The US Department of Energy recently either encouraged or discouraged certain applicants in submitting full funding proposals through the Regional Clean Hydrogen Hubs program. In this blog post, RFF scholars examine the profiles of the encouraged applicants and discuss other aspects of the application process.
The action around clean hydrogen fuel is increasing in the United States. In December, the US Department of Energy (DOE) encouraged 33 of 79 applicants to submit a full application to the Regional Clean Hydrogen Hubs (H2Hubs) program in April 2023. At stake is a share of the $7-billion pot that’s been allocated to the H2Hubs program by the Bipartisan Infrastructure Law.
The purpose of the H2Hubs program is to develop clean H2Hubs, which DOE defines as regional networks of hydrogen producers and consumers that are linked by connective infrastructure. The program will help demonstrate the production, processing, delivery, storage, and end use of clean hydrogen and serve as the basis for the development of a national clean hydrogen network.
Developing clean hydrogen is a priority for Congress, the Biden administration and, specifically, DOE. Clean hydrogen has the potential to reduce emissions in the industrial, transportation, and power sectors of the economy. Congress recently doubled down on clean hydrogen by passing the Inflation Reduction Act, which includes tax subsidies that aim to improve the competitiveness of low-carbon hydrogen compared to current high-emitting methods of hydrogen production or the use of fossil fuels. These recent commitments, which reduce the costs of producing clean hydrogen, are part of the Biden administration’s efforts to reach a 100 percent clean electric grid in the United States by 2035 and net-zero carbon emissions from the US economy by 2050.
We were surprised to learn that 79 applicants submitted pre-proposals (called “concept papers” by DOE) for H2Hubs to DOE, because we had counted only 27 public announcements of proposed H2Hubs in the lead-up to the submission deadline of November 7, 2022. Although DOE has not released a list of the encouraged applicants, we found public announcements for 22, most of which were on our radar and appear in our Hydrogen Hub Explorer data tool. We call these applicants “identified encouraged hubs.” One of the discouraged applicants also was on our radar. (Note that receiving a “discourage” notification from DOE does not preclude submitting a full application.)
After the deadline for full applications in April 2023, DOE will review the submissions over the course of several months and select between 6 and 10 winners. Each winner will receive up to $1.25 billion in funding to be spent in four phases of H2Hub development—planning, financing, construction, and operation—over the course of 8 to 12 years.
What Do We Know About the 22 Identified Encouraged Hydrogen Hubs?
We and other interested parties should not have to read tea leaves to figure out how DOE selects applications and, at this stage, which applicants have been encouraged. But so be it.
Our analysis is informed by the three H2Hub pre-proposals that are publicly accessible, the DOE informational webinar for H2Hubs applicants that followed the encourage/discourage notification from DOE, and press releases and publications by or about encouraged H2Hub applicants. (Note that the H2Hub characteristics that we describe here are subject to change before the full application deadline; for instance, DOE may provide additional feedback.)
With this information, here is what we can add to the ongoing conversation about the encouraged H2Hubs.
The 33 applicants that DOE encouraged requested more funding than applicants that were discouraged. Less than half of the H2Hub applicants were encouraged, but they accounted for close to 60 percent of the total pre-proposed investments in all 79 applications. The average amount of public funding requested by encouraged applicants was $1 billion; discouraged applicants requested an average of $600 million. The average cost share by the private sector also was larger for encouraged applicants ($2.9 billion) than for those discouraged ($1.3 billion). Scale appears to matter to DOE: the agency seems to prioritize larger—and likely more ambitious—endeavors, rather than pilot-scale projects.
Neighboring or overlapping hydrogen hubs have strong incentives to partner with each other to decrease the number of applications per region and increase their chances of winning the award.
While identified encouraged hubs spanned almost all regions of the country (Figure 1), some regions seemed to attract more H2Hub applicants than others. In particular, seven H2Hubs were proposed for the Northeast and four along the Gulf Coast. Other identified encouraged hubs were scattered across the Southwest, the Pacific Northwest, the Rockies, the Southeast, the Midwest, and Hawaii. Because one of the requirements in the Bipartisan Infrastructure Law is that, “to the maximum extent practicable, each regional clean hydrogen hub shall be located in a different region of the United States,” neighboring or overlapping H2Hubs have strong incentives to partner with each other to decrease the number of applications per region and increase their chances of winning the award.
DOE encourages such collaboration, and applicants may be listening. In the Midwest, a coalition in northwestern Indiana is in talks with the Midwest Alliance for Clean Hydrogen and the Great Lakes Clean Hydrogen coalition to potentially combine their efforts in a joint application.
Figure 1. Identified Encouraged Hydrogen Hubs in the United States
Data source: RFF’s Hydrogen Hub Explorer data tool
Some partnerships already have formed, including the Horizons Clean Hydrogen Hub, which is centered around Corpus Christi, Texas. This hub appears to incorporate two previously announced H2Hub applicants: the Gulf Coast hub in Texas, which is led by Ares Management and Apex Clean Energy, and the Hydrogen City hub led by Green Hydrogen International.
Not all encouraged H2Hub applicants have publicly announced that they were encouraged, and, among the 46 discouraged applicants, only one has announced that they were discouraged. This gap in information likely partly reflects a policy of secrecy regarding sensitive commercial or technical details at H2Hubs led by the private sector, when the competition allows only 6 to 10 winners. For the discouraged hubs, perhaps disclosure is simply uncomfortable.
Among the 22 identified encouraged hubs, two approaches seem to stand out. The first incorporates large, multi-state, public-private partnerships, like the Western Interstate Hydrogen Hub in the Mountain West region or the Decarbonization Network of Appalachia H2Hub. These hubs plan to use federal funding primarily to coordinate projects that involve hydrogen producers and end users, thereby developing the clean hydrogen market in their respective regions, rather than subsidizing the capital costs of individual projects. The Western Interstate H2Hub, for example, focuses on connecting four production areas where private developers are proposing projects.
The second salient approach is being led by the private sector. In these hubs, the primary recipients of federal funds would be the coordinator of hydrogen markets and the developer of the main production facilities. The pre-proposal from the Obsidian Pacific Northwest Hydrogen Hub exemplifies this type of organization: Obsidian Renewables plans to coordinate the H2Hub effort and develop the production facilities and underlying infrastructure at two different anchor sites.
Which Fuel Feedstocks Are the Encouraged Hydrogen Hubs Using?
Collectively, identified encouraged hubs plan to produce hydrogen by using all the feedstocks targeted by the Bipartisan Infrastructure Law—fossil fuels, renewable energy, and nuclear energy. Many H2Hubs plan to produce hydrogen from several different feedstocks (Table 1). So far, 15 identified encouraged hubs (the majority) plan to use renewable energy to produce clean hydrogen, nine plan to use fossil fuels, and seven plan to use nuclear energy.
Table 1. Feedstock Used by Identified Encouraged Hubs
Note: Some H2Hub applicants plan to produce hydrogen with multiple feedstocks.
Some applicants, such as the Arkansas, Louisiana, and Oklahoma Hydrogen Hub in the South (known as the HALO Hydrogen Hub), included blue, pink, and green hydrogen production in their pre-proposals. Green hydrogen is produced by splitting water into hydrogen and oxygen through electrolysis that itself is powered by renewable electricity. Pink hydrogen is produced through electrolysis that is powered by nuclear energy. Blue hydrogen is produced with fossil fuels in a process in which the associated carbon emissions are captured and stored. The H2Hubs that plan to produce blue hydrogen in the Appalachian Basin (the Appalachian Regional Clean Hydrogen Hub and the Decarbonization Network of Appalachia) and in Texas (the Trans Permian H2Hub and the HyVelocity Hub) may well be frontrunners in fulfilling the congressional directive that DOE select two hubs “in regions with abundant natural gas resources.”
What End Uses Are Being Targeted by the Identified Encouraged Hydrogen Hubs
Identified encouraged hubs include consumers of clean hydrogen in the four sectors required by the Bipartisan Infrastructure Law—industry, transportation, power, and residential and commercial heating. All of the identified encouraged hubs plan to develop industrial end uses for hydrogen (Table 2). For example, the Great Lakes Clean Hydrogen coalition plans to use hydrogen in the steel industry, and the Horizons H2Hub plans to use hydrogen as a chemical feedstock. Hydrogen also would be used as a fuel for trains, planes (e.g., in the Alliance for Renewable Clean Hydrogen Energy Services H2Hub), public transit, or trucking (e.g., in the Southwest Clean Hydrogen Innovation Network) in 18 of the 20 identified encouraged hubs.
Table 2. End Uses Demonstrated by Identified Encouraged Hydrogen Hubs
Note: Some H2Hubs plan to target multiple end uses.
The Bipartisan Infrastructure Law also targets the demonstration of clean hydrogen for use in electric power generation, which 15 identified encouraged hubs mentioned in their pre-proposals, including the Hawaii Pacific Hydrogen Hub. Only four hubs explicitly plan to use hydrogen in the residential and commercial heating sector. For example, the Western Interstate H2Hub and its utility partner, Xcel, plan to test hydrogen blending in the heating sector.
Who Is Partnering with Encouraged Hydrogen Hubs?
Several partners are involved in several identified encouraged hubs. For example, the legacy hydrogen producer Air Liquide is partnered with six; the green hydrogen producer Plug Power is included in six that span from Appalachia to California; Battelle, a nonprofit that works on advancing science and technology, is involved in two; and the National Renewable Energy Lab is identified as a partner in four.
Some partners already have clean hydrogen projects around the United States, but most of the projects are in the planning stage. Air Products and Applied Energy Services Corporation are building the largest clean hydrogen production facility in the United States that uses solely renewable energy, and Fortescue Future Industries is conducting a feasibility study about whether they can repurpose a coal mine in Washington State as a green hydrogen production facility. These projects likely will be included in H2Hubs going forward.
In the next blog post in our Hydrogen-Hubs series, we will consider hypotheses about why the US Department of Energy may have discouraged certain applicants and what we can expect for the upcoming selection process, which begins in April 2023.