Biden admin picks 7 ​‘clean hydrogen hubs’ for $7 billion federal boost

After more than a year of evaluating competing proposals, the Biden administration has picked the parts of the country where it hopes to turn billions of dollars of federal investment into the seeds of a clean hydrogen economy. 

On Friday, the Department of Energy announced the selection of seven ​“clean hydrogen hubs” — sets of projects that promise to combine big investments in low-carbon hydrogen production with big investments in preparing industries to use that hydrogen to reduce their carbon emissions. 

The hubs are scattered around the nation — from the Pacific Northwest and California to the Midwest, and from the Gulf Coast to the East Coast. The consortia behind the hubs — groups of state governments, private companies and research organizations — are now eligible to receive up to a cumulative $7 billion in federal funds over the coming years. 

That money won’t all be spent at once. Most will be released only after each hub has met key design and viability milestones, and it’s possible that some hubs may not advance to full-scale construction and operation. 

But if they do come to fruition, they’re expected to lead to more than $40 billion in follow-on investment from the companies involved. 

The $7 billion to be spent on the hubs makes up the majority of $9.5 billion in hydrogen incentives authorized by the 2021 Bipartisan Infrastructure Law. Nearly 80 consortiums initially applied for the funding, and 22 projects competed for the final selection. 

Details on the specific plans of individual consortia have been kept largely confidential. DOE officials revealed a bit of information during a Thursday press event, including the fact that all seven hubs will produce at least some hydrogen using renewable energy. But three will also use nuclear power, and most will also convert fossil gas to hydrogen and use carbon-capture technology to limit resulting emissions, they said. 

The industries expected to use the hydrogen range from chemicals and fertilizer production to shipping, trucking and power generation, according to DOE officials. Some of these industries have few options beyond hydrogen to reduce their carbon emissions — steelmaking and chemical manufacturing are prime examples — while others may have more economically viable options that offer greater certainty of reducing carbon emissions, such as electrification via renewable power. 

The Bipartisan Infrastructure Law requires that at least one of the hydrogen hubs uses nuclear power and one uses fossil fuels with carbon capture and storage, and the law calls for the hubs to serve a variety of end uses. But many climate and environmental groups are concerned that the funding could go toward building an industrial base that doesn’t help reduce greenhouse gas emissions. 

Friday’s announcement about the hubs is not tied to a forthcoming Biden administration decision on which projects will be eligible for lucrative low-carbon hydrogen production tax credits created by the Inflation Reduction Act. But DOE officials pointed out that hydrogen producers involved in the hubs will doubtless seek to maximize the value of those tax credits by conforming to the regulations, which are expected to be released later this month. 

The tax credits are seen as vital to bringing down the cost of clean hydrogen, which is now about three times higher than the cost of fossil-fuel-derived hydrogen. Currently, the vast majority of the roughly 10 million metric tons of hydrogen produced annually in the U.S. is made with fossil gas. The Biden administration has set a goal of producing an equivalent amount of hydrogen annually via zero-carbon or near-zero-carbon methods by 2030, and the seven hubs are expected to produce 3 million metric tons per year, according to DOE. 

Building a hydrogen economy means building hydrogen demand

But if hydrogen is going to be able to help reduce carbon emissions from key sectors of the economy, it will require more than cutting costs and scaling up production, industry experts say. It will also require tens of billions of dollars of investment into the storage and transportation networks needed to deliver it to end users, as well as equivalent amounts of investment in transforming the industries that intend to use it. 

“In my mind, the hubs are less about how much emissions will be reduced by the individual hubs and more about demonstrating new technologies,” said Aaron Bergman, a fellow at nonprofit research group Resources for the Future who previously worked at DOE and the White House. ​“I see the role of the hubs as providing government funds to guide the development of these technologies so that the private sector can take on the risk of investing in them.” 

Today, the plans for expanding clean hydrogen production capacity in the U.S. far outpace the plans for using that clean hydrogen. Two DOE reports released this year — Pathways to Commercial Liftoff: Clean Hydrogen and the U.S. National Clean Hydrogen Strategy and Roadmap — identified a lack of long-term clean hydrogen purchasing commitments as a key barrier to scaling up the industry. 

A February report from the Energy Futures Initiative, a not-for-profit research group run by former Energy Secretary Ernest Moniz, also emphasizes this demand gap. The hydrogen hub program is ​“one of the only active programs targeting demand-side market activators,” the report says. 

The issue of ​“how to activate demand is extremely challenging,” said Alex Kizer, senior vice president of research and analysis at the Energy Futures Initiative. ​“Our question is, who’s going to use this stuff? Where’s the demand? This is where the regional hubs come in: a huge opportunity to sort through some of the demand-side challenges.” 

The cost for industries to switch from using fossil fuels to using hydrogen can be daunting, he said. Even fertilizer production, which converts fossil gas to hydrogen before processing it into ammonia, will require significant investments to start using pure hydrogen delivered via pipelines. And beyond the Gulf Coast region, where hydrogen is produced and used at large scales for oil refining and chemical production, little if any hydrogen storage and pipeline infrastructure now exists in the U.S.

“If you look just at sweet spots in the country — where it has the best clean energy resource, maybe it’s next to a refinery or someone who we think could be on the low-cost end of that cost to switch…and you don’t have to build much pipeline infrastructure, and everything’s going your way — the economics of those projects really pencil out,” Kizer said. ​“But to scale beyond all the sweet spots is going to take a lot more work.” 

The challenge is much greater for industries that don’t already use hydrogen, he said. ​“You have to get stuff built. You have to get regulatory structures aligned. You have to create some certainty for the users.” 

Hydrogen hubs could become the places where this cross-industry alignment happens. That’s certainly the hope of David Crane, DOE’s under secretary for infrastructure and former head of the department’s Office of Clean Energy Demonstrations, which is managing the hydrogen hub program. 

“I’d say the single greatest failure I would have at this job is if in 20 years we looked at the hydrogen hubs we helped incent with our grants, and they all looked like Summer Olympics sites…ghost towns,” Crane told Canary Media in a 2022 interview.​“The key to success is that these things will be thriving 10 to 20 years from now.”

The winning hydrogen hubs 

Each of the seven hubs chosen by the Biden administration will combine different hydrogen production technologies and end uses, DOE officials said. Here’s a list of the hubs, along with descriptions from Thursday’s briefing. 

• The Appalachian Regional Clean Hydrogen Hub (ARCH2), which encompasses parts of West Virginia, southeast Ohio and southwest Pennsylvania, will receive up to $925 million. The project is ​“one of the bigger hubs in terms of production” and ​“takes advantage of the bountiful natural gas that’s in the region,” a senior DOE official said. Consortium members include industrial gas giant Air Liquide, chemical producer Chemours, Virginia-based utility Dominion Energy, gas pipeline operator EQT, and hydrogen fuel-cell and electrolyzer manufacturer Plug Power.
  
  
• California’s Alliance for Renewable Clean Hydrogen Energy Systems (ARCHES), a public-private consortium with more than 400 members, will receive up to $1.2 billion. It includes projects in the southern and northern parts of the state, including the major ports of Long Beach, Los Angeles and Oakland, where hydrogen can be used to fuel ships and drayage trucks, the official said. 
  
  
• The HyVelocity Gulf Coast Hydrogen Hub, which will receive up to $1.2 billion, is centered in Texas and includes Air Liquide, oil giant Chevron, energy company and offshore-wind-power developer Ørsted, and Sempra Infrastructure, the arm of energy company Sempra that develops fossil-gas pipelines and liquefied-natural-gas terminals. The Gulf Coast has by far the biggest existing network of hydrogen storage and pipeline infrastructure in the country, as well as a preponderance of refineries and ammonia and methanol producers now using hydrogen. It will be ​“the largest hub in terms of blue hydrogen,” or hydrogen made using fossil gas with carbon capture, a senior DOE official said — but ​“it’s also the largest in terms of green hydrogen. So we’re looking forward to working with our friends in Texas to show how much cost-down we can achieve by scaling the technology as much as possible.”
  
  
• The Heartland Hydrogen Hub, which includes Minnesota and North Dakota, will receive up to $925 million. It includes Minnesota-based utility Xcel Energy and a joint venture of Marathon Petroleum and Canadian pipeline operator TC Energy, according to the Minneapolis Star Tribune. Xcel has stated it intends to produce hydrogen using electricity from the region’s ample wind farms as well as from its Prairie Island nuclear plant, and hub backers have put forward plans for tapping fossil gas for conversion into hydrogen. A senior DOE official said the hydrogen is slated for use in fertilizer production and power generation.
  
  
• The Mid-Atlantic Clean Hydrogen Hub (MACH2), which will receive up to $750 million, encompasses southeastern Pennsylvania and parts of Delaware and New Jersey, and will center on feeding into the region’s industrial base, a senior DOE official said. The consortium includes Air Liquide, chemicals giant DuPont, oil pipeline company Enbridge, refinery company PBF Energy, Philadelphia’s fossil-gas utility, and public transit systems in Delaware and southeast Pennsylvania.
  
  
• The Midwest Hydrogen Hub, which will receive up to $1 billion, arose from the merger of two groups — the Midwest Alliance for Clean Hydrogen (MachH2) and the Midwest Hydrogen Corridor Consortium (MHCC). It targets development in Illinois, Indiana, Michigan and Wisconsin. Consortium members include Air Liquide, steelmaker ArcelorMittal, U.K. oil giant bp, fuel-cell maker Bloom Energy, electric mobility company BorgWarner, energy company and gas and nuclear power plant owner Constellation, engine and electrolyzer manufacturers Cummins and Rolls-Royce, and utilities Ameren and NiSource. The hub has plans to use hydrogen for steel and glass production, power generation, refining, heavy-duty transportation and sustainable aviation fuel. Nuclear power will provide a significant share of the electricity to produce hydrogen from this hub, a senior DOE official said.
  
  
• The Pacific Northwest Hydrogen Hub (PNWH2), which will receive up to $1 billion, encompasses parts of eastern Washington state, eastern Oregon and Montana, and intends to make hydrogen exclusively using renewable energy. Members include Amazon, bp America, Plug Power, Australian iron mining giant and hydrogen developer Fortescue, and a number of investor-owned and public utilities in the region. The consortium intends to use hydrogen for transportation and fertilizer production, a senior DOE official said.

It’s important to note that these hubs have a long way to go from this week’s selection to building the infrastructure they envision. ​“They’re not necessarily concrete entities at the moment,” said Bergman of Resources for the Future. ​“They’re a collection of letters of intent.” 

DOE will put the hubs through multiple phases before investing the majority of the $7 billion earmarked for these projects. Design and planning are expected to take 12 to 18 months, followed by a development phase centered on pulling together commercial agreements and financing, which could last years. Only then will hubs move on to construction, which is when the majority of funding will be spent, a senior DOE official said. 

Setting up those commercial agreements and financing structures is likely to be extraordinarily complex, Bergman said. Yet the challenge is expected to boil down to a relatively straightforward conflict between hydrogen producers and hydrogen consumers: ​“The producers are going to want long-term contracts for their offtakes, and the consumers are going to say, ​‘I don’t want to lock myself into high-price contracts.’” 

But if major buyers, or ​“offtakers,” commit to purchasing a significant amount of the hydrogen produced at hubs — and get commitments from producers that there will be steady and predictable supplies — that could pave the way for smaller-scale purchasers to join in, said Patrick Molloy, a manager with the Climate-Aligned Industries Program at think tank RMI. (Canary Media is an independent affiliate of RMI.) 

Finding ways to store and transport hydrogen at high volumes and low costs could be critical to scaling up this approach, he noted. A recent report from RMI on the plans of hydrogen producer Hy Stor Energy to store hydrogen in salt caverns — geological formations that are now used to store oil and natural gas in huge quantities — underscores the value of having this kind of resource. 

“The one thing we get to consistently, once people get around conversations around pricing, is resilience,” he said. ​“We’re talking about consistency of supply at the timing and volume that the offtaker needs it.” 

Providing that certainty ​“requires high volumes, at a consistent pace, at a consistent state,” he said. Hydrogen hubs with access to underground storage and preexisting pipeline networks — and a preexisting set of industries already using hydrogen — are better positioned to provide large-scale offtakers with what they need, while also allowing ​“every less-consistent volume offtaker to tap into that pipeline infrastructure,” he said. 

At the same time, the DOE and the new hydrogen hubs are meant to do more with their hydrogen than feed it to existing industrial users, Bergman said. ​“If all these hubs did was deliver clean hydrogen to an ammonia manufacturer, I’d consider them a failure.” 

Concerns about transparency, community impact and emissions

Hydrogen hubs also will not be considered a success if they run roughshod over the communities they’re built in, Bergman said. 

The DOE requires hubs to engage with communities. A senior DOE official said Thursday that the seven hubs selected this week expect to invest a combined $1 billion to support community benefits plans — agreements to fund local employment, economic development and public works. 

But environmental and community groups are worried about what they describe as a lack of transparency from DOE and hydrogen hub consortiums in the run-up to this week’s selection. ​“This is a lot of taxpayer money, and they have a right to know how the decisions were made, what the criteria were to make the decisions and what the DOE’s vision is going forward,” said Bergman. 

The Environmental Defense Fund, an environmental group that often works with the business community, noted in an April blog post that DOE and hub developers are ​“failing” at being transparent about their plans. 

“Because DOE has kept all applicant data confidential, there are few public details about the applicants and their proposed projects,” EDF wrote. ​“If ​‘community benefit plans’ move forward without real transparency and authentic outreach, dialogue and collaboration, they will be ​‘benefit plans’ in name only and result in no meaningful change from how industrial development occurred in the past.” 

Chris Espinosa, legislative director for climate and energy at nonprofit Earthjustice, is also concerned about the lack of transparency. ​“There are a lot of gaps, and a lot of lack of clarity” in the hydrogen hub plans to date, he said in a Thursday interview. While DOE has pledged to open the hydrogen hub development process to public input, it remains unclear ​“whether there will be sufficient time for communities to provide public input within that process that actually has a meaningful opportunity to impact the decisions or trajectory of these projects,” he said. 

“There are a lot of ways to produce hydrogen, but very few of those are truly clean. There’s a way to produce hydrogen with renewable energy sources in a manner that does not increase emissions at every stage of the production, transport and usage process. But most of the time, energy-intensive hydrogen production exponentially exacerbates emissions.” 

In a Friday press release, DOE estimated that the hubs will eventually eliminate 25 million metric tons of carbon dioxide emissions from end uses per year, roughly equivalent to the annual emissions of over 5.5 million gasoline-fueled cars. A senior DOE official said Thursday that the agency has done a preliminary life-cycle assessment of each hydrogen hub application. It has also encouraged the hubs to follow ​“best practices” to reduce methane leakage from fossil-gas hydrogen production, as leaks can undermine the carbon-reduction benefits of carbon-capture systems. 

But the regulatory framework for managing the emissions of these hubs remains unclear. DOE’s ongoing work on a Clean Hydrogen Production Standard, as called for by the Bipartisan Infrastructure Law, appears to be the sole public guidance on what standards the federal government will apply to limiting emissions from the hubs. 

The draft guidance calls for limiting ​“clean” hydrogen to emitting no more than 2 kilograms of carbon dioxide equivalent per kilogram of hydrogen produced. Hydrogen with this level of emissions-intensity would earn 75 cents per kilogram under the Inflation Reduction Act’s 45V tax credit. But that’s well below the most lucrative rung of the tax credit, which offers $3 per kilogram for hydrogen produced with less than 0.45 kilograms of carbon dioxide equivalent per kilogram of hydrogen — an important subsidy to help achieve cost-effective green hydrogen production. 

Bergman noted that many producers that plan to make hydrogen using fossil gas with carbon capture intend to take advantage of a different federal tax credit targeted at carbon-capture projects — the 45Q tax credit, which offers up to $85 per ton of carbon captured from point-source emitters such as hydrogen production facilities. That credit doesn’t rely on any assessment of the life-cycle emissions of the hydrogen being produced. 

Nor does the text of the Bipartisan Infrastructure Law set any metric for measuring the emissions of projects funded by the hydrogen hub program, he noted. Instead, it states that the hubs must ​“demonstrably aid the achievement” of DOE’s clean hydrogen production standard — a definition that leaves much room for interpretation.