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Alex Kimani

Alex Kimani

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com. 

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America’s Hydrogen Hubs Could Mint New Billionaires

  • Buried deep in Biden’s $1 trillion bipartisan infrastructure bill lies a huge boost for domestic hydrogen production.
  • The historic plan includes a provision for $9.5 billion in funding to build at least four domestic hydrogen hubs.
  • The plan has led to new strategic partnerships between states eyeing this multi-billion-dollar jackpot.

After years of failed efforts in Washington to overhaul physical infrastructure, last year,  President Joe Biden signed the more than $1 trillion bipartisan infrastructure bill into law, unlocking funds for transportation, broadband, and utilities. Buried deep into the historic plan was a provision for $9.5 billion in funding to build at least four hydrogen hubs--places where the gas can be produced and used in a self-reinforcing cycle. A hydrogen economy that runs factories and power plants on the fuel may be years away; however, that has not stopped multiple U.S. states from scrambling for Biden's hydrogen bonanza, never mind the fact that many have not even worked out the details of how they intend to realize their hydrogen dream.

According to Bloomberg, many states are forming strategic partnerships to increase their chances of landing funding. For example, New York has formed an alliance with Massachusetts, New Jersey, and Connecticut to produce green hydrogen. Their plan appears to make sense considering that none of the four states is endowed with natural gas, the raw material used in the production of natural gas through steam-methane reforming. New York is also home to one of the country's hydrogen behemoths: Plug Power Inc. (NASDAQ:PLUG).

Last month, McDermott (OTCPK:MDRIQ) announced that it would design and build two 500K-gallon double-wall liquid hydrogen spheres for Plug Power's new green hydrogen production facility in New York. Plug says it expects the production facility, which will leverage its proton exchange membrane electrolyzer technology, to produce 45 metric tons/day of green liquid hydrogen, making it the largest green hydrogen facility in North America.

Arkansas, Louisiana, and Oklahoma have forged another partnership that will use existing infrastructure to form the basis of its hub. Hydrogen is already produced in the region using natural gas and used in some manufacturing processes, such as lowering the sulfur content of fuels from refineries. To qualify for the federal money, the carbon dioxide released by stripping hydrogen from gas will need to be captured and stored, most likely underground. The three states intend to use their hydrogen to decarbonize heavy industry and transportation.

Related: World’s Richest Have Taken A $400 Billion Wealth Cut Amid Ukraine Crisis

A third alliance involving Colorado, New Mexico, Utah, and Wyoming also seems to be taking an "all-of-the-above" approach. The sprawling combination of states includes plenty of natural gas and renewables, particularly wind power, and their agreement to seek funding highlights both.

Back in February, a coalition of businesses that includes Equinor ASA (NYSE:EQNR), Mitsubishi Power, Marathon Petroleum Corp. (NYSE:MPC), and United States Steel Corp. (NYSE:X) said they would help work on a hub that would knit together Ohio, Pennsylvania, and West Virginia

Some states like Joe Manchin's West Virginia have decided to go it alone.

Clean Energy Turns Bullish

The U.S. is not the only country building out a hydrogen economy.

After enduring a year to forget in 2021, the hydrogen and clean energy sectors have turned bullish again as Russia's war on Ukraine is helping to shine a spotlight on energy security. Sky-high oil and gas prices are also making the case for renewables more attractive. 

The EU has pledged to cut Russian gas imports by two-thirds by the end of the year, a  target it aims to achieve by diversifying its suppliers and improving energy efficiency in households. But more importantly, the bloc has vowed to double down on green energy fuels by increasing renewable hydrogen production.

The 27-member bloc has been heavily criticized for being too reliant on Russia for energy, with the EU importing around 45% of its gas from the country, according to the International Energy Agency. In 2020, Russian oil imports accounted for about 25% of the bloc's crude purchases, according to the region's statistics office.

Two years ago, the European Union set out its new hydrogen strategy as part of its goal to achieve carbon neutrality for all its industries by 2050. 

In a big win for the hydrogen sector, the EU outlined an extremely ambitious target to build out at least 40 gigawatts of electrolyzers within its borders by 2030, or 160x the current global capacity of 250MW. The EU also plans to support the development of another 40 gigawatts of green hydrogen in nearby countries that can export to the region by the same date.

The EU aims to have at least 6 gigawatts of clean hydrogen electrolyzers installed by 2024.

The EU announced that hydrogen will play a key role in helping decarbonize manufacturing industries and the transport sector. The organization says it will support blue hydrogen during a "transition phase," although it did not mention it in its topline targets.

Although natural gas producers would no doubt prefer centralized blue hydrogen, they will not be complaining too much since natural gas infrastructure can easily be repurposed to carry hydrogen.

The decision by European policymakers follows years of hard lobbying by more than 30 energy companies, including ExxonMobil, ENI, Shell, Total, Equinor, and other European natural gas companies which have called for a "technology-neutral strategy" arguing that renewables such as wind and solar cannot grow fast enough to power the "clean hydrogen" sector to meet decarbonization goals. The signatories have claimed the green hydrogen industry is currently too small to spark the growth of a large-scale European hydrogen economy in the space of just a decade.

Although a colorless gas, hydrogen gets referred to in colorful terms, including blue, brown, green, and gray, depending on how it's produced. Nomenclature used by market research firm Wood Mackenzie classifies it as brown when it's produced via gasification of coal or lignite or gray when it's made through steam methane reformation, typically using natural gas as the feedstock. These two are currently the leading methods of producing industrial hydrogen. Both processes generate varying amounts of C02 though they are still considerably cleaner than burning fossil fuels.

By Alex Kimani for Oilprice.com

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Leave a comment
  • Thomas Broussard on April 18 2022 said:
    Hydrogen's Global Warming Potential (caused by fugitive emissions) was found to be 11 times that of Carbon Dioxide. Why pursue the dream. Stop all development now!

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