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Ventura Highway - Is a DOE-Backed Clean Hydrogen Hub in California’s Future?

Last year’s $1 trillion-plus infrastructure law calls for the U.S. Department of Energy (DOE) to invest up to $8 billion over five years to support the development of four or more U.S. hydrogen hubs. It’s a safe bet that the DOE will determine that at least one location along the Gulf Coast is worthy of its support — and maybe even a couple, given the extent of existing hydrogen supply, demand and midstream infrastructure already in place in Texas and Louisiana in particular. We’d also be willing to wager that California will be another beneficiary of the federal government’s hydrogen-hub largess. Not only does the nation’s most populous state have extraordinary potential for clean-hydrogen development, its public and private sectors have been aggressively pursuing climate-friendly energy alternatives for decades. In today’s RBN blog, we examine the various efforts underway to develop hydrogen-related infrastructure — and hydrogen demand — in the Golden State.

While there’s no certainty as to how the energy transition will play out over the next two or three decades, it seems clear that the shift to a lower-carbon economy in the U.S. and around the world will be an “all of the above” kind of thing, involving everything from wind, solar and nuclear power to battery storage, electric vehicles and fuel cells — and don’t forget hydrocarbons. The U.S. shift toward increasing natural gas usage has had by far the most significant impact on decarbonization up to now. Beyond that, the impact of hydrocarbons on the climate can be reduced by blending with renewable fuels or other means — or mitigated (partially or even fully) with carbon offsets and carbon sequestration, as we discussed in a recent Drill Down Report.

Then there’s low-carbon or clean hydrogen, the focus of our Gulf Coast Highway blog series. In Part 1, we looked at the provisions of the Infrastructure Investment & Jobs Act of 2021 that are designed to propel the hydrogen market forward. In addition to the $8 billion in support for new hydrogen hubs we mentioned in the introduction to today’s blog, the new law sets aside an additional $1 billion to back efforts to reduce the cost of producing clean hydrogen from water via renewables-powered electrolyzers to $2/kilogram (from the current $4-plus/kg) by 2026, and another $500 million to help advance equipment manufacturing technologies and techniques for clean-hydrogen processing, delivery, storage, etc. (The federal government’s first Energy Earthshots initiative, announced in July 2021, seeks to bring the cost of clean hydrogen down to $1/kg within a decade. The recently passed Inflation Reduction Act [IRA], which we detailed in Name Game, includes the new 45Z hydrogen production tax credit, which will be worth up to $3/kg, depending on the lifecycle greenhouse gas [GHG] emissions rate at the facility.) We also discussed the criteria the DOE will use in selecting the hydrogen hubs it will invest in, including feedstock diversity, end-use diversity, geographic diversity, and the potential to create jobs. Then, in Part 2 and Part 3, we detailed hydrogen-hub plans under development in the Houston and Corpus Christi areas, respectively.

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