Massive green hydrogen hub in Utah wins $504M federal loan guarantee

DOE’s Loan Programs Office backs a project that will convert renewable power to hydrogen, store it underground and use it to generate electricity for Utah and Los Angeles.

Artist’s rendering of the ACES green hydrogen project in Utah.
Artist’s rendering of the ACES green hydrogen production and storage hub that's won a conditionally approved $504 million federal loan guarantee. (Advanced Clean Energy Storage)
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One of the biggest proposed green hydrogen projects in the U.S. has won a $504.4 million conditional loan guarantee from the U.S. Department of Energy’s Loan Programs Office, putting the $1-billion-plus project a step closer to building hundreds of megawatts of hydrogen production capacity in Utah. 

The Advanced Clean Energy Storage (ACES) project, launched in 2019, plans to build 220 megawatts of electrolyzers that will use carbon-free electricity to convert water to up to 100 metric tons of hydrogen a day. That hydrogen will be stored in two massive underground salt caverns near the town of Delta, Utah, capable of storing up to 5,500 metric tons of hydrogen, or enough to generate 300 gigawatt-hours of electricity. 

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The ACES project is a joint venture of Mitsubishi Power Americas, a subsidiary of Japan’s Mitsubishi Heavy Industries that makes turbines and other energy industry equipment, and Magnum Development, the owner of the salt caverns where the hydrogen is to be stored. These are some of the only underground salt dome formations in the U.S. outside of the Gulf Coast region. The salt domes in the Gulf Coast store vast amounts of oil and fossil gas, including the U.S. Strategic Petroleum Reserve, and they’ve also been targeted for hydrogen production and storage.

Artist’s rendering of the ACES green hydrogen hub project in Utah
Artist’s rendering of the ACES project, with electrolysers on the surface and underground hydrogen storage. (Mitsubishi Heavy Industries)

In terms of its scale, ACES matches some of the bigger green hydrogen projects being developed in Europe, Australia and the Middle East. Haddington Ventures, financial adviser for the ACES project and equity sponsor of Magnum Development, is now securing $650 million in equity financing, according to Mitsubishi Power Americas’ Tuesday announcement.

Hydrogen produced in ways that limit or eliminate carbon emissions could be a vital replacement for fossil fuels for hard-to-decarbonize industries such as shipping, aviation, steelmaking and cement production. But ACES is targeting its initial green hydrogen production for another use: replacing fossil gas as a fuel to generate electricity. 

ACES’ first customer will be the Intermountain Power Agency, which operates a coal-fired power plant that supplies roughly half of its electricity to municipal and cooperative utilities in Utah. The other half goes to the far-off municipal utility Los Angeles Department of Water and Power (LADWP).

A map of Utah's Intermountain Power Agency
A map of Intermountain’s current operations. (Intermountain Power Agency)

The Intermountain plant is being converted to an 840-megawatt turbine designed to run on a blend of 70 percent natural gas and 30 percent hydrogen starting in 2025, with a plan to convert it to 100 percent hydrogen by 2040. That could provide LADWP with always-available carbon-free generation to help meet its goal of reaching net-zero carbon emissions by 2035

Intermountain is one of the more advanced efforts to tap hydrogen as an energy-storage resource for power grids that are converting to carbon-free generation. One of the biggest challenges for decarbonizing the grid is how to cover the gaps when solar and wind power aren’t producing enough to meet electricity demand — including days- or weeks-long lulls that utility-scale lithium-ion battery farms can’t cost-effectively cover.

Utah produces less than 4 percent of its electricity from renewable resources today. But PacifiCorp, the Berkshire Hathaway Energy–owned parent company of Rocky Mountain Power, Utah’s main investor-owned utility, is planning to build solar and wind power across its six-state territory, including Utah. 

The ACES project is also at the center of a sprawling plan for a Western U.S. hydrogen production, storage and pipeline network being envisioned by the Western Green Hydrogen Initiative, a consortium of 11 Western states, two Canadian provinces, Mitsubishi, LADWP and utility Dominion Energy. 

Why DOE’s Loan Programs Office is supporting green hydrogen

The DOE’s Loan Programs Office has now conditionally approved three loans or loan guarantees since the start of the Biden administration, and two of them have been for hydrogen projects. The first was in December, when LPO conditionally approved a $1.04 billion loan to Monolith, a company seeking to expand its Nebraska facility that uses renewable energy to power a pyrolysis process that converts fossil gas to hydrogen, which is initially intended for conversion to ammonia for fertilizer production. Instead of emitting carbon into the atmosphere, Monolith’s process yields a solid carbon byproduct that can be used in industrial processes such as making tires. 

DOE has made carbon-free hydrogen research, development and commercialization a major focus. The bipartisan infrastructure law passed last year includes $8 billion to fund four clean-hydrogen production hubs. It also directs $500 million to clean hydrogen demonstration projects and $1 billion to research advances in the electrolyzers that use electricity to split water into oxygen and hydrogen. 

Jigar Shah, head of DOE’s Loan Programs Office, said in a Tuesday statement that making hydrogen via electrolysis using renewable electricity costs about $5 per kilogram today. That’s roughly four to five times the cost of making hydrogen via steam reforming of methane from fossil gas, the carbon-emitting process that currently produces the vast majority of the world’s hydrogen, which is used primarily for refining, fertilizer production and other industrial processes. The aim of the new loan guarantee for the ACES hub is to help bring that $5-per-kilogram price point down to about $1 per kilogram, the target that DOE has set with its Hydrogen Shot program.

Using hydrogen to decarbonize heavy industry, transport and energy generation will dramatically increase global demand for cost-effective production at much larger scales than today. While industries are beginning to implement clean hydrogen to reduce emissions, many hurdles remain for deploying it at scale,” Shah said in the statement.

LPO’s mission is to provide loans or loan guarantees to lower the cost of capital for technically proven but underdeveloped technologies ranging from renewable energy, electric vehicles, batteries and battery materials to transmission grids, carbon-capture systems and nuclear power. 

Shah has said that the U.S. must scale up its climate-change solutions deployment” investment from about $200 billion a year today to closer to $1 trillion per year to meet the Biden administration’s goal of halving economywide carbon emissions from 2005 levels by 2030

The International Energy Agency has projected that the world will need about 850 gigawatts of electrolyzer capacity by 2030 to stay on the narrowing pathway to net-zero carbon emissions by 2050. The ACES project represents less than one-quarter of 1 percent of that global target — an indication of the enormity of the investment needed in the decade ahead.

Jeff St. John is director of news and special projects at Canary Media.