hubs for which we have information on feedstocks, 19 hubs feature renewables, among which nine also feature nuclear energy. Three of the selected hubs explicitly mention the production of “blue” hydrogen, which is hydrogen produced from fossil fuels while capturing most carbon dioxide emissions. Biomass, an additional feedstock, was not expected to be featured by many hub applicants; to our knowledge, only the Alliance for Renewable Clean Hydrogen Energy Systems in California will use biomass.
Table 1. Hydrogen Hubs That Have Won Funding from the US Department of Energy
The Infrastructure Investment and Jobs Act also requires that the winners include four categories of hydrogen end users: industry, transportation, power, and residential and commercial heating. All these categories are represented across the seven winners. Industrial and transportation end uses are included by six of the seven winning hubs; among the encouraged hubs for which we had information about end users, 21 of the 24 hubs list transportation as an end use, and 22 hubs list industry as an end use. For industry, converting current hydrogen production from “gray” methods (in which hydrogen is derived from natural gas reforming, the predominant mode of production in the United States) to “blue” methods is thought to be low-hanging fruit in the refining and chemicals sectors. The Midwest Alliance for Clean Hydrogen and the Heartland Hydrogen Hub explicitly refer to hydrogen use in the refining and chemical sectors. Only the Heartland Hydrogen Hub features heating, which is not surprising, as heating likely is not an efficient use of hydrogen.
Finally, the Infrastructure Investment and Jobs Act requires that the winning hubs be distributed geographically. This distribution can be seen in Figure 1, taken from the Office of Clean Energy Demonstrations website. Two states potentially are involved in multiple hubs, with Pennsylvania hosting potential operations in both the Mid-Atlantic Clean Hydrogen Hub and the Appalachian Regional Clean Hydrogen Hub, while the state of Montana is involved in the Pacific Northwest Hydrogen Hub and possibly in the Heartland Hydrogen Hub. Major regions that do not have a hub are the Southeast and the Northeast.
Figure 1. Regional Clean Hydrogen Hubs That Won Funding from the US Department of Energy
Comparisons with prior versions of our hydrogen hub map reveal that some hub projects underwent significant changes during the application process. For example, some winning hubs reorganized after the encourage/discourage decision, with the Appalachian Regional Clean Hydrogen Hub and the Midwest Alliance for Clean Hydrogen dropping Kentucky and Wisconsin from their coalitions, respectively, while the Pacific Northwest Hydrogen Hub added Montana to its partners.
By our count, at least 15 hydrogen hubs submitted applications that were not funded by the US Department of Energy (DOE) (Table 2).
Table 2. Hydrogen Hubs That We Know Applied but Were Not Selected for Award Negotiations
The Big Hill to Climb
Although last Friday’s announcement is an important step for DOE’s Regional Clean Hydrogen Hubs program, the announcement of the selected hubs is only the beginning; years will pass before any of these hubs start producing hydrogen. In fact, the “winners” announced on Friday were selected only to open negotiations to determine the terms of the awards. No money will flow out the door until these negotiations conclude.
The end result of these negotiations is a contractual relationship between DOE and each of the seven selected hubs, which will specify the award terms and conditions. But several steps must first happen along the way. For example, applicants will have to provide documents that justify the soundness of their financial and organizational management. DOE even includes National Environmental Policy Act review among its list of milestones.
As a sign of how new this process is, DOE promises to release a “Recipient Guide to Award Negotiation and Administration,” but the guide remains listed as “coming soon.” Nonetheless, no guarantee exists that DOE and any particular hub will be able to come to an agreement. In the event that negotiations fail, DOE may have to start negotiations with an alternative applicant.
An important part of the contract between DOE and each hub is the definition of the go/no-go review criteria for each phase of funding. Each hub will undergo four funding phases. The first is up to $20 million for detailed planning. The final phase is the full operation of the hub. At each of the go/no-go decision points between the four phases, the progress of each hub will be measured against its goals to unlock the next phase of funding. If certain hubs are not progressing satisfactorily, they will not receive the later tranches of funding. As such, this aspect of the negotiation is of paramount importance. Evaluation of community benefits plans also will be included in these go/no-go decisions, which will necessitate significant effort and engagement from hubs.
Under this phased process, a long path winds from the initial grant to seeing any steel in the ground (and any associated construction jobs promised by the hubs). The contract period is set to last for about 10 years, with construction starting in the third phase, around year five, and with full operation of the hub expected after eight years.
The release of the list of awardees underscores the need for greater transparency surrounding DOE’s hydrogen hub program. With billions of dollars of taxpayer money at stake, the American people deserve to know where their money is going.
Currently, information from the federal government on the selected hubs is restricted to a few paragraphs on the DOE and White House websites. We do not even have lists of constituent entities for each hub, nor do we know what specific technologies are being demonstrated for hydrogen production and end use—and some of the available information is contradictory. For example, for the Heartland Hydrogen Hub, DOE’s press release lists Minnesota, North Dakota, and South Dakota as members, whereas the North Dakota Office of the Governor presents the hub as a coalition involving Minnesota, Montana, North Dakota, and Wisconsin. Sources also differ on the type of feedstocks used for hydrogen production in the Heartland Hydrogen Hub, with some sources citing natural gas and other sources restricting the feedstocks to renewables and nuclear.
We recognize that this announcement is only the start of award negotiations and that some questions do not yet have answers. After all, some of these hubs may still be forming and may not have formal contractual relationships among their potential constituent entities. Given this uncertainty, some level of secrecy is understandable. Nonetheless, it is important that DOE commits to sharing this information and providing a timeline for its release. The Office of Clean Energy Demonstrations says that it encourages the selected hubs to engage with the public about their projects, but that encouragement may not be enough.
In fact, DOE should go even further to engender confidence by providing more insight into its process for selecting the hubs. We know that the review process has been extensive, involving experts in many fields who read applications and provided scores to compare the applicants. But we’d like to know: How many full applications actually were scored? Is there a reason that the scores for each hub (or, at a minimum, aggregate statistics) shouldn’t be released? How were the so-called “program policy factors” taken into account? We also would like to see the underlying data on greenhouse gas reductions, clean hydrogen production, and projected costs for each applicant.
Going forward, as DOE progresses through the stages of implementation and the various go/no-go decisions, the agency should commit to share information about the metrics for the decisions and how those decisions will be made.
Emissions and Jobs
Two important metrics that have broad interest for the hubs are short-term emissions reductions and job creation. Both of these metrics are difficult to get a handle on.
With respect to emissions, DOE says that the hubs propose to reduce carbon dioxide by 25 million metric tons per year “from end use” by way of the production and use of 3 million metric tons of hydrogen per year. However, these metrics are not the ultimate impacts across the economy, which are much harder to determine. For example, we do not know the carbon footprint of the electricity that will be used to make “green” hydrogen (which depends on the rules for the 45V tax credit, as determined by the US Department of the Treasury, which are projected to be released “soon”) and which could work against emissions reductions in the near term.
Jobs are even more challenging to understand. It is reasonably straightforward to calculate the number of people that will be employed in constructing and operating these hubs, but what’s not clear is whether these are “new” jobs, or if the people involved would have been employed elsewhere. Ultimately, the level of employment depends on the overall state of the US economy during the construction and operation of the hubs, and any localized effects will depend on the economic conditions where the specific hub projects are located.
From a societal perspective, we care about how much this program can help decarbonize the hard-to-abate sectors through innovation, cost reductions, and well-functioning clean hydrogen markets. If these goals are attained, the program will be more than justified, irrespective of the short-term impacts on hydrogen, carbon dioxide, or number of jobs.
The selection of these hydrogen hub winners is an important milestone along the path to net zero. We hope that this large government investment can catalyze new technologies and network effects to enable decarbonization across the US economy.
However, many challenges associated with hydrogen fuel remain, not least of which is that unsubsidized clean hydrogen can be quite expensive. Some of these hubs may fail to make it to later stages of funding or may not live up to their planned performance. These outcomes would not necessarily be a bad thing. The government needs to take risks, and any real risk will involve some probability of disappointing results. Also, hydrogen may end up not being the answer in many sectors; other decarbonization pathways ultimately may win out. Should that happen, this bet on hydrogen hubs still would be worthwhile, because the potential benefits are so large.
The challenge of reaching net zero is formidable, and the United States needs to explore all options to achieve that goal. Even as we may question some aspects of the design and implementation of the hydrogen hubs program, we support the government’s commitment to making the investments that are needed to address climate change.