New Report Provides a Roadmap for Regional Hydrogen Hubs

WASHINGTON—When Congress included $20 billion for low-carbon energy demonstration projects in last year’s infrastructure bill, lawmakers sent a clear signal that the Energy Department’s new Regional Hydrogen Hubs program (H2Hubs) should seek to create regional hydrogen economies that cut emissions, create jobs, and spur a robust national clean hydrogen sector. But the question is how to get there. A new report from the Information Technology and Innovation Foundation (ITIF), the leading think tank for science and technology policy, provides a roadmap.

With $8 billion allocated over five years, H2Hubs is the largest program in DOE’s clean energy demonstration portfolio. ITIF’s new report argues that to fund a successful hydrogen ecosystem as Congress intended, DOE should focus on the capital costs of building core hydrogen production plants and related infrastructure such as delivery systems, and it should generally eschew covering operating expenses or supporting end users.

“DOE is facing a strategic challenge,” said Incumetrics, Inc. president Robin Gaster, who authored the report for ITIF. “On the one hand, the notice of intent it has issued appears to seek accountability and simplicity by focusing funding on the core plant. On the other, it has an obligation to fulfill the congressional mandate to help build a hydrogen-driven ecosystem. The way to resolve that challenge is to focus primarily on the former while also funding critical infrastructure improvements on a case-by-case basis. Beyond that, DOE should avoid using demonstration project funds to subsidize end users directly, and it shouldn’t subsidize the ongoing operations of infrastructure providers.”

In analyzing the strategic challenge DOE faces between funding core hydrogen plants versus multiproject ecosystem, the new report examines five elements that DOE could fund:

• The core plant build-out and closely related initiatives
• Core plant operations
• Infrastructure such as long-duration storage and pipelines
• End users
• Protecting hydrogen hubs from market risks

The analysis reaches the following conclusions:

1. Focusing on a single production facility is too narrow and disregards congressional intent.
2. Demonstrating hydrogen production at scale is expensive—$250 million to $500 million per plant—so a significant percentage of hub funding will need to go to central production entities, which are also the focus for hard targets for H2 production, costs, and CO2 emissions.
3. A hybrid model could work best. DOE should consider funding for the core plant and then allocate the remainder of the hub’s proposed budget to address specific roadblocks facing the regional network.
4. As infrastructure is further downstream than hydrogen production (and closer to the market), DOE could seek a non-DOE match for residual funding higher than the proposed 50 percent, which would stretch DOE dollars further.
5. Preliminary identification of residual funding projects should be included in the hub selection process.
6. DOE funding should focus primarily on core plant capital expenditures for both the core plant and infrastructure related projects. Funding for operating expenses should be limited in principle to the period before the plant and infrastructure reach full capacity.
7. End-user subsidies should in principle be avoided, because they will be expensive over even the medium term, and once started, will be difficult to end.
8. DOE should explore options for insulating hubs against volatile energy prices.

“Under this hybrid model, DOE would seek hub proposals that explicitly allocate funding to both the core plant and regional infrastructure,” said Gaster. “The core plant would need to meet the hard targets, while the residual funding elements could ensure that the hydrogen ecosystem as a whole is viable.”

Read the report.