In November of 2021, President Biden signed the Bipartisan Infrastructure Law (BIL), which established the Regional Clean Hydrogen Hubs (H2Hubs) program. Under the authority of the US Department of Energy (DoE), six to ten hydrogen hub projects — eligible for up to $1.25 billion in federal funding, respectively — were to be selected. The formal application process closed on April 7, 2023, and on October 13, 2023, President Biden announced the awardees.
Federal policy objectives & resource overview
The BIL authorized a total of $8 billion in federal funding for hydrogen development, with the bulk allocated to the H2Hubs program. Under the new Section 813 of Title VIII of the Energy Policy Act of 2005, the program is envisioned to create a network of clean hydrogen producers, potential clean hydrogen consumers, and connective infrastructure located in close proximity. While the program is intended to stimulate the development of the entire hydrogen value chain, the H2Hubs program is intended to substantially reduce costs associated with the production, distribution and consumption of green hydrogen, which dovetails with the targets set by DoE for 10 million metric tons of clean hydrogen by 2030, 20 million by 2040, and 50 million by 2050.
To support the proliferation of hydrogen as a critical component of the energy industry, the Inflation Reduction Act of 2022 (IRA) also included tax credits for new investments in hydrogen production capacity. Most recently, in September of 2023, DoE issued a request for proposals (RFP) for an independent entity to administer a demand-side initiative to work with the H2Hubs awardees in order to reach efficient operation and cooperation between producers and end users. DoE will provide $500 million to $1 billion to the selected entity; applications for the RFP are due on October 26, 2023.
From a market perspective, hydrogen is not yet fully competitive relative to other fuels due to its complex supply chain — including nascent segments such as liquefaction and transportation. While the density of the energy potential of Hydrogen is readily apparent, the market requires substantial investment and growth until it can be competitive with oil and gas. The current state of the market is relatively similar to the early stages of the liquefied natural gas (LNG) market, with industry participants working to determine the most efficient technologies for liquefaction, uncertainty about the supply chain, and competing opinions about the most efficient methodology for long-distance transportation and the development of an eventual spot market. For now, it seems as if the conversion of hydrogen into ammonia for long-haul shipping is the leading technology, and offtake for use as a blending fuel with natural gas for power generation and development of fertilizer are early demand centers for the future hydrogen that will be produced.
To achieve early synergy with clean hydrogen goals while green hydrogen continues to move towards competitiveness and scale over the longer term, hydrogen hubs may incorporate fuel blending. By adding hydrogen to existing natural gas supply, the hubs may be able to reduce the carbon intensity of existing production facilities (such as oil refineries, ammonia production for fertilizer manufacturing, and steelmaking) and, accordingly, act in pursuit of the overarching climate goals of the Bipartisan Infrastructure Law. This will require infrastructure improvements beyond production of hydrogen, and the H2Hubs program could also stimulate the development of technology to enable hydrogen to utilize existing natural gas midstream assets. In the coming years, green hydrogen may be able to replace blended fuels in a wider range of applications at production facilities.
As it stands, blue hydrogen is generally the most cost-competitive with other fuels, and is the leading hydrogen source for use in refineries and for production of ammonia and methanol. Green hydrogen…
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