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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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Hotspots

Trump Administration to ‘Reconsider’ Approval for MarWin

And more of the week’s most important conflicts around renewable energy.

The United States.
Heatmap Illustration/Getty Images

1. Sussex County, Delaware – The Trump administration has confirmed it will revisit permitting decisions for the MarWin offshore wind project off the coast of Maryland, potentially putting the proposal in jeopardy unless blue states and the courts intervene.

  • Justice Department officials admitted the plans in a paragraph tucked inside a filing submitted to a federal court in Delaware this week in litigation brought by a beach house owner opposed to the offshore wind project.
  • DOJ stated in the filing that more time was “necessary as Interior intends to reconsider its [construction and operations plan] approval” for MarWin, and that it plans to “move” for “voluntary remand of that agency action” in a separate case filed by Ocean City, Maryland against the project.
  • “The outcome of Interior’s reconsideration has the potential to affect the Plaintiff’s claims in this case,” the filing stated. “Continuing to litigate this case before any decision is made in the [Ocean City case] would potentially waste considerable time and resources for both the parties and the Court.” As of today, no new filings have been made in the Ocean City case.

2. Northwest Iowa – Locals fighting a wind project spanning multiple counties in northern Iowa are opposing legislation that purports to make renewable development easier in the state.

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Q&A

Should Renewable Energy Companies Sue Trump?

They don’t have much to lose, Heiko Burow, an attorney at Baker & Mackenzie, tells me.

Heiko Burow.
Heatmap Illustration

This week, since this edition of The Fight was so heavy, I tried something a little different: I interviewed one of my readers, Heiko Burow, an attorney with Baker & Mackenzie based in Dallas, Texas. Burow doesn’t work in energy specifically – he’s an intellectual property lawyer – but he’s read many of my scoops over the past few weeks about attacks on renewable energy and had legitimate criticism! Namely, as a lawyer who is passionate about the rule of law, he wanted to send a message to any developers and energy wonks reading me to use the legal system more often as a tool against attacks on their field.

The following conversation has been abridged for clarity. Let’s dive in.

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Spotlight

Interior’s Renewables Attacks Snag Power Lines

Nevada's Greenlink North is hit with a short, but ominous delay.

Solar panels and pylons.
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I can now confirm the Trump administration’s recent attacks on renewables permitting appear to be impacting transmission projects, too.

Over the past two weeks, the Interior Department has laid forth secretarial orders implementing a new regime for renewables permitting on federal lands. This has appeared to essentially kill the odds of utility-scale solar or wind projects on federal land getting approved any time soon. Public timetables for large solar projects across the American West have suddenly slipped back by years-long intervals, and other mega-projects – like Esmeralda 7 – appear now to be trapped in limbo.

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