Dive Brief:
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Environmental organizations and think tanks criticized the Department of Energy’s selection of multiple hydrogen hubs that plan to use fossil fuels as a feedstock for hydrogen production. The majority of the hubs selected by the DOE will use a variety of hydrogen production strategies instead of excluding methods that generate carbon emissions.
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In addition, the selection of several hubs in the Midwest at the exclusion of the Northeast and Southeast surprised Frank Wolak, president and CEO of the Fuel Cell & Hydrogen Energy Association.
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Many hydrogen projects are set to move forward regardless of whether they were selected for hub funding, according to Wolak. Hydrogen tax credits created by the Inflation Reduction Act may prove the greater factor in driving hydrogen production, said Pete Budden, hydrogen advocate at the Natural Resources Defense Council.
Dive Insight:
Even an appropriation of $8 billion can only go so far. So with dozens of applicants hoping to become DOE-funded hydrogen hubs, it was inevitable that someone was going to be disappointed, Wolak said.
The seven hydrogen hubs selected by the DOE were chosen in part because they are in areas where historically disadvantaged populations have been “sacrificed” for the production of fossil fuels, Shalanda Baker, director of the DOE's Office of Economic Impact and Diversity, said during a Monday webinar. Each of the hubs will be required to create a plan that ensures 40% of the benefits associated with being a hub will accrue to these historically marginalized communities.
Funding for the hubs is not yet final and will be contingent on a negotiation period that is expected to take months before planning and construction begins, DOE officials said during the webinar. They indicated that the hubs will also be subject to a four-stage process evaluating their progress toward goals established during the negotiation process.
After two years of anticipation, the reaction to the DOE's specific hub selections was mixed, particularly among environmental groups.
There were some highlights, Budden said. The selections focused on applications for using hydrogen like steel making and the production of fertilizer, where alternative paths to decarbonization are limited.
However, Budden said the DOE's selected hubs aim to produce far more hydrogen from fossil resources than the NRDC and other environmental organizations would like. The DOE said on Monday that two-thirds of the hydrogen produced in the hubs will come from renewable resources. But plans to employ a mix of fossil-based production methods could increase carbon emissions from the hubs, Budden said.
“This will set the tone for how hydrogen is developed and the sectors it is developed in,” Budden said. “Once big investments in fossil [fuels] and carbon capture are built, people are going to want to keep using them, and the future is definitely green and electrolytic so we might as well start off building that.”
Hydrogen today is generally made by using heat and pressure to extract hydrogen from natural gas, but it can also be made by using electricity to split water into oxygen and hydrogen. When renewable energy drives the latter process, it produces zero-carbon hydrogen — a solution that is preferred by most environmental advocates.
Some environmentalists also oppose the use of existing clean energy resources like hydropower or nuclear energy to make hydrogen for fear this additional demand for electricity will extend the use of fossil fuels for power generation. Budden said the NRDC was disappointed to see that many of the hubs plan to rely on these resources.
But the mix of production methods was not overly surprising or concerning to Wolak, who said he felt the DOE's selection reflected the balance of technologies called for in the bipartisan infrastructure law.
Several of the selected hubs, such as California and the Gulf Coast hub centered in Texas, were reasonably obvious shoe-ins, Wolak said. The creation of an Appalachian hub that included West Virginia also seemed like a given, he said, on account of current leadership in the U.S. Senate.
Wolak said other selections were more interesting, such as the designation of a Pacific Northwest hub that shares so many common elements with the California hub. The selection of two Midwestern hubs — the Heartland hub centered in Minnesota and the Dakotas and the Midwest hub in Illinois, Indiana and Michigan — also surprised Wolak. The central plains region saw numerous candidates vying for a slot as hubs dedicated to agriculture and heavy industry. The Heartland and Midwest hubs must have made the strongest case in their applications, Wolak concluded.
Wolak noted that the DOE did not select any hub applicants from the southeastern and northeastern U.S., despite the presence of seemingly strong candidates in those regions.
Ultimately, Wolak doesn’t see the hub decision forcing a significant change of course in the hydrogen industry. Many of the hub proposals had already begun to line up commercial partners and financing, and projects with a strong business case are likely to move forward whether or not they received funding, he said. Budden shared a similar conclusion — the hydrogen production tax credit created by the Inflation Reduction Act is likely to drive more investment than the hubs themselves given the amount of funding on offer.
“The 45v tax credits are so lucrative that there will be more than $7 billion — tens to maybe hundreds of billions” of federal dollars available to hydrogen projects, Budden said. “So that will be the deciding factor in how hydrogen gets made.”
