March 01, 2022
The Department of Energy’s new RFI provides key insights into its proposed implementation of the recently passed Clean Hydrogen Hub Program.
The bipartisan Infrastructure Investment and Jobs Act (IIJA) that was signed into law by President Biden on November 15, 2021, included an unprecedented $9.5 billion federal investment in clean hydrogen. The vast majority of this investment—$8 billion, to be exact—was directed towards the creation of a program aimed at facilitating the development of at least four regional clean hydrogen hubs (the Clean Hydrogen Hub Program). The IIJA defined a “regional clean hydrogen hub” as a network of clean hydrogen producers, potential clean hydrogen consumers, and connective infrastructure located in close proximity” and specified that such hubs must encompass the use of diverse feedstocks, end-uses, and geographic placement. But aside from these broad requirements, IIJA left the details and implementation of the Clean Hydrogen Hub Program up to the discretion of the Department of Energy (DOE).
On February 15, DOE provided the first glimpse into how it plans to implement the Clean Hydrogen Hub Program in its Request for Information on Regional Clean Hydrogen Hubs Implementation Strategy (RFI). Although the RFI is only a “preliminary plan” that is subject to change based upon, among other things, the responses DOE receives to the more than sixty questions it solicited feedback on therein, it nevertheless provided some important insights into what DOE envisions for the Clean Hydrogen Hub Program. Given that the adoption of a clean hydrogen tax credit remains—despite key senators’ vocal support—uncertain, the implementation of the Clean Hydrogen Hub Program will be an important driver in this emerging sector.
The RFI breaks down the application and selection process into four different launch periods. The first two launch periods (Launches 1 and 2) would be essentially identical in substance and focused on soliciting, selecting, and deploying funding for the clean hydrogen hubs (H2Hubs). The solicitation for Launch 1 must commence, pursuant to the IIJA, no later than May 14, 2022. The second two launch periods (Launches 3 and 4) would be for supplementing the selected H2Hubs with new technologies, capabilities, end-uses, or additional partners.
DOE envisions the soliciting, selection, and deployment of funding for the H2Hubs as occurring in two phases: the H2Hub planning phase and the H2Hub construction and deployment phase.
In Phase 1—the H2Hub planning phase—key partners would be required to demonstrate that their H2Hub would have the energy resources, infrastructure, regional workforces, design, financing, environmental permitting, and decarbonization potential to meet the IIJA’s and DOE’s criteria for a clean H2Hub. The end goal of Phase 1, according to the RFI, would be “to have a full plan ready for the roll-out of the hub in Phase 2” as well as insight into what critical reviews (including National Environmental Policy Act (NEPA)), permitting, financing, or other issues must be addressed to minimize the H2Hubs’ risk going forward. The RFI lists 22 activities and analyses that a Phase 1 project must complete in order to move to Phase 2. The H2Hubs will be funded in Phase 1 at between $1 to $4 million, plus a required cost share at a percentage to be determined. DOE expects to take approximately 9 months following the conclusion of Phase 1 to evaluate, select, and negotiate with the proposed H2Hubs that will be moving on to Phase 2.
Phase 2—the H2Hub construction and deployment phase—would be divided further into three subphases, which DOE suggests would likely occur over multiple fiscal years. Subphase 2a appears to overlap somewhat with Phase 1 and would involve additional project development activities such as front-end engineering design, NEPA reviews, siting, permitting, and finalizing off-take agreements. This subphase will also require a developer to submit a technical proposal and budget justification. Subphase 2b would feature the construction of the H2Hub and subphase 2c would be when the H2Hub is operational. DOE would hold a “Go/No-Go review” for proposed H2Hubs between each budget period during Phase 2, which it expects to occur over a five or more-year period. DOE anticipates that it will disperse $500 million to $1 billion for each H2Hub selected under Phase 2, plus a 50% required cost share.
As compared to Launches 1 and 2, the RFI provides little detail on what to expect for Launches 3 and 4 other than they will be used to “solicit and select new technologies, capabilities/end-uses, or partners that could be incorporated into and supplement the selected H2Hubs formed through Launches 1 and 2.” Launches 3 and 4 are proposed to commence (apparently simultaneously) as Phase 2 for Launch 1 is getting started and as Phase 1 for Launch 2 is coming to a close. The RFI also notes that Launches 3 and 4 will together receive $1 to $2 billion of the $8 billion appropriated under the IIJA. DOE’s H2Matchmaker tool—which it launched a beta version concurrently with the release of the RFI—will presumably be used to support the pairing of H2Hubs with new technologies and clean hydrogen end-users.
Other than requiring that the Clean Hydrogen Hub Program will support the development of “at least 4 regional clean hydrogen hubs,” the IIJA did not specify how many H2Hubs would be funded. The RFI, however, suggests that DOE will end up supporting somewhere between 6 to 10 regional clean H2Hubs. Given the number of public and private parties that have already announced their intentions to develop clean hydrogen hubs, developers should expect the competition for these 6 to 10 federally backed and partially funded H2Hubs to be significant.
The Biden Administration has made clear in both guidance and executive orders that energy projects receiving federal funds will need to demonstrate commitments to environmental justice and minimizing negative impacts on disadvantaged and tribal communities. That policy concern is abundantly present in the RFI. One of the requirements that a proposed H2Hub must meet to move to Phase 2 of the selection process is that it has an “Equity, Environmental and Energy Justice” strategy that includes “significant and meaningful” community engagement plans. Proposed H2Hubs must also show that they have plans to ensure that environmental impacts on disadvantaged communities are minimized. The RFI identifies a non-exhaustive list of 8 environmental justice policies that will be a “high priority” in its funding of H2Hubs, including decreasing energy burdens, increasing the clean energy job pipeline and job training for individuals, and increasing energy democracy and community ownership of energy resources. Developers seeking funds from the Clean Hydrogen Hub Program will need concrete plans for addressing these priorities to be competitive.
Although not explicitly stated, the RFI serves to underscore the important role that support from state and local governments and public-private partnerships (P3) will play in securing Clean Hydrogen Hub Program funding. The planning phase—Phase 1 of Launches 1 and 2—for example will require applicants to demonstrate the role the surrounding communities will play in the proposed H2Hub with particular emphasis on communities transitioning away from fossil fuel economies. State and local government support or P3 arrangements will also help proposed H2Hubs navigate non-federal permitting and other regulatory hurdles. A number of states have already announced P3 arrangements to compete for funding from the Clean Hydrogen Hub Program, and Wyoming, Colorado, New Mexico, and Utah have signed a joint memorandum for “developing a regional clean hydrogen hub (Hydrogen Hub) as contemplated by the 2021 Infrastructure Investment and Jobs Act.”
As noted above, the RFI seeks feedback on over 60 different questions, and the answers to many of them will be key in how DOE evaluates H2Hub proposals. For example, how DOE evaluates the showing of what constitutes clean hydrogen production may determine whether a green hydrogen H2Hub would need a co-located renewable energy facility or could get by with as little as a virtual power purchase agreement. Another example is found in how expansively DOE evaluates the question of a proposed H2Hubs’ lifecycle greenhouse gas emissions for purposes of meeting the 2 kg CO2-to-kg of H2 clean hydrogen definition or whether DOE decides to lower the CO2 emissions threshold for purposes of the definition as it may limit the number of blue hydrogen hubs that are eligible to receive funds from the Clean Hydrogen Hub Program.
Responses to these questions and many others are due to DOE on March 8, 2022. DOE intends to issue an FOA in early May of 2022, as required by IIJA.
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