DOE’s New Hydrogen Hubs Program Comes With Risks—And Opportunities

April 11, 2022 | 12:43 pm
a natural gas plant with pipes foregroundedZorandim/
Julie McNamara
Senior Energy Analyst

The November 2021 Infrastructure Investment and Jobs Act (IIJA), also referred to as the Bipartisan Infrastructure Law, or BIL, includes an $8 billion “regional clean hydrogen hubs” program that charges the Department of Energy (DOE) with the development of at least four hydrogen hubs to advance the nation’s clean hydrogen sector.

Hydrogen’s role in the nation’s clean energy transition is critically important—and constrained.

That’s because while hydrogen provides a necessary path for extending clean energy solutions to polluters that are otherwise hard to decarbonize, like maritime shipping and steelmaking, there are real costs and trade-offs in its use, including being inefficient to produce via renewables (or worse, potentially generating still-sky-high pollution if made from natural gas), requiring wholesale infrastructure upgrades to transition from fossil fuels, and generating health-harming NOx emissions if combusted. As a result, when today’s fossil fuel end uses can be directly electrified via renewables instead, such as for heating in buildings, it is overwhelmingly a better decarbonization path.

Therefore, to ensure hydrogen plays a productive role as opposed to a wasteful—and potentially outright harmful—diversion, it must be guided by rigorous implementing frameworks that strategically prioritize and target its use and set robust standards to ensure truly clean and safe deployment.

And that leads to this pressing question: Is the newest and largest hydrogen program in U.S. history up for the task?

The legislative language is, quite frankly, alarming. Instead of setting the stage for the narrowly targeted, rigorously defined role that hydrogen requires, the BIL does the exact opposite, with repeated calls for prioritizing hydrogen production from fossil fuels instead of renewables; wastefully pushing a widespread uptake and use of hydrogen instead of its strategic deployment; and setting timelines that unquestionably bias the program in favor of industry over communities.

But critically: The story doesn’t have to end there, because the text also leaves a lot of room for DOE to shape the program as it moves to implementation.

And it’s in that space that we need to push, because as a country, we cannot afford an $8 billion retrenchment in fossil fuels and the cascading consequences thereof—especially when the alternative, the true strategic build-out of targeted, actually clean and beneficial hydrogen production and use, is vital to meeting our climate goals.

The following paragraphs provide background on the hydrogen hubs program, detail some of the major concerns prompted by the underlying BIL text, and highlight critical risks and key opportunities for DOE to shift the program for the better as it moves to implementation.

Background on the hydrogen hubs program

The crux of the hydrogen hubs program, or “H2Hubs” as DOE now refers to it, is the granting of funds over a five-year period (fiscal year 2022 to fiscal year 2026) to at least four “hubs” that bring together clean hydrogen producers and end users to facilitate the demonstration, development, and commercialization of the nation’s “clean hydrogen economy.”

Under that general aim, the law explicitly includes five specific hub selection criteria:

  • Feedstock diversity, including at least one hub demonstrating clean hydrogen production from fossil fuels, one from renewable energy, and one from nuclear energy.
  • End-use diversity, including at least one hub demonstrating the use of hydrogen in the power sector, one in the industrial sector, one in the residential and commercial heating sector, and one in the transportation sector.
  • Geographic diversity, with hubs to be located in different regions of the US and using energy resources that are “abundant” in that region.
  • Location in natural gas-producing regions, calling for at least two hubs in regions of the US with “the greatest natural gas resources” (though it does not explicitly call for using those gas resources).
  • Employment, prioritizing hub proposals likely to create skilled training and long-term employment opportunities for “the greatest number of residents in the region.”

Critically, for all but the final criteria on employment, each is prefaced in the text with this very consequential caveat: “to the maximum extent practicable.” That means at most the above should be considered informative, not determinative—and that’s key because as listed, many of the above criteria threaten to drive the buildout of at best wasteful, and at worst actively harmful, hydrogen investments.

Furthermore, the law includes a final overarching allowance for DOE to incorporate additional criteria as it deems necessary and appropriate, which vitally widens the aperture for exactly what this program will—and won’t—be selecting for.

Timeline for H2Hubs program

Within the constraints of the five-year funding allocation, the text sets additional timelines for DOE in moving the program forward. These include an initial proposal solicitation 180 days after passage of the BIL (which would be this May), and an initial selection round one year after the deadline for proposal submission.

However, the wording in the text in fact enables significantly more flexibility on DOE’s part than a first read might suggest—and indeed, DOE appears to be exercising some flexibility in its anticipated upcoming timelines. For example, DOE has most recently suggested that it intends to issue a draft funding opportunity announcement this May, then hold a pre-solicitation meeting to receive additional public feedback, then issue the actual funding opportunity announcement in late 2022.

Moreover, DOE has floated plans to segment proposal selection into at least two phases, with awards in the first phase focused on covering hub planning and evaluation, and awards in the second phase supporting hub deployment—and only proposals clearing the first phase would be eligible for the second. Further, DOE’s current plan would not only break up the solicitation process into multiple phases but would also launch multiple such rounds.

Which is all to say, right from the jump it’s clear that how DOE implements its mandate has enormous consequences for how the program ultimately plays out. The above details that for process; the below details that for content.

RFI responses elevate concerns and opportunities in H2Hubs implementation

When it comes to content and direction, the BIL text puts the H2Hubs program firmly in the camp of concern—but again, DOE ultimately appears to have a lot of room to run to get the program to a better place, ranging from deep-in-the-weeds decision points to big-picture prioritization questions.

And in an encouraging sign, DOE raised many of these issues in its February’s request for information (RFI) on H2Hubs implementation strategy.  

Beyond the fossil fuel industry, which has been dominating hydrogen headlines and talking points, numerous environmental and community groups submitted RFI responses to ensure that DOE was indeed seeing the full picture and confronting the costs and consequences of advancing an ill-considered program.

The topics raised have been many and varied, but from our perspective three key points—covering numerous subtopics—emerged to help guide DOE as it moves forward with H2Hubs program implementation.

1. Strategic prioritization.

As stated at the outset, the right role for hydrogen is highly targeted deployment, not general and widespread use. As a result, as DOE finalizes hub selection criteria, it must be clear about hydrogen’s strategic purpose—and it must aim to focus and catalyze progress in those areas. This means prioritizing projects that serve end uses that cannot be otherwise decarbonized and arriving at that conclusion based on comprehensive evaluations that compare hydrogen applications to possible alternatives, all evaluated within the context of 1.5C-aligned economy-wide decarbonization transition requirements.

2. Broad consideration of production and end-use impacts.

When it comes to how hydrogen is produced, transported, and used, a narrow consideration will miss key climate, pollution, and environmental impacts. For example, the BIL’s working “clean hydrogen” production qualification standard is limited only to carbon emissions, and only those produced at the point of hydrogen production. For pathways producing hydrogen from fossil fuels, such a standard would fully miss upstream methane leakage, which analyses have shown can result in produced hydrogen having a high carbon intensity even if (if, if, if) the facility itself manages to achieve high capture rates—and at present, methane emissions remain a major problem. This standard would also be an issue for electrolysis, as while at the point of production electricity is simply splitting water into hydrogen and oxygen, how the electricity powering that electrolysis is produced has major implications for the ultimate carbon intensity of the hydrogen, too, as only renewable electricity that is additional to the system would result in low-carbon hydrogen.

DOE will not be able to stand up a robust “clean hydrogen” program if it does not significantly broaden the scope of how it defines “clean hydrogen”; otherwise, it threatens to support the deployment of hydrogen production pathways that will never align with climate goals. The same holds true for evaluating the costs, benefits, and trade-offs of hydrogen end-use applications, as well as the magnitude of climate impacts of hydrogen leakage itself. And for each of these, DOE must look beyond carbon to also consider impacts such as criteria pollutants and water availability and use.

3. Community engagement and workforce development.

Hydrogen has the potential to drive beneficial community investments and workforce opportunities—or not. And so far, especially on the community front, hydrogen projects have done anything but, with fossil fuel interests racing to secure their fortunes before many groups have even been alerted to these nascent activities, let alone had a chance to weigh in. Community engagement is all the more critical given the fact that even though new hydrogen efforts have the potential to correct for past wrongs, fossil fuel-based hydrogen hub proposals in particular threaten to perpetuate the injustices long disproportionately borne by environmental justice communities. The H2Hubs program must proactively prioritize getting this right from the outset. And it can, by ensuring that the program leaves time for communities to meaningfully weigh in, as well as that selection criteria require substantive community engagement both before projects are launched as well as continued throughout. Similarly, DOE can ensure that the H2Hubs program advances high-quality jobs by setting robust labor standards for selection eligibility. All of this should be done in direct and ongoing stakeholder outreach and engagement.

Putting the H2Hubs program in the broader hydrogen context

DOE is now in the process of reviewing RFI responses, with its next expected move to be a draft funding opportunity announcement released this May. At that time, we will see the degree to which the department took this feedback to heart, and the degree to which it will still need to be pushed to get the details right.

The H2Hubs program is just one program—but because of its size, and because it is one of the first on the national stage, it has the potential to shape hydrogen activities for many years to come. And already we are witnessing that effect, with states and regions around the country now racing to position themselves as “favorable” locations for hubs, from California to Pennsylvania, Nebraska to Kentucky, New Mexico to Illinois, and many more in between. However, in a piercing example of just how much our nation stands to lose if DOE fails to get this right, several state and regional proposals have thus far been shaped to cater to the worst possible outcomes of the H2Hubs program based on initial BIL text—think hand-outs for fossil fuels, narrow-to-no consideration of broader climate and pollution impacts, complete lack of strategic prioritization, and ignoring community engagement.

We do not need—indeed, we cannot afford—a hydrogen hubs program that drives billions of dollars of investments into perpetuating climate- and health-harming fossil fuel extraction, infrastructure, and use; that drives billions of dollars of investments into hydrogen applications that not only result in increased NOx emissions but that could also be so, so, so much more efficiently addressed by direct electrification with renewables instead; that drives billions of dollars of investments into decades-long infrastructure that is entirely misaligned with where we need to go.

Instead, we need DOE to take a clear-eyed look at where hydrogen is truly an asset for the nation’s clean energy transition and set up a program that establishes the guardrails, priorities, and frameworks to direct investment dollars appropriately. To catalyze real and necessary clean hydrogen solutions for applications where clean energy alternatives do not otherwise exist. To guide the build-out of a strategic, clean, sustainable, and truly beneficial hydrogen economy.

There will be other opportunities for course corrections in future hydrogen policies and investments, but they will all be harder to get right if this first one gets it wrong.

DOE must get this right.