Global MFG - Jul 30, 2023
Hydrogen hubs form backbone of ‘once in a generation' clean energy effortPete Bigelow | Automotive News
A U.S. Department of Energy initiative designed to spur hydrogen adoption is less than two months away from reaching a milestone. In September, department officials intend to select winners for the Regional Clean Hydrogen Hubs program.
The department will select six to 10 sites to split $7 billion to build networks that link producers, infrastructure providers and customers across multiple industries, including transportation. The government will spend an additional $1 billion to jump-start hydrogen demand in the early years of production.
Officials tout the hub initiative as a "once in a generation opportunity" to build support for hydrogen, an abundant element that when used as a fuel emits water vapor rather than carbon dioxide — the main global warming contributor.
"Hydrogen is a wonderful molecule," said Melissa Klembara, director of portfolio strategy in the department's Office of Clean Energy Demonstrations, which oversees the hydrogen hub program.
But there's a rub. Hydrogen is more expensive today than incumbent fuel technologies such as gasoline and diesel. And it is only as green as the energy used to produce it. Some observers fear increased use might do more environmental harm than good.
Nonetheless, federal officials and industry experts believe hydrogen can decarbonize up to 25 percent of global energy emissions, according to the Energy Department, and it stands as a pillar in a White House goal of reaching net-zero emissions by 2050.
Along the way, the hub program is hoped to give the nascent hydrogen economy a trampoline bounce toward commercial viability.
"This is huge," said Bryne Norman, senior business development manager with Honeywell's Sustainable Technology Solutions division. "There are a lot of challenges for the industry to work through that need to be solved. But this is exciting because it really kick-starts private interest."
That may be an understatement.
The initial response to the hub initiative exceeded Energy Department expectations, Klembara said. Seventy-nine entities submitted concept papers. Collectively, they requested almost $60 billion in funding, more than seven times the amount available in the program outlined in the Bipartisan Infrastructure Law.
Further, those proposals outlined $150 billion in private capital commitments, more enthusiasm than anticipated.
"I was blown away by the excitement we were able to generate and the types of partnerships coming together," Klembara said.
The Energy Department winnowed the field in April. Thirty-three entities are now vying for the funding.
“I was blown away by the excitement we were able to generate and the types of partnerships coming together.”
-- Melissa Klembara, director of portfolio strategy in the Energy Department office that oversees the hub program
Thinking big benefited finalists
For now, government officials aren't talking about the applicants. Industry experts are closely watching. While there's not a singular formula for choosing winners, there are some known criteria.
Some of the chosen hubs will utilize renewable energy feedstock, while others will rely on fossil fuels and nuclear power. Some will target specific industries, such as steel making, heavy-duty trucking and power generation.
Geography is another key consideration because the Energy Department wants to spread the economic and environmental benefits and will locate the hubs in different regions to "the maximum extent practicable." Many of the partnerships and coalitions that submitted applications were formed along state and regional lines.
Other groups formed with a central corporate partner coordinating efforts among a variety of stakeholders.
Beyond the stated criteria, one factor that could determine which applicants are chosen is the scope of their project's ambitions.
The average amount of public funding requested by the finalists was $1 billion, according to an analysis by Washington, D.C., think tank Resources for the Future, which has been tracking hub developments. Those that didn't make the cut had requested an average of just $600 million, according to the analysis.
"Scale appears to matter," said Yuqi Zhu, senior research associate at the organization. "The [Energy Department] seems to prioritize larger — and likely more ambitious — endeavors rather than pilot-scale projects."
A preference toward bigger projects underscores the government's view of the initiative. Bigger means more capacity to generate hydrogen, highlighting how it is a linchpin in the national strategy to reach net-zero emissions in 2050.
The DOE should select hub projects with the capacity to generate 100 million metric tons of hydrogen per year or more, said Mona Dajani, head of the renewable energy, hydrogen and infrastructure practice at global law firm Shearman & Sterling.
"Otherwise, it's going to take many more hubs to meet the DOE's road map goals," she said.
Currently, 10 million metric tons are produced in the U.S. each year, according to Energy Department figures, almost all produced via carbon-emitting methods.
Globally, hydrogen generation is already a $155.3 billion market, according to Grand View Research, a market insights firm in San Francisco. The company estimates the market will reach an estimated value of $317 billion in 2030.
The Energy Department expects it will take eight to 12 years for selected hubs to ramp up operations.
Byron McCormick, a retired scientist who developed hydrogen fuel cell technology at Los Alamos National Laboratory and later was a General Motors executive, said the hydrogen hub initiative is a textbook example of how well-placed government dollars can accelerate implementation.
But he said the government should pick sites for their business potential and avoid political considerations.
The hub program's "value will ultimately depend on the balance between political favoritism and hard-nose business and utility applications," he said. "There is great opportunity here, but years of experience have shown that opportunity can also be squandered."
Hydrogen carries risk
Federal government support extends beyond the hub initiative funding. A provision in the Inflation Reduction Act known as 45V extends a tax credit of as much as $3 per kilogram to producers of clean hydrogen.
But what constitutes "clean" is a controversial question. The U.S. Treasury Department will determine the answer this summer. Environmentalists fear the government could extend the tax credit to hydrogen production methods that actually increase carbon emissions.
Here's the conundrum: Utilizing renewables or nuclear energy for electrolysis, the process of using electricity to split water into hydrogen and oxygen, would be cleaner but more expensive. Using electricity from the current grid would be cheaper — accelerating adoption — but not environmentally advisable, according to the Energy Department.
"Grid electricity is not the ideal source," according to a report from the Energy Department's Office of Energy Efficiency and Renewable Energy, "because most of the electricity is generated using technologies that result in greenhouse gas emissions and are energy intensive."
An analysis from the Environmental Defense Fund is more blunt.
It warns a hydrogen electrolyzer powered by an average U.S. electric grid would generate more than twice as much carbon emissions as hydrogen produced today using steam-methane reforming . But the method using the grid would be considered clean under the current tax credit standards.
Also, hydrogen leakage into the atmosphere can further exacerbate global warming. Hydrogen is the smallest molecule and can slip through equipment initially designed for larger particles. The group urged hub developers and the Energy Department to make plans for containing leakage in their blueprints and to establish a definition for "clean" that considers the entire life cycle.
"Clearly, the whole emissions story matters," wrote Akin Olumoroti, a senior analyst at the group.
“There is great opportunity here, but years of experience have shown that opportunity can also be squandered.”
-- Byron McCormick, a retired scientist and former General Motors executive who developed hydrogen fuel cell technology at Los Alamos National Laboratory
Trucking ‘really makes sense'
While there's disagreement about whether cheaper, emissions-producing hydrogen should be used today as a bridge to greener future use cases, there is consensus that hydrogen produced from the new hubs should first target hard-to-abate industrial sectors such as oil refining and ammonia, concrete and steel production.
"As the hydrogen economy grows more prolific and after infrastructure has been decarbonized, then those ancillary use cases start to make sense," Honeywell's Norman said.
Those include transportation. Automakers such as Toyota Motor Corp., General Motors and Hyundai Motor Group have poured effort into exploring hydrogen use across transportation modes and energy products.
Truck companies, including Freightliner-owner Daimler Truck, Volvo Group and Kenworth, are exploring fuel cell and hydrogen combustion options.
Most agree that hydrogen makes the most sense, at least initially, in heavy-duty trucking applications and on long-haul routes where long charging times and heavy batteries make electric trucks less economically viable.
"It really makes sense as a fuel source when you have places where batteries just won't work for some reason," said Michael Berube, deputy assistant secretary for sustainable transportation and fuels at the Office of Energy Efficiency and Renewable Energy.
Trucking could begin to implement hydrogen at scale in the 2027 to 2034 time frame, when refueling infrastructure could be more readily available, according to the Energy Department's National Clean Hydrogen Strategy and Roadmap.
Less than 1 million metric tons of clean hydrogen are produced per year today in the U.S., according to the department's figures. But the government has a production goal of 50 million metric tons of clean hydrogen per year by 2050.
That's an arduous growth curve. The hub initiative is only a start.
"This is definitely not enough," said Dajani, of Shearman & Sterling. "Many more hubs need to be developed."