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Spotlight

Hydrogen Hubs Are Struggling. Why?

Explanations abound.

Hydrogen plant.
Shutterstock / Heatmap

Key projects for the Energy Department’s hydrogen hubs are dropping like flies. And it’s really not obvious why.

Three hubs DOE selected for potential federal support have lost projects that were linchpins. Industrial giant Fortescue is no longer publicly committing to a hydro-powered hydrogen production plant proposed in Washington state that was key to the Pacific Northwest hub. News of a pause at the project was previously reported, but the company notably declined to even say the project was still getting built when asked about it this week.

“While Fortescue will continue to maintain a portfolio of other projects for the future, our financial discipline always comes first. We will never do projects that are not currently economically viable,” the company said in a statement provided to me this morning.

Meanwhile CNX, a natural gas company, has indefinitely put the kibosh on a blue hydrogen ammonia plant in West Virginia crucial to the Appalachian hydrogen hub known as ARCH2. Marathon Petroleum’s midstream subsidiary MPLX also confirmed to me they’ve canceled a hydrogen storage facility planned for that hub, and Chemours is no longer involved with the hub either.

Another blue hydrogen ammonia plant in North Dakota crucial to a different hub – known as the Heartland hub – has been canceled by Marathon and TC Energy.

In other words: a year after the Biden administration made a big announcement about the seven hubs that could potentially receive billions of dollars in government funding, almost half of them are running into serious trouble.

The companies that have quietly pulled out or paused projects are laying blame on implementation of the federal hydrogen production tax credit, claiming rules enforcing the “three pillars” and carbon intensity requirements are too onerous. Meanwhile critics of the hydrogen hubs are seizing on project cancellations and delays to argue against their construction outright; the Ohio River Valley Institute, an environmental group opposed to the ARCH2 hydrogen hub, has received a lot of press in recent days for a report claiming the hub is “coming apart.”

I’m already hearing whispers from industry insiders in D.C. who are trying to spin these cancellations as evidence the credit implementation has been too favorable to climate activists and is constraining growth in the nascent hydrogen space.

But what’s really going on?

Conversations with experts and stakeholders indicate to me this could be evidence of broader macroeconomic issues hitting the hydrogen industry, from inflation pushing up the price of electrolyzers to the stubbornly low price of natural gas. We saw this with the Plug Power project in New York, which we were first to report problems with. These market issues may be overpowering the subsidies and demand-side benefits of the bipartisan infrastructure law and Inflation Reduction Act.

These hiccups may also be a calm before a storm of hydrogen investment and a reshuffling of capital that’ll become more evident after the IRA’s production tax credit is fully implemented with final regulations. Perhaps it’ll take final rules to see the companies supportive of the “three pillars” move more projects forward.

It could also be a mixture of these things and other factors, like issues with the specific sites companies had selected for their plants.

No matter the cause for these hubs stuttering, these projects falling out of the fold is a shock to no one, especially supporters of the “three pillars” approach to the tax credit. Though it may indicate flaws with a disorganized approach to the energy transition.

“I’m not surprised if at the end of the day some of the many projects supported by DOE are not viable in the end,” said Jesse Jenkins, an assistant professor at Princeton University and expert in energy systems engineering. In addition to co-hosting Heatmap’s Shift Key podcast, Jenkins leads the REPEAT Project, which produced influential policy analysis supporting the “three pillars” approach to Treasury’s implementation of the hydrogen production tax credit.

Irrespective of the reasons, it’s important to remember that on some level both industry and the Biden administration stumbled into this mess. That’s because Congress passed the bipartisan infrastructure law mandating the creation and financing of these hubs before the IRA was even introduced. The infrastructure law itself required DOE to start soliciting proposals for hub funding mere months after it was enacted. This means the hub program was crafted independent of a tax subsidy boosting supply.

The hubs may be lobbying for a specific version of the hydrogen production credit to be implemented, as many D.C. lobbyists like to point out, but the program wasn’t referenced in the tax credit’s statute either.

As Jenkins put it, any conflict between the hubs and tax credit provisions is evidence “that reflects that many of the projects [selected] are not compliant.”

Biden administration officials spoke to me for a half hour this morning about the canceled projects on the condition of anonymity to candidly discuss the tax credit and hubs. To them, this can be explained as the process working as intended, and they emphasized how the credit and hub are independent programs. They also expect more capital to be unleashed after the credit is finalized, as companies who’ve supported the “three pillars” get certainty to make final investment decisions.

The administration’s view sounded akin to the optimistic vision relayed to me by Clean Air Task Force’s Conrad Schneider: “This is what progress looks like. It’s slow, it’s steady. It’s not [a] steady state though.”

My take? This is further proof we live in a disorganized energy transition. So far in The Fight, we’ve covered the struggles to get projects built because of opposing forces at a grassroots level. That same dynamic applies to the federal climate programs incentivizing a switch from carbon-intensive business practices. And sometimes, there’ll be tug-of-war competing interests between the climate programs themselves.

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Spotlight

Meta’s Bacterial Mystery Could Poison the Data Center Well

Water pollution in Wyoming has big implications for the future of data center development.

A data center and water pollution.
Heatmap Illustration/Getty Images

Did a Meta data center introduce a rare, dangerous bacteria into the sewers system of Wyoming’s capitol city? It’s an environmental pollution mystery with an answer that could decide the future of American AI infrastructure development.

Our drama begins in Cheyenne, Wyoming, where the city’s board of public utilities just wrapped up a lengthy investigation into the presence of Cupriavidus gilardii, a potentially lethal bacteria resistant to heavy metals, in the city’s wastewater treatment systems. Apparently, in February, board staff detected the contamination and shut off public access to the city’s water reuse system, a supply of treated non-potable water fed with treated wastewater and used for lawns, athletic fields, and other green spaces. Officials were worried that spraying this water could release into the environment a bacteria found to cause fatal health outcomes in immunocompromised or elderly people who are infected by it.

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How Big of a Problem Is Data Center Noise?

A conversation with Ross Marchard of the Taxpayers Protection Alliance

The Q&A subject.
Heatmap Illustration

This week’s conversation is with Ross Marchard, executive director for the Taxpayers Protection Alliance, a center-right advocacy group that focuses on what it sees are onerous policies potentially hindering responsible collection and use of tax dollars. TPA’s position on AI clearly skews pro-free market, as they’ve recently defended Anthropic from Trump administration attacks. TPA also recently took on the mantle of defending data centers from noise complaints, publishing a paper on Tuesday “debunking myths about data centers being excessively noisy.” The paper references various analyses of data centers by state legislators and local regulators to argue that claims the sector is generally noisy are false.

I asked TPA’s executive director to chat with me about why and how the organization will try to quell these fears. The conversation was really interesting so I decided to share it with you in full, sans light editing for clarity and consistency.

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Hotspots

The Electro-Magnetic Freakout on the Cape

And more of the week’s news around project development.

The United States.
Heatmap Illustration/Getty Images

1. Barnstable County, Massachusetts – I have a whopper of an update on the Vineyard Wind project, which might be in operation but risks becoming fodder in the fight against offshore wind.

  • Like all offshore wind projects, Vineyard Wind has to send power to the coastline via cable. One of the three sites where these giant power lines land is Barnstable, a small shore community, where longtime residents for years have voiced concerns about electromagnetic fields or EMF.
  • Concerns about EMF are comparable to those about infrasound from data centers. We do not know whether these concerns are really rooted in legitimate health impacts, as I have written, but regardless this remains a common concern raised around large high-voltage power lines, including those for offshore wind projects.
  • On June 30, the town’s board of health heard from a group of Barnstable residents who claim to have measured EMF from the town’s wind cable. The same group, Save Greater Downes Beach, had unsuccessfully sought to stop the cables through litigation and public pressure.
  • This board of health meeting was controversial: Ahead of the meeting, the director of Sierra Club’s Massachusetts chapter wrote the board of health requesting their testimony be limited and no action be taken on the findings. “Concerns being raised about electromagnetic field exposure associated with Vineyard Wind 1’s underground export cables are not only invalid but outside of the Board of Health’s jurisdiction,” wrote chapter director Vick Mohanka, according to a copy of the letter posted to Facebook by anti-wind activist Susanne Conley.
  • This Sierra Club chapter was right to be concerned about how this meeting would affect Vineyard Wind. I watched the lengthy testimony before the board of health. Activists presented a case that the town should implore regulators with authority to deeply study the wind farm cables. They asked the board of health to back a state study on EMF and put the question before the Massachusetts permitting regulator, the Energy Facility Siting Board.
  • “We’re not asking the board to place any restrictions or limitations on the project at this time,” Gary Peters, a local medical professional and member of Save Greater Dowses Beach, told the board. “We’re asking you to put that ball in the court of EFSB.”
  • The board was receptive to this request. Board chair F.P. Lee told the group he would “take this under advisement” and said he’d talk to their legal department about it. Daniel Luczkow, the board’s vice chair, said he agreed with activists’ feelings that Barnstable residents were “guinea pigs.”
  • “It sounds like the contention is that these levels we’re measuring are much, much higher than the information given when the project was started,” Luczkow said. “We’re the only place on the planet, maybe, that actually runs these [cables] through a populated area and we have no idea what type of damage they’re causing?”
  • Should Barnstable strenuously take this issue up, I would predict it only be a matter of time before it’s also raised by organs of the federal government. Health and Human Services Secretary Robert F. Kennedy Jr. last year asked the Centers for Disease Control to study negative health impacts from precisely this infrastructure. This kind of hyperlocal squabble is often what manifests as conversation in anti-wind opposition circles, and Vineyard Wind was already causing PR headaches for the energy transition.
  • Avangrid did not respond to a request for comment.

2. Prince William County, Virginia – Northern Virginia is officially hostile territory for data center developers, and I learned about it through a call from my mom.

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