On September 22, 2022, the U.S. Department of Energy (DOE) announced a $6-7 billion Funding Opportunity to begin the development of a nationwide program for the planning, construction, and operation of commercial-scale Regional Clean Hydrogen Hubs, known colloquially as “H2Hubs.” H2Hubs are defined as “a network of clean hydrogen producers, potential clean hydrogen consumers, and connective infrastructure located in close proximity.” The DOE’s effort results from the Bipartisan Infrastructure Law (BIL) passed in 2021. The BIL appropriates $8 billion over a five-year period (2022-2026) and amends the Energy Policy Act of 2005 to establish a program to develop four to ten regional H2Hubs.
Each H2Hub will include multiple partners utilizing diverse hydrogen technologies to efficiently produce commercial volumes of hydrogen. To ensure the H2Hubs generate local, regional, and national benefits, the H2Hubs will include the engagement of local and regional stakeholders, as well as Indian Tribes. H2Hubs will be expected to participate in community and labor engagement, create well-paying jobs, and advance diversity, equity, inclusion, and accessibility.
Community participation, labor engagement, job creation, and diversity expectations placed upon H2Hubs are similar to local prevailing wage requirements in the Inflation Reduction Act. In the Inflation Reduction Act, the United States Senate Committee on Finance amended the Internal Revenue Code of 1986 to provide an opportunity for qualified clean hydrogen production facilities to increase tax credits for clean hydrogen production.
H2Hubs will promote a national clean hydrogen network and expand access to efficient, reliable, and affordable clean energy. An established nationwide network will advance the achievement of the clean hydrogen production standard promulgated in the BIL and incentivize additional investment in the production, processing, delivery, storage, and end-use of clean hydrogen.
The BIL encourages certain H2Hubs characteristics and provides selection criterions the DOE must utilize in selection:
(A) Feedstock Diversity:
At least one H2Hub must demonstrate the production of clean hydrogen from fossil fuels;
At least one H2Hub must demonstrate the production of clean hydrogen from renewable energy; and
At least one H2Hub must demonstrate the production of clean hydrogen from nuclear energy.
(B) End-Use Diversity:
At least one H2Hub must demonstrate the end-use of clean hydrogen in the electric power generation sector;
At least one H2Hub must demonstrate the end-use of clean hydrogen in the industrial sector;
At least one H2Hub must demonstrate the end-use of clean hydrogen in the residential and commercial heating sector; and
At least one H2Hub must demonstrate the end-use of clean hydrogen in the transportation sector.
(C) Geographic Diversity: To the extent possible, each H2Hub must (i) be located in a different region of the country; and (ii) use energy resources abundant in the respective region.
(D) Hubs in Natural Gas-Producing Regions: If possible, at least two H2Hubs must be located in regions with the greatest natural gas resources.
(E) Employment: The DOE must give priority to H2Hubs demonstrating a high likelihood of creating opportunities for skills training and long-term employment to the greatest number of residents of the region.
The September 22 DOE Funding Opportunity Announcement to seek H2Hub proposals delineated a framework for development, construction, and operation. H2Hubs will follow a four-phased structure:
- Phase 1: Initial planning and analysis activities to ensure the H2Hub concept is both technologically and financially viable. This phase will seek input from stakeholders.
- Phase 1 will last approximately 12-18 months from project initiation. Phase duration is project specific.
- Up to $20,000,000 in DOE funding
- Phase 2: Finalize engineering designs and business development, site access, labor agreements, permitting offtake agreements, and community engagement activities necessary for progression to Phase 3.
- After the successful completion of Phase 1, Phase 2 will take up 2-3 years. Phase duration is project specific
- Up to 15% of total DOE funding
- Phase 3: Installation, integration, and construction of H2Hubs
- After the successful completion of Phase 2, Phase 3 may take approximately 2-4 years. However, Phase 3 duration will differ significantly for each H2Hub.
- Negotiable amount of DOE funding
- Phase 4: Ramp-up to full operations, which includes data collection to analyze operations, performance, and financial viability
- After the successful completion of Phase 3, DOE anticipates Phase 4 activities will last 2-4 years but may extend longer depending upon specific H2Hub characteristics. By the end of Phase 4, H2Hubs will demonstrate full commercial-scale operations for an extended period.
- Negotiable amount of DOE funding
Currently, the DOE will only authorize funding for Phase 1. Additional funding for phases 3-4 will be based upon an H2Hub’s Phase 1 success.
The September 22 announcement provides an extensive list of eligibility criteria. If an H2Hub funding application does not meet the eligibility requirements, it will not be considered for funding. Among many others, notable criteria include:
(A) Eligible Applicants: The preferred applicants are domestic entities and either: (1) higher education institutions; (2) for-profit entities; or non-profit entities; and (4) state and local governmental entities, and Tribal nations.
(B) Cost Sharing: Must be at least 50% of the total project costs for demonstration projects or commercial application activity. The cost share must come from non-federal sources unless otherwise permitted by law. Cost share may come from either project participants, state or local governments or third-party financing. The September 22 announcement contained a cost share information sheet and the same cost share calculation.
(C) Compliance Criteria: Concept Papers, Full Applications, and any replies to reviewer comments must meet all compliance criteria or they will be considered non-compliant, and DOE will not review or consider non-compliant submissions.
The application process includes two phases (1) a Concept Paper phase; and (2) a Full Application phase. Applicants must submit an eligible Concept Paper to be eligible to submit a Full Application. Concept Papers are due on November 7, 2022, by 5:00 P.M. EST. Full Applications are due on April 7, 2023, by 5:00 P.M. EST. The DOE encourages submission at least forty-eight hours in advance of the deadline.
Written with the assistance of Mackinlee Rogers, a fall clerk in the Husch Blackwell LLP Austin, Texas office.