Clean. Adaptable. Versatile. These are just a few superlatives used to describe hydrogen energy. Some call it a "Swiss Army knife" solution to decarbonizing several economic sectors, including transportation, manufacturing and power generation.
Hydrogen's potential uses are not new. The first use of fuel cells dates to the mid-19th century. But the widespread adoption of hydrogen as an energy source has been hindered by several challenges, including high production costs, lack of infrastructure and technological immaturity.
Hydrogen is not unique in this aspect. Throughout human history, the development of supporting infrastructure and complementary technologies has been necessary for the success and widespread adoption of new technologies.
The story of electric vehicles is a great example. In 1897, the best-selling car in the U.S. was an EV — the Pope Manufacturing Company's Columbia Motor Carriage. By the late 19th century, EVs were more popular than steam- or gas-engine cars.
Yet, through the 20th century, internal combustion engines dominated vehicles. EVs did not achieve commercial success again until significant advancements in battery technology boosted their efficiency, development of extensive charging infrastructure enabled longer journeys, and reductions in cost improved their affordability.
To overcome the challenges facing hydrogen, the U.S. Department of Energy's Office of Clean Energy Demonstration, or OCED, pursuant to the Infrastructure Investment and Jobs Act, launched a funding opportunity announcement, or FOA, to establish regional clean hydrogen hubs across the country.
These so-called H2Hubs aim to kick-start the hydrogen economy by co-locating all the essential participants in the hydrogen value chain in close proximity, thus obviating the need for transportation and avoiding numerous associated costs. H2Hubs will also demonstrate the commercial application of hydrogen alternatives to various existing carbonintensive processes.
The Infrastructure Investment and Jobs Act allocates more than $62 billion to the DOE to provide more Americans access to dependable and clean energy — and, importantly, to deploy technologies that are not yet commercially viable.
The DOE aims for the U.S. to produce 10 million metric tons of clean hydrogen on an annual basis by 2030, 20 MMT by 2040, and 50 MMT by 2050. For perspective, the U.S. currently produces approximately 10 MMT of hydrogen — almost all of it from fossil fuels, with no CO2 emissions controls. This does not qualify as clean hydrogen.
Out of $62 billion, $8 billion has been authorized for the development of six to 10 H2Hubs, each expected to receive between $500 million and $1 billion in federal funding. Applications are due by April 7. The DOE anticipates announcing the winners this fall, and concluding award discussions by the end of this year or early 2024.
An H2Hub is defined as a network of clean hydrogen producers, potential clean hydrogen consumers and connective infrastructure located in close proximity, that demonstrates the production, processing, delivery, storage and end use of clean hydrogen.
One factor the DOE will consider in evaluating potential H2Hubs is feedstock diversity — i.e., production of hydrogen from fossil fuels (including via various thermal conversion processes such as methane pyrolysis), renewable energy, nuclear energy and technologies that produce hydrogen as a byproduct.
Another factor the DOE will consider is the end-use diversity of produced hydrogen. For an application to be considered, an applicant must demonstrate end uses such as electric power generation, industrial applications, residential and commercial heating, and transportation.
Key goals of H2Hubs include enticing investment from the private sector, hastening the adoption of existing technologies, and encouraging development of new technologies in the U.S. This domestic component is a key difference between this FOA and funding announcements from other DOE offices.
A review of other FOAs reveals that entities with non-U.S. ownership are encouraged to apply — or at the very least, not discouraged from applying — and the criteria used to define a domestic entity are much laxer than those used in the H2Hubs FOA.
Whereas FOAs from other DOE offices require either domestic control or ownership, the H2Hubs FOA defines a domestic entity as one that has both domestic ownership and control. Otherwise, it is considered a foreign entity.
Therefore, a foreign subsidiary that has a presence and operations in the U.S. — regardless of the scale, extent or duration of such operations — would not automatically qualify as a domestic entity, as it would for some other funding announcements. The H2Hubs FOA requires substantially more documents from an entity that does not have both domestic ownership and control.
The FOA treats H2Hubs as critical to U.S. domestic energy security in other notable ways — including a requirement to prove to the DOE that the project team has appropriate measures in place to control sensitive information and protect against the unauthorized transfer of scientific and technical data.
Additionally, the FOA requires the applicant to show that adequate protocols exist between the U.S. subsidiary and its foreign parent organization to comply with export control laws and any obligations to protect proprietary information from the foreign parent organization.
Besides such stringent requirements, the foreign entity also has to show how the project will promote "domestic American manufacturing of products and/or services"; prove to the DOE's satisfaction that its participation is in the best interests of U.S. industry and economic development; and demonstrate that the foreign entity will satisfy other conditions that may be deemed necessary by the DOE to protect U.S. government interests.
These requirements are largely absent from other FOAs, including other recent hydrogen-related funding announcements. However, we do note that the requirements of this FOA mirror the requirements in some of the OCED's other funding announcements — including those relating to long-duration energy storage demonstrations and large-scale carbon capture pilot projects.
The DOE's H2Hubs initiative is a promising effort to shorten the time required for the widespread adoption of new technology. H2Hubs should demonstrate clean hydrogen's use cases in multiple sectors, in part by co-locating all the essential stakeholders, to alleviate the most obvious pain points.
These pain points include a lack of widespread infrastructure, and costs and regulatory hurdles involved in both the transmission of wind and solar electricity and the transportation of the hydrogen produced from it.
Originally Published by Law360
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