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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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The Trump administration appears to be advancing solar projects through the permitting process now.
After a temporary halt to permitting for solar projects, the Bureau of Land Management told me a few weeks ago that it had lifted the pause, but I had told you I would wait for confirmation to see whether projects could actually move through government permitting. On Friday, the Bureau of Land Management publicly confirmed that federal solar permitting can happen again, formally approving the Leeward Renewable’s Elisabeth solar project in Yuma County, Arizona – what appears to be the first utility-scale solar facility on federal acreage approved by the Trump administration.
The Elisabeth project is located in a remote part of southwestern Arizona in the Agua Caliente Solar Energy Zone, an area designated for solar energy leasing that has existed for more than a decade, and is adjacent to other large solar projects that have been previously approved according to BLM.
On the same day, BLM released a draft environmental review of a separate solar project in Arizona that the agency segregated land for late last year at the same time as Elisabeth: the Avantus’ Pinyon solar-plus-storage project, which is open for public comment through late May. Tucked on page 37 of that draft document was a list of other solar projects in the nearby vicinity on federal lands that have yet to enter the federal permitting process under the National Environmental Policy Act, which BLM dubbed as “reasonably foreseeable” impacts to the cumulative environment.
The fact BLM is willing to admit other solar projects could advance later on is significant after the sputtering seen in the earliest days of the Trump administration. We’d seen hints of progress seeping through updates to BLM webpages. In mid April, we reported the agency quietly updated the timetable for the Esmerelda 7 mega-solar project in Nevada to say the agency would issue a final decision on the project this summer. I took a peek through the BLM data and found other examples of the same thing, including the Bonanza solar farm, which is now expected to receive its final environmental impact statement in June according to the project website.
BLM has also moved forward with transmission lines on federal lands that would go to solar projects off federal lands, indicating a level of agnosticism about connecting solar farms to the grid if the energy is generated on private property.
It’s still not clear whether solar permits will be a steady trickle for the foreseeable future or if this form of renewable energy could benefit from the Trump administration’s desires to maximize energy generation. Take all of this with a grain of salt because at any moment, a news cycle or disgruntled legislator could steal the president’s ear and make him angry at solar power.
But in times as chaotic as these for U.S. renewables developers, we’ll take this ray of sunshine.
And more of the week’s top news in renewable energy conflicts.
1. Hampden County, Massachusetts – Disgruntled residents in the small city of Westfield have won their fight against a Jupiter Power battery storage project.
2. Staten Island, New York – Speaking of people booing battery storage, the battle over BESS on Staten Island is potentially turning into major litigation.
3. Montgomery County, Maryland – County planners have approved a small solar farm on agricultural lands in the small D.C. exurb of Rockville surprising even the project’s developer Chaberton Energy.
4. Mecklenburg County, Virginia – A 90-acre RWE solar project has been rejected for the second time by county officials despite the developer slimming down the project size in response to local complaints.
5. Licking County, Ohio – The Ohio Supreme Court is allowing Open Road Renewables’ utility-scale Harvey Solar project to proceed over objections from angry neighbors.
6. Adams County, Illinois – It’s not all sunshine and roses in the Midwest though, as even a relatively tiny solar farm is struggling to get approval in rural Illinois.
7. Pierce County, Wisconsin – An AES utility-scale solar farm is getting significant pushback from surrounding residents over farmland impacts.
8. Dickinson County, Iowa – Invenergy has removed some turbines from its Red Rock Wind Energy Center in a bid to try and overcome a vocal contingent of opposition in the county.
9. Cedar County, Iowa – Elsewhere in the Hawkeye State, an Iowa farmer is suing Nordex claiming that a wind turbine fire damaged his wheat crop.
10. Lincoln County, Oklahoma – A battery storage facility proposed by Black Mountain is the subject of an investigative news article about opposition to BESS in Oklahoma.
11. Santa Barbara County, California – The backlash to the Moss Landing battery fire has now led the central coast city of Santa Maria to ban new battery storage facilities.
A conversation with Jason Marshall of Massachusetts’ Executive Office of Energy and Environmental Affairs
This week’s conversation is about transmission. It may have been lost in the shuffle but earlier this week, the state of Massachusetts led a coalition of Northeast states in releasing a joint strategic action plan on transmission planning. We haven’t covered transmission fights too much yet in The Fight (that’ll change soon, stay tuned). So I wanted to learn more about how and why this plan came together, especially given how crucial wires will be to connecting renewables to the grid there. So I got on the horn with Jason Marshall, deputy secretary and special counsel for federal and regional energy affairs in Massachusetts’ Executive Office of Energy and Environmental Affairs. We wound up chatting about how significant this plan is – and a little bit about folk music too.
The following transcript is a slightly abridged version for clarity.
To start – why does this strategic action plan exist?
The strategic action plan has actually been about two years in the making and it’s something that the Healy-Driscoll administration has actually led from our office, knowing there’s a gap in transmission planning.
How transmission planning works today is it focuses on facilities developed within a specific planning region but Massachusetts – and all states – don’t exist as energy islands and we should be collaborating more closely across all regions. We saw a gap in identifying needs in the system, where we were only looking at needs within our singular region, and not looking at whether there are more cost effective ways to solve a reliability issue by enhancing ties with neighbors. That was basically it. There’s not a routine process that exists right now to do interregional planning.
Help me understand how transmission planning helps mitigate conflicts in developing transmission?
Planning in general helps mitigate conflict. You’re being proactive and have transparent procedures developed and put in place for how the process works.
This goes back to what the gap is. Because we don’t have formalized rules to do transmission planning, to the extent there are interregional transmission lines that our state develops, it’s happening on an ad hoc basis. It’s a project-by-project type of a process.
What are the conflicts most crucial to manage in transmission siting?
So taking a step back, this strategic action plan is not focused on siting and permitting. Massachusetts passed a landmark law last year that significantly reformed the siting and permitting process in [the state]. But that being said, this goes back to one of your earlier questions: if you have formalized procedures in place, in a set of rules filed with regulators, that’s a way to make sure there’s an efficient process with transparency at the earliest possible stage.
Walk me through how the plan does that.
There’s several components. In our view, the plan is really anchored by a request for information we hope to issue as early as this summer inviting project developers to submit design concepts to this group of states involved in the effort. I don’t think anything like that has ever been done before. The other part of that [request] is work the states plan to do, inviting stakeholders and market participants, to participate in a discussion on cost allocation and how the states may divide the costs of any interregional project that might come to fruition through this process. These are two really important steps that create formality around this.
Briefly, on that point, and I think this is important: typically the way transmission planning is done, you come up with a set of rules and then you implement those rules. But because those rules don’t exist, this group of states is collaborative and doing this in reverse, using potential real projects as a catalyst to explore broader reforms.
The last question is just a broader one about transmission and the power mix. A pretty crucial aspect of Massachusetts’ expected renewable energy portfolio is supposed to be offshore wind. We’re dealing with hurdles in that space right now. How does that impact your transmission planning and the power grid?
If you look through the plan, what will come across is that the effort is broader than any one specific resource. That’s purposeful. This group of states recognizes the many benefits that transmission provides, from increasing access to markets for lower price energy to reliability and resiliency. And it can include connecting new resources, and it’s not specific to any resource type.
That being said, like all resources, offshore wind could potentially be enabled through the work we’re doing. A number of resources could potentially be facilitated through this work. One of the components of the plan is trying to standardize equipment design used for transmission which is a real technical issue but it has real consequences in terms of facilitating a network transmission grid, making sure the equipment is interoperable and we can talk to each other.
To conclude, a fun question: what was the last song you listened to?
The last song? It was “Automatic” by The Lumineers. I love the new album, they’re coming to Fenway Park in July and I’m taking my daughter to the show.