US Hydrogen Hubs: What are the Conditions for Funding?
The outlook for hydrogen hubs in the US has rapidly changed since the announcement of the IRA, specifically targeted to position the US as the world leader in renewable capacity. Hydrogen Industry Leaders highlights what is in store for new hydrogen hubs in the US.
Aligning public and private investment is no big secret in the US, with public funding being followed up with over $5 billion invested by private hydrogen-related companies on the tailwinds of the 2021 Infrastructure Investment and Jobs Act (IIJA) in 2022 alone.
The IIJA saw the authorisation of $1.2 trillion of investment in infrastructure upgrades to help the United States transition to a zero-carbon economy. Additionally, the legislation allocated $8 billion for the Department of Energy (DOE) to fund four Regional Clean Hydrogen Hubs across the US.
This could lead to as many as ten hydrogen hubs across the US, which would significantly improve energy security. The hubs will be localised centres for the production, transportation, storage, and end-use of hydrogen.
It is crucial to approach the development of hydrogen hubs with careful consideration and prioritise designs that optimise climate and community benefits, given the significant investment from the federal government and the potential advantages they offer.
The IIJA directs the DOE to fund hubs that:
- Demonstrably aid the achievement of the clean hydrogen production standard;
- Demonstrate the production, processing, delivery, storage, and end-use of clean hydrogen; and
- Can be developed into a national clean hydrogen network to facilitate the production and use of low-emissions hydrogen in sectors of the economy that will be difficult or impossible to electrify.
The IIJA mandates specific criteria
The IIJA mandates that each H2Hub must exhibit diversity in production methods and feedstock by showcasing clean hydrogen production from fossil fuels, renewable energy, and nuclear energy. In addition, the hubs must demonstrate the varied end-uses of hydrogen in the electric power generation, industrial, residential and commercial heating and transportation sectors.
The hub’s program requires a non-federal cost share of at least 50%, which can be fulfilled by private project participants, state or local governments, or other third-party financing, but cannot be covered by federal funds.
To align with the federal Justice Initiative, DOE will require hub applicants to include Community Benefits Plans (CBPs) in their full applications. These plans will be a significant aspect of the application and will carry a weightage of 20% in the technical and merit review process. Regional hydrogen hubs that can provide skills training and long-term employment opportunities to the maximum number of residents in the area will receive priority.
What benefits do we expect hydrogen hubs to create?
The creation of a hydrogen hubs program marks a historic moment, demonstrating the government’s firm commitment to expand innovative technologies and industries that are necessary for achieving deep decarbonisation in the years ahead. The program is expected to produce the following outcomes:
- The hydrogen hubs program has the potential to accelerate the decarbonisation of hard-to-electrify end-use sectors, including marine shipping, heavy-duty trucking, aviation, steel-making, and industrial process heating, which were accountable for approximately 16% of U.S. emissions in 2018. The availability of low-carbon hydrogen could be highly advantageous for these industries. Some industries, such as industrial facilities that utilise hydrogen instead of natural gas for their high-temperature processes, may be firmly integrated into a hub. On the other hand, other end-users, like marine shipping, heavy-duty trucking, and aviation, may move between hubs, stopping in different regions across the U.S. to refuel with low-carbon hydrogen or hydrogen derivatives.
- In-hub users such as industrial facilities will typically receive hydrogen through short pipelines directly from the producer, whereas hydrogen distribution to other end-use sectors, particularly transportation, will be more widely dispersed. The hydrogen hubs program is anticipated to encourage the establishment of hydrogen and ammonia-powered transportation corridors connecting the hubs, leading to improved economics for individual hubs, hastening their development, and promoting the growth of a worldwide hydrogen network, which could potentially position the U.S. as a hydrogen exporter through our ports.
- In combination with the hydrogen production credit provided by the Inflation Reduction Act (Section 45V), which offers a tax credit of up to $3.00 per kilogram of clean hydrogen produced based on its carbon intensity for hydrogen projects that commence construction before 2033, the hydrogen hubs program is expected to reduce the cost of hydrogen production and provide a significant incentive for project developers. The mandatory 50% non-federal cost share will also attract private and state funding sources to invest in the hydrogen market.
