August 15, 2023 • 5 min read
How can hydrogen transform the US energy landscape?
With ambitious goals in sight for 2050, how is the US encouraging the growth of hydrogen hubs, generating funding and diversifying demand?
The global supply and demand of hydrogen primarily fossil-based reached approximately 90 million tonnes (Mt) in 2020. However, the IEA stipulates that low-carbon hydrogen production will need to reach around 530 million MTPA globally if we’re to meet net zero by 2050.
“Using hydrogen and hydrogen-based fuels could avoid up to 60 gigatonnes of CO2 emissions by 2050 – working in tandem with other clean energy options to decarbonize at the rate required,” says Gary Martin, Vice President of Energy Transition and a leader in our newly created Hydrogen Centre of Excellence in Baton Rouge, United States.
Recognizing hydrogen’s potential, the US has embarked on an ambitious journey to establish multiple hydrogen hubs. Supporting both low-carbon and renewable hydrogen, across the country.
“These hubs are envisioned as networks for hydrogen production, storage, distribution, utilization, and export. Fostering a sustainable, affordable energy ecosystem that could transform various sectors, from transportation to industry.”
But what is the benefit of these hubs for the US energy landscape? And what investment is required for these hubs to support demand?
Increased funding and investment for US hydrogen hubs
The Infrastructure Investment and Jobs Act (IIJA) of 2021, also known as the Bipartisan Infrastructure Bill, allocated US$1.2 trillion for a range of infrastructure and energy projects. Including US$9.5 billion for hydrogen programs. US$8 billion of this is dedicated to creating Regional Clean Hydrogen Hubs.
“These hubs are set to be a central driver in helping regions across the country benefit from clean energy investments while creating job opportunities,” says Martin.
The Inflation Reduction Act (IRA) of 2022 is a production tax credit for cleaner hydrogen, with the credit amount varying according to the carbon intensity of hydrogen produced.
“For the US to keep up with the forecasted hydrogen demand, investment is required in both low-carbon hydrogen and renewable hydrogen,” says Martin.
“The maximum credit is U$3/kg, which can be given to renewable hydrogen that is produced by methods that emit 0.45 or less of kgs CO2/kgs H2. Lower credits are available for hydrogen produced by methods that emit up to 4.0 kgs CO2/kgs H2.”
The Department Of Energy (DOE) National Clean Hydrogen Strategy and Roadmap released in June 2023, looks at pathways for clean hydrogen use to 2050, and highlights the importance of regional hydrogen hubs to enable the scale up of clean hydrogen production located near high-priority hydrogen users.
“Acts like these will help to lower the cost of low carbon hydrogen production, making it more attractive to investors. And more commercially viable and help prove the feasibility,” he explains.
“With successful hubs in operation, private investment will be willing to move forward, and build out the needed infrastructure for hydrogen production, storage, transportation and usage.”
Encouraging competition and collaboration
Multiple hubs across the US are aiming to produce both low carbon and renewable hydrogen. The country has the advantage of using existing infrastructure that can be repurposed to transport hydrogen. Texas for example, has over 45 hydrogen production facilities and more than half of the nation’s hydrogen pipelines (over 900 miles).
However, Texas isn’t the only state moving at pace and competing for its share of government funding. California invested $242 million to support hydrogen research, development, and deployment projects between 2008-2021, and has now created the California Hydrogen Hub, a network which has more than 100 partners.
Earlier this year, the DOE had 79 projects submitted for the Regional Clean Hydrogen Hub program, many of which are partnerships and collaborations requesting $60 billion in federal funding to go alongside $150 billion of their own spending. After a review, the Office of Clean Energy Demonstrations formally encouraged 33 of the applicants to submit full proposals.
Collaborations between local governments are also popping up throughout the nation. For example, the States of New York, New Jersey, Maine, Rhode Island, Connecticut, Vermont and the Commonwealth of Massachusetts recently announced their $3.25 billion proposal submission for a Northeast Regional Clean Hydrogen Hub (NE Hub) to the DOE to compete for the federal hydrogen hub funding.
“We’re supporting many of the regional hubs that have applied for funding,” says Martin. “Our experts have been engaging and working with customers across who are seeking to produce 4 million tonnes per year of low-carbon and renewable hydrogen by 2030.
“From implementing carbon capture to integrating renewables, we work across industries touching on every step of the hydrogen journey, playing a leading role in many pioneering projects.”
Mitigating the cost of hydrogen transport and storage
Technology for producing hydrogen already exits and new innovations are making the process more efficient. Will connecting the process through hydrogen hubs reduce costs?
“Much of this comes down to logistics, as a significant amount of the cost associated with producing and utilising hydrogen relate to transport and storage,” says Martin.
“Hydrogen hubs typically involve the establishment of co-located hydrogen production and use facilities. Co-locating production with points of use allows for economies of scale and reduces the storage and transportation requirements, making the overall process more efficient and cost-effective.
“One area that hydrogen really shines is in hard-to-abate industries. For example, the traditional way to manufacture steel uses coal, which creates a substantial amount of carbon emissions. Using hydrogen could reduce these emissions dramatically.
“If we created a lower-carbon hydrogen economy without hydrogen hubs, you would need to build a transportation network with storage. Because of its physical and chemical properties, hydrogen is particularly expensive, either as a gas or liquid, to transport and store,” says Martin.
“That's the driver behind hydrogen hubs. It’s the most economical way to produce and use hydrogen – where you're not transporting it and you reduce the need for storage.”
Embracing hydrogen’s potential to match supply and demand
The future potential for hydrogen is endless, as Martin discusses the impact hydrogen will have in the US energy mix.
“In the US, we were predominately looking at stimulating the supply side of hydrogen. However, in market economies, you need to match demand with supply. The production of low-carbon hydrogen in the US is currently projected to reach up to 70 million tons by 2050. However, to reach this goal and the associated reduction in CO2 emissions, we need to also work with end users.
“New and lower cost outputs of hydrogen can drive demand around the world. And hydrogen hubs are set to play an important role in driving down costs and accelerating market adoption. However, to achieve hydrogen production at the scale and pace needed for net-zero, continued government support will be important,” continues Martin.
“If the increasing investor attractiveness of hydrogen hubs continues to grow in an upward trajectory, cleaner hydrogen is set to play a vital role in the future of the US energy mix.
“And its likely governments and leading bodies around the world will start to follow suit as we continue on the path to net zero.”