The Stealth Winners from Biden’s Hydrogen Hubs? Gas, Trucks, and Unions

Seven regions of the country are about to become laboratories for a whole new system of producing and using energy. If all goes according to the Biden administration’s plans, by the end of the decade, clean hydrogen, which can be produced and used without greenhouse gas emissions, will replace fossil fuels across a variety of industries that can’t easily run on renewable energy.

President Biden announced the seven regions that will be eligible for up to $7 billion to build “hydrogen hubs” while visiting Pennsylvania on Friday. The selected hubs are made up of coalitions of governments, companies, labor groups, and universities that will use a combination of private and public funding to build new infrastructure to test the production, transport, and use of hydrogen.

The hubs have not yet been awarded any funding and will now move into a negotiation phase where they will refine their community benefits plans and other aspects of their proposals before being awarded an initial grant to move forward. In the coming weeks, the Department of Energy will begin hosting virtual community briefings with the project teams and local stakeholders in their regions, which may be used to inform the negotiation process.

Friday’s announcement included the names of the seven hubs that are eligible for funding and a few paragraphs explaining the general outline of what they plan to do. The Department of Energy provided the following map which offers a rough sense of the number of projects within each hub and where they will be located. But there’s still very little information about what these projects are.

U.S. Department of Energy

Based on what we do know, here are three big takeaways from the announcement today.

1. There’s going to be a lot of natural gas.

At least some of the dots on that map will be production facilities. The main benefit of hydrogen is that it doesn’t release emissions when burned, but the challenge is that it isn’t readily available in the environment like coal or gas or renewable energy. It has to be produced. And it will only help tackle climate change if it can be produced without emissions.

Three of the hubs — in California, the Pacific Northwest, and the Mid-Atlantic — plan to make hydrogen using only renewable energy, nuclear power, or biomass. But at least three of the hubs — in the Gulf Coast, Appalachia, and the Midwest — plan to make it from natural gas and capture the carbon released in the process. (The Department of Energy did not specify what resources the Heartland hub plans to use.)

A lot of climate advocates and researchers are skeptical if not outright against schemes to make hydrogen from natural gas with carbon capture. One risk is that not all of the carbon will be captured. Another is that it takes additional natural gas to run the capture equipment, so the overall effect could be increased natural gas production. That could perpetuate pollution in communities living near wells and processing facilities. Depending on how much methane leaks from natural gas infrastructure, it could also cancel out any benefits from using hydrogen.

The scale of these risks will become clearer after the projects move to the awards phase, at which point they will have to “submit detailed risk assessments and risk management plans outlining potential risks and impacts, and how they will mitigate those impacts.”

2. Get ready for hydrogen trucks.

Hydrogen has the potential to be used in basically any application that we use fossil fuels in today. But because it takes so much energy to make, it won’t necessarily make sense to use it everywhere. One of the main purposes of the hydrogen hubs program is to determine the cases where hydrogen will be an efficient, economical way to cut emissions.

The hubs outline a variety of ways they will use hydrogen, from steelmaking to fertilizer production to power generation. But there’s one area that at least six out of the seven hubs all see a future in: heavy duty transportation. All of the regions except the Heartland hub describe building networks of hydrogen fueling stations for long-haul trucks, buses, municipal waste, drayage, and other heavy duty vehicles.

Truck manufacturers are mixed on whether hydrogen will ultimately be the best solution to replace diesel. Equipping trucks with rechargeable batteries could turn out to be cheaper. But powering trucks with hydrogen fuel cells may be a lighter, space-saving option, and offer the ability to refuel more quickly. If the hubs program establishes a national network of hydrogen fueling stations, that could help tip the scales in favor of fuel cell trucks. The question is whether it will be built in time to beat the pace of battery innovation.

However, there are two other types of transport where many experts agree hydrogen will be useful: aviation and shipping. The Midwest and Pacific hubs also plan to produce aviation fuel, and the Gulf Coast aims to produce fuel for ships.

3. Many jobs will be union.

While hydrogen hubs certainly come with risks, they also have the potential to deliver big economic benefits to communities. The research firm Rhodium Group estimates that a commercial-scale hydrogen production facility that uses electricity is associated with an average of 330 jobs during the construction phase and 45 permanent jobs when the plant becomes operational.

The hubs are expected to create more than 200,000 jobs during the construction phase, and more than 100,000 permanent jobs. The question, as always, is whether these will be “good” jobs. But at least three of the hubs — in California, the Mid-Atlantic, and the Pacific Northwest — say they will require labor agreements for all projects connected to their hubs. If the job estimates provided by the hubs are accurate, some 86% of the permanent positions created by the hubs will be in these three regions.

By definition, these kinds of deals are hashed out between developers and local unions prior to any hiring and establish wages and benefits for the workers involved in a project. They don’t guarantee that union workers will be hired, but they do level the playing field for union contractors to compete with non-union shops — and set clear standards for whoever is ultimately hired.