The Division of Vitality (DOE) has chosen a consortium that can work to foster demand for industrial clear hydrogen at seven regional hydrogen hubs (H2Hubs), which the company in October 2023 chosen to obtain $7 billion in federal funding.
The Hydrogen Demand Initiative (H2DI) consortium will likely be tasked with designing and implementing demand-side help mechanisms, which is able to search to stimulate hydrogen demand and unlock “market potential” for the H2Hubs, the DOE’s Workplace of Clear Vitality Demonstrations (OCED) mentioned on Jan. 17.
The hassle is a part of a DOE initiative introduced in July 2023 that dedicates federal investments of as much as $1 billion to foster hydrogen demand-side initiatives. “Hydrogen tasks affiliated with the H2Hubs will likely be eligible to qualify for demand-side help beneath this initiative,” it famous.
The initiative is in the end geared towards bolstering the expansion and sustainability of the H2Hubs program by offering “improved offtake certainty,” which may enable hydrogen producers to draw non-public sector funding in addition to end-use consumers, the OCED mentioned. “It is going to additionally lay the muse for broader non-public sector scale-up and use of the clear hydrogen market by offering worth transparency and standardized contracts for the tasks it helps.”
Distinctive Set of Professional Information
The newly chosen H2DI consortium will comprise EFI Basis (EFIF), a Washington D.C.-based nonprofit headed by former DOE secretary Ernest Moniz, Intercontinental Trade, a agency that operates monetary exchanges, together with the New York Inventory Trade, and intelligence firm S&P World. The H2DI, notably, additionally consists of Dentons, one of many world’s largest legislation companies that makes a speciality of vitality regulatory points, and a modeling and evaluation group from the MIT Vitality Initiative.
The DOE on Wednesday mentioned a number of demand-side help mechanisms “will likely be decided over the course of 2024, in partnership with EFIF, S&P, and ICE, and with enter from the H2Hubs and the non-public sector.” Potential mechanism varieties “embrace pay-for-difference contracts, income backstops, or off-take ensures,” it mentioned.
The company famous it chosen the consortium after a aggressive Request for Proposal course of that evaluated candidates on 5 key analysis standards: market expertise and experience, operational skill, ecosystem credibility, power of proposal for a demand-side mechanism, and enterprise programs and processes.
The DOE selected a 3rd celebration to companion with on the hydrogen demand-side initiative to supply “extra flexibility to contract with tasks,” it famous. A 3rd celebration additionally “permits DOE to entry experience in industrial contracting and mission finance that the Division might not have already got in-house,” it added.
“Every companion brings a singular set of professional information to H2DI,” EFIF famous on Wednesday. EFIF will lead the consortium and handle actions, together with performing monetary and industrial evaluation and growing neighborhood engagement methods. S&P World will market assessments, consider monetary workflows, have interaction the stakeholder neighborhood for enter, and supply and handle information. ICE will construct the market and merchandise (together with the mechanism’s governance program), function the demand-side mechanism platform, and supply and handle information.
The MIT Initiative mentioned it would carry out a techno-economic evaluation of the hydrogen demand, carry out greenhouse gasoline lifecycle accounting, in addition to granular sector “coupling” modeling (for gasoline, electrical, CO2, end-uses) utilizing the modeling platform SESAME (Sustainable Vitality Programs Modeling Atmosphere). Lastly, Dentons will advise on regulatory due course of and allowing points, together with, as they concern the Nationwide Environmental Coverage Act and the Federal Vitality Regulatory Fee. It is going to additionally develop contracts, help monitoring, reporting, and verification, and create operational necessities.
A ‘Important Step’ to Guarantee Market Certainty
In line with the OCED, growing a hydrogen demand-side initiative marks a “vital” step to reinforce “the early industrial viability” of the H2Hubs. Whereas the seven regional hydrogen hubs—which span Appalachia, California, the Midwest, the Gulf Coast, the American heartland, the Mid-Atlantic, and the Pacific Northwest—will obtain $7 billion allotted by the Infrastructure Funding and Jobs Act (IIJA), “demand formation for brand spanking new vitality sources typically lags the creation of latest dependable provide,” the company famous.
“Demand-side help and different ‘demand pull’ measures bridge the hole between producers, who want medium- to long-term offtake certainty for a good portion of their projected output to safe financing to construct a mission, and consumers, who typically desire to purchase on a short-term foundation for vitality inputs which are starting to be produced at scale, like clear hydrogen,” it defined. “Demand pull” measures “have been a precious device within the scale-up of renewable vitality applied sciences like wind and photo voltaic,” it famous.
The DOE mentioned it expects to work with the H2DI consortium over the following six to 9 months to design demand-side help measures. The hassle will embrace crafting demand-side help agreements for H2Hubs hydrogen tasks, which may in the end “unlock last funding selections and catalyze the formation of a mature clear hydrogen market.” The group can be anticipated to “develop an operational plan for the best way to administer these mechanisms as soon as finalized,” the company mentioned.
In a February 2023 research evaluating hydrogen demand, EFIF advised that latest federal incentives, together with tax credit furnished by the Inflation Discount Act (IRA) might not create ample demand to drive the formation of a nationwide hydrogen market, and it urged extra coverage and regulatory actions. The research’s detailed techno-economic evaluation of potential end-use sectors on the low finish of the associated fee curve—together with steelmaking, refining, ammonia, and methanol—advised that clear hydrogen prices “could also be aggressive within the $0.27–$0.90 vary, utilizing an assumption that these industries will search to keep away from passing extra prices to their clients.”
However for many potential sources of latest demand—equivalent to hydrogen mixing in pure gasoline pipelines, long-duration vitality storage, and energy era—“this value vary might not sufficiently de-risk the change to scrub hydrogen, which requires aggressive prices with incumbent and different applied sciences, familiarity with and certainty of the know-how, in addition to sturdy coverage help,” it says.
The research recommends a number of actions, together with as they relate to coverage and industrial methods, that might quickly speed up hydrogen use. These embrace calling on Congress to “considerably improve” funding for the H2Hubs program,” to incentivize extra hydrogen clusters, and a realistic method on 45V, the IRA’s tax incentives designed to spur the event of unpolluted hydrogen manufacturing.
A Concerted Push for Hydrogen
In line with the DOE, clear hydrogen manufacturing for home demand has the potential to scale from lower than 1 million metric tons per yr (MMTpa) to an estimated 10 MMTpa in 2030. It estimates most near-term demand might come from transitioning present end-uses, which presently maintain a carbon-intensive hydrogen manufacturing capability of round 10 MMTpa. The company means that the “alternative” for clear hydrogen, aligned with the DOE Nationwide Clear Hydrogen Technique and Roadmap, is 50 MMTpa by 2050.
Nevertheless, if water electrolysis turns into the dominant hydrogen manufacturing technique, the DOE estimates as much as 200 GW of latest renewable energy will likely be wanted by 2030 to help clear hydrogen manufacturing. On the finish of September 2023, the U.S. held a complete capability of about 1,180 GW, of which 321 GW was from renewables, and 96 GW was from nuclear.
However as POWER lately reported, whereas the Treasury Division lately launched its long-awaited proposed rules and steerage defining 45V tax credit, the measure was obtained with disappointment by the facility business. Prevalent issues cited by the business embrace a scarcity of flexibility within the proposed rule. The teams argued that limitations may impede the event of a home clear hydrogen economic system, hinder broader decarbonization objectives, and adversely have an effect on alternatives for American employees.
—Sonal Patel is a POWER senior affiliate editor (@sonalcpatel, @POWERmagazine).
