State funds start flowing to US hydrogen hubs
The U.S. Department of Energy (DOE) has allocated state-backed subsidies to five clean hydrogen hubs, officially kickstarting plans to build a hydrogen backbone across the country, though the program may struggle in the early stages.
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President-elect Donald Trump, due to take office in January, is skeptical of decarbonization efforts, prompting concerns over potential project cancellations. Meanwhile, some have criticized a lack of community outreach and scant details on how the hubs will be built.
In 2023, the government announced seven hubs as part of a $7 billion Regional Clean Hydrogen Hubs Program (H2Hubs) from the Bipartisan Infrastructure Law.
In July, around $3 billion was awarded to Appalachia (ARCH2), California (ARCHES), and the Pacific Northwest (PNWH2) to help fund Phase 1, which consists of planning analysis, and design activities as well as stakeholder and community engagement.
A further $2.2 billion was shared between the Midwest and the Gulf Coast in November, while planned hubs in the Heartland (HH2H) and the Mid-Atlantic region (MACH2) remained under award negotiations, the DOE said.
The first step will be evaluating the environmental and social impact of the hubs through the National Environmental Policy Act Review Process (NEPA).
“We’ve been getting all the processes and protocols in place and now, after almost two years, we've just got up and running to where we can really start operating as an organization,” says Shawn Bennett, Energy and Resilience Division Manager at Battelle.
Battelle is serving as the prime contractor for the Appalachian Regional Clean Hydrogen Hub (ARCH2).
“Our main focus now is to start outreach with state and local communities, bring them up to speed on where we're at with ARCH2, and to start that NEPA process so we can, over several years, get these projects constructed and up and running.”
ARCH2 will receive a cost-share amount of up to $925 million from the DOE’s Office of Clean Energy Demonstrations (OCED), with $30 million allocated to Batelle for Phase 1, which is expected to last 36 months.
Located across the states of West Virginia, Ohio, and Pennsylvania, the hub will produce more than 1,500 tons of clean hydrogen per day from natural gas and carbon capture and sequestration (CCS), as well as from biomass, to feed transport sectors, make clean ammonia for fertilizers, and power data centers.
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Faltering start
Since the original announcement, a number of projects have abandoned their plans, and while some claim that these cancellations are a sign of H2Hubs’ fundamental weaknesses, the DOE and its project managers shrug it off as teething problems and regulatory uncertainty.
The government has offered billions in subsidies from the Inflation Reduction Act (IRA) in the form of Production Tax Credits (PTCs) for clean hydrogen producers, with handouts calibrated against how much carbon dioxide is emitted during the hydrogen production process.
However, the Internal Revenue Service (IRS) is still hammering out the details of what, exactly, defines clean hydrogen as part of the 45V process, a final decision that many hope will be finalized before Trump takes power in January.
“The living question of 45V is something that makes everyone a little bit skittish, waiting for that to happen,” says Battelle’s Bennett.
“It's caused a chill over the market and the quicker they can get that figured out and move along in a business-friendly way, the quicker we can move ahead. It's a very important lynchpin for the success of not just the hubs, but the hydrogen economy in general.”
Construction for the ARCH2 hub should begin around year three of the projects, Bennett says and, at first, will concentrate on the production of hydrogen through the best means available to project managers, including so-called ‘blue’ hydrogen from methane and CCUS.
Once buyers, or offtakers, are found and costs for clean electrolytic hydrogen come down, consumers will have the opportunity to switch if it is price competitive, he says.
Appalachian outreach
The Appalachian region stretches from New York in the north to Mississippi in the south, and includes 430 counties and eight cities in 13 states.
The main centers of a shale and fracking boom in the United States are found in the Appalachia, with massive sources of natural shale gas, including Marcellus Shale and Utica Shale formations.
Critics, however, claim that much of the investment into these sites has gone into very few communities and had little economic impact on the region.
ARCH2 Projects
Source: Ohio River Valley Institute
Just 22 counties in Ohio, Pennsylvania and West Virginia produce more than 90% of all Appalachian natural gas, according to the Ohio River Valley Institute, leading to deep distortions on which regions have benefited.
Poverty in Appalachia declined two percentage points between 2013-2022. However, almost a fifth of the regions saw poverty rates increase or stay the same during that time, according to the Appalachian Regional Commission.
The uncertainty over ARCH2 has led to project cancelations. Five of the fifteen originally proposed projects having been abandonded, the think tank says.
When CNX Resources Corp. announced it was pulling out of a tri-state hydrogen production project at Adams Fork as part of ARCH2 in December, 2023, it cited delays and uncertainty over implementation rules, and specifically the failure to implement 45V.
“CNX calls on the federal government to heed the advice of elected officials, organized labor, and stakeholders across the country who have advocated for rules that would catalyze, not stifle, the burgeoning hydrogen economy,” the company said in a statement.
The Ohio River Valley Institute estimates that the around $1 billion of federal funds available to each of the hubs as federal seeding money represents only between 10%-20% of the required capital to support the facilities announced.
Clean hydrogen prices, even with subsidies and proposed tax credits, would still exceed that of fossil-fuel produced hydrogen and no incentives to switch have been granted potential offtakers, it said.
Efforts at community outreach have largely failed, says Sean O'Leary, Senior Researcher at Ohio River Valley Institute, with considerable opposition leading to multiple cancellations by the government.
“The same structural weaknesses that caused the Appalachian natural gas boom to not be a major generator of jobs or prosperity are also present in plans for the hydrogen hub,” says O’Leary.
“Many of the remaining projects (that form part of ARCH2) are either fundamentally uneconomic or are being driven by companies that are vastly under-capitalized and, in some cases, largely notional.”
By Paul Day