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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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Plus, what a Texas energy veteran thinks is behind the surprising turn against solar and wind.
I couldn’t have a single conversation with a developer this week without talking about Texas.
In case you’re unaware, the Texas Senate two days ago passed legislation — SB 819 — that would require all solar and wind projects over 10 megawatts to receive a certification from the state Public Utilities Commission — a process fossil fuel generation doesn’t have to go through. The bill, which one renewables group CEO testified would “kill” the industry in Texas, was approved by the legislature’s GOP majority despite a large number of landowners and ranchers testifying against the bill, an ongoing solar and wind boom in the state, and a need to quickly provide energy to Texas’ growing number of data centers and battery manufacturing facilities.
But that’s not all: On the same day, the Texas Senate Business and Commerce Committee approved a bill — SB 715 — that would target solar and wind by requiring generation facilities to be able to produce power whenever called upon by grid operators or otherwise pay a fine. Critics of the bill, which as written does not differentiate between new and existing facilities, say it could constrain the growth of Texas’ energy grid, not to mention impose penalties on solar and wind facilities that lack sufficient energy storage on site.
Renewable energy trades are in freak-out mode, mobilizing to try and scuttlebutt bills that could stifle what otherwise would be a perfect state for the sector. As we’ve previously explained, a big reason why Texas is so good for development is because, despite its ruby red nature, there is scant regulation letting towns or counties get in the way of energy development generally.
Seeking to best understand why anti-renewables bills are sailing through the Lone Star State, I phoned Doug Lewin, a Texas energy sector veteran, on the morning of the votes in the Texas Senate. Lewin said he believes that unlike other circumstances we’ve written about, like Oklahoma and Arizona, there really isn’t a groundswell of Texans against renewable energy development. This aligns with our data in Heatmap Pro, which shows 76% of counties being more welcoming than average to a utility-scale wind or solar farm. This is seen even in the author of the 24/7 power bill – state Senator Kevin Sparks – who represents the city of Midland, which is in a county that Heatmap Pro modeling indicates has a low risk of opposition. The Midland area is home to several wind and solar projects; German renewables giant RWE last month announced it would expand into the county to power oil and gas extraction with renewables.
But Lewin told me there’s another factor: He believes the legislation is largely motivated by legislators’ conservative voters suffering from a “misinformation” and “algorithm” problem. It’s their information diets, he believes, which are producing fears about the environmental impacts of developing renewable energy.
“He’s actively working against the interests of his district,” Lewin said of Sparks. “It’s algorithms. I don’t know what folks think is going on. People are just getting a lot of bad information.”
One prominent example came from a hailstorm during Hurricane Uri last year. Ice rocks described like golfballs rained down upon south-east Texas, striking, among other things, a utility-scale solar farm called Fighting Jays overseen by Copenhagen Infrastructure Partners. The incident went viral on Facebook and was seized upon by large conservative advocacy organizations including the Competitive Enterprise Institute.
What’s next? Honestly, the only thing standing between these bills and becoming law is a sliver of hope in the renewables world that the millions of dollars flowing into Texas House members’ districts via project investments and tax benefits outweigh the conservative cultural animus against their product. But if the past is prologue, things aren’t looking great.
And more of the week’s most important conflicts around renewable energy.
1. Westchester County, N.Y. – Residents in Yonkers are pressuring city officials to renew a moratorium on battery storage before it expires in July.
2. Atlantic County, New Jersey – Sorry Atlantic Shores, but you’re not getting your EPA permit back.
3. St Clair County, Michigan – We may soon have what appears to be the first-ever county health regulations targeting renewable energy.
4. Freeborn County, Minnesota – Officials in this county have rejected a Midwater Energy Storage battery storage project citing concerns about fires.
5. Little River County, Arkansas – A petition circulating in this county would put the tax abatement for a NextEra solar project up for a vote county-wide.
6. Van Zandt County, Texas – Officials in this county have reportedly succeeded in getting a court to impose a restraining order against Taaleri Energy to halt the Amador battery storage project.
7. Gillespie County, Texas – Peregrine Energy’s battery storage proposal in the rural town of Harper is also facing a mounting local outcry.
8. Churchill County, Nevada – Battery storage might be good for Nevada mining, but we have what appears to be our first sign of revolt against the technology in the state.
A conversation with Mike Barnwell of the Michigan Regional Council of Carpenters and Millwrights
Today’s conversation is with Mike Barnwell at the Michigan Regional Council of Carpenters and Millwrights, a union organization more than 14,000 members strong. I reached out to Barnwell because I’d been trying to better understand the role labor unions could play in influencing renewables policy decisions, from the labor permitting office to the fate of the Inflation Reduction Act. So I called him up on my way home from the American Clean Power Association’s permitting conference in Seattle, where I gave a talk, and we chatted about how much I love Coney Island chili in Detroit. Oh, and renewable energy, of course.
The following conversation has been lightly edited for clarity.
I guess to start, we covered Michigan’s new permitting and siting law. What role did your union play in that process?
Locally, with the siting laws, we were a big part of that from the local level all the way to the state. From speaking at the Capitol down to city council and building authority meetings about projects happening in areas and cleaning out some of the red tape to make these possible.
It’s created jobs for our members current and future.
So you see labor as being helpful in getting permitting done faster?
Being labor maybe I’m biased but I think it is. I say labor collectively, we’ve got a pretty good coalition here in Michigan.
Do you think unions like yours will be similarly influential in the future of the Inflation Reduction Act back in Washington, D.C.?
Let me put it this way: the requirements of registered apprenticeships being on site come back to creating jobs for our members. Otherwise it’s just hiring anybody off the street – unskilled and unsafe workplaces. We train our folks through our apprenticeships and that legislation is ensuring safety on the jobs for one, let alone letting them build careers and pensions.
We’re a carpenter-centric union but this all falls under the work of what we do. We’ve been implementing our four-year apprenticeship program — every kind of renewable energy training you can think of, we’ve implemented it into our programs. It’s hands on. We have mockups at our training centers where [projects] get built and torn down and built and torn down. When you talk about a utility-scale solar project, it’s an average of 160-170 individuals working on that project. Without proper skills training they can’t work in coordination with each other.
How are you feeling about the future of the tax credits?
Uneasy.
The current leadership, they obviously have different views than the past leadership did. Lookit – when you talk about the IRA that has done nothing but create jobs for the blue collar working man in not just our state but around the nation. Here in Michigan, it almost went from zero to sixty in 10 seconds. It was miraculous what they did for us. We went from scratching and clawing in trying to procure these projects to now the IRA requiring skill training and prevailing wage and benefits and health care, which what as a union we’re all about.
Just in the last year, we’ve brought on over 300 new members just for solar alone. That’s all because of the federal tax credit and the language in the IRA.
Last question – what role do you see labor playing in the process of getting individual projects permitted and built?
Our role in that, I’ve been to plenty of these community meetings myself but it’s the actual working guy, the guy who is using his tools every week, who goes and speaks up to their county or town leadership about the benefits of these projects.
That big BlueOval battery plant in Marshall, Michigan – I don’t know if that would’ve been permitted without the work of our members being at those meetings, letting their voices be heard. There was obviously an opposition voice as well, but ours were a bit louder in the room. People want to hear the voices that say yes we want it and here’s why. This is how I support my family from the work on these projects. Otherwise it would’ve never gotten off the ground.