Kick-Starting Deployment of Clean Hydrogen in the United States – The Bipartisan Infrastructure Law

In 2021, we witnessed a number of important developments in the future role of hydrogen as part of the United States’ energy transition pathway. President Biden has empowered the secretary of energy, through new legislation and funding commitments, to “speed up the development of critical technologies to tackle the climate crisis.”[1] Key to this effort is the $1.2 trillion Infrastructure Investment and Jobs Act (commonly referred to as the Bipartisan Infrastructure Law (BIL)) signed into law by President Biden on November 15, 2021. This client alert considers the key provisions of the BIL related to hydrogen and looks at how the U.S. Department of Energy (DOE) Hydrogen Program is to be implemented between now and 2026.

What does the BIL say on Hydrogen?

The BIL includes a range of provisions related to clean energy solutions, including hydrogen and carbon capture, utilization, and storage (CCUS). We have provided a summary of the main hydrogen-related provisions at the end of this client alert for easy access. Some key takeaways from the BIL are:

• Establishment of a National Clean Hydrogen Strategy and Roadmap. The BIL sets out the focus areas for the development by the DOE of a national strategy and roadmap to facilitate wide-scale production, processing, delivery, storage, and use of clean hydrogen.[2] 
• $9.5 billion in funding for clean hydrogen programs. The BIL directs $8 billion of funding for the development of at least four regional clean hydrogen hubs,[3] $1 billion for electrolysis research, development, and demonstration,[4] and $500 million for clean hydrogen technology manufacturing and recycling R&D and demonstration projects.[5] 
• Definition of “Clean Hydrogen.” Significantly, the BIL defines “clean hydrogen” in a technology-agnostic way, by reference to the carbon intensity (at the site of production) as: “hydrogen produced with a carbon intensity equal to or less than 2 kilograms of carbon dioxide (CO2)-equivalent produced at the site of production per kilogram of hydrogen produced.”[6] Based on this definition, the DOE, in consultation with the Environmental Protection Agency, is to establish an initial carbon standard for qualifying hydrogen projects by May 2022.[7] Specific details of the carbon intensity calculations (including how carbon offsets and carbon capture and sequestration will be treated) will be eagerly awaited by potential hydrogen project participants. Importantly, the “at the site” qualification in the definition appears to clarify that carbon intensity of processes upstream or downstream of the hydrogen production site will be excluded from the calculation. 
• H2 Matchmaker. The DOE plans to establish and maintain an interactive online map and database, which will act as a voluntary tool to assist with exchange of information and with the formation of teams of hydrogen producers, consumers, infrastructure operators, and other stakeholders for participation in hydrogen hubs. 

How does the BIL tie in with the DOE’s Energy Earthshot?

The BIL underpins and provides a legislative framework and funding for the DOE’s hydrogen initiatives. The BIL also aligns with the priorities already established by the DOE’s Hydrogen Shot, by emphasizing that the main goal of the electrolysis program is to reduce the cost of clean hydrogen to $2 per kg of hydrogen by 2026. Significant recent progress and ongoing activities include:

• Launch of the “Hydrogen Shot” / “1 1 1” ($1 for 1 kg clean H2 in 1 decade) on June 7, 2021. As part of the Hydrogen Shot, the DOE issued a Request for Information (RFI) on the potential locations that could support hydrogen demonstration projects and clean hydrogen hub formation.
• DOE held a public webinar on December 8, 2021 to share updates on the Hydrogen Shot and the BIL, including feedback received from 200+ responses to the RFI. The DOE reported on the consolidated findings of the RFI, on the basis of which they divided the United States into the following nine clean hydrogen clusters based on various perspectives including diverse resources, end-uses, and impact potential:

• Rollout by DOE of the H2 Matchmaker tool website took place in December 2021.  Early access to self-identified hydrogen participants will be provided in January 2022 and full access to interactive maps and company listings is targeted for February 2022.
• DOE will solicit proposals for the Regional Clean Hydrogen Hub Program by May 14, 2022. The DOE will select at least four regional hubs across the United States, meaning that the total number of hubs selected could be greater, with likely at least two hubs in regions with the greatest natural gas resources.

What should clients look out for?

Although the implementation of the hydrogen program under the BIL is still in its infancy, the scale of the planned hydrogen economy and the short target timelines imply that there may be advantages for early movers in the U.S. clean hydrogen sector. Interested parties should pay close attention to updates on the DOE hydrogen hub selection process and consider whether participation in the H2 Matchmaker portal, to connect with potential hub partners, is beneficial for them at this stage. In parallel, clients should watch out for further legislation (especially the Build Back Better Act) or regulations having a potential impact on the DOE Hydrogen Program.

While hydrogen production itself is not a novel technology, the immense speed at which the clean hydrogen sector in the United States is to be implemented, including the utilization of innovative production processes and a much broader range of end-use applications, means that proper project structuring and appropriate risk allocation among stakeholders will be more crucial than ever. Due to the anticipated political intricacies in the implementation of the clean hydrogen hubs across the United States, clients should partner with legal advisors with expertise not only in the relevant energy and infrastructure industries but also at the state and federal governmental level.

If you have any questions relating to this client alert or would like further information, please reach out to our dedicated energy transition and hydrogen team, who are standing by to advise you on all aspects of the hydrogen industry. In the Americas, please contact Susan Mac Cormac, Greg Smith, Shai Kalansky, or Benjamin Fox. In Asia, please contact Mike Graffagna, Jon Ornolfsson, or Tessa Davis.

Summary of key provisions of the Bipartisan Infrastructure Law

• The Act:
  • Provides that DOE will develop a National Clean Hydrogen Strategy and Roadmap.
  • Allocates $9.5 billion for clean hydrogen over five years.  The funding includes:
    
    • $8 billion for 4 Regional Clean Hydrogen Hubs;
    • $1 billion for R&D, demonstration, commercialization, and deployment of electrolysis technology; and
    • $500 million for clean hydrogen technology manufacturing and recycling R&D and demonstration projects.
  • Provides that DOE will develop a standard for carbon intensity of clean hydrogen production.
  • Provides that DOE will develop a Clean Electrolysis Program.

• Key Dates:
  • 90 days after Act’s enactment:
    
    • Clean Electrolysis Program will be established.
  • 180 days after Act’s enactment:
    
    • National Strategy and Roadmap to be submitted to Congress;
    • Clean Hydrogen Standard to be developed; and
    • Hydrogen Hubs Solicitation deadline.
  • 1 year after Hydrogen Hubs Solicitation Deadline:
    
    • Selection of Hydrogen Hubs.
  • Every 3 years after adoption of National Strategy and Roadmap:
    
    • Update the National Strategy and Roadmap.
  • 5 years after adoption of Clean Hydrogen Standard:
    
    • Update the Clean Hydrogen Standard.

• National Clean Hydrogen Strategy and Roadmap:
  • By May 14, 2022, DOE will develop a technologically and economically feasible, national strategy and roadmap to facilitate wide-scale production, processing, delivery, storage, and use of clean hydrogen.
  • The roadmap will focus on:
    
    • Establishing a standard of hydrogen production that achieves the clean hydrogen production standard (2 kg CO2/kg H2);
    • Clean hydrogen production and use from natural gas, coal, renewable energy sources, nuclear energy, and biomass;
    • Identifying potential barriers, pathways, and opportunities to transition to a clean hydrogen economy;
    • Identifying existing economic opportunities for the production, storage, use, etc. of clean hydrogen in the major shale gas-producing regions and for merchant nuclear power plants;
    • Adopting approaches reflecting geographic diversity across the country, to advance clean hydrogen based on resources, industry sectors, environmental benefits, and economic impacts in regional economies;
    • Identifying opportunities and barriers in using existing infrastructure for deploying clean hydrogen, including the natural gas infrastructure system, the carbon dioxide pipeline infrastructure system, end-use local distribution networks, end-use power generators, LNG terminals, and industrial users of natural gas; and
    • Identifying the needs for, and barriers and pathways to, developing clean hydrogen hubs (including, where appropriate, clean hydrogen hubs coupled with CCUS hubs).

• Regional Clean Hydrogen Hubs
  • A Regional Clean Hydrogen Hub is defined as: “a network of clean hydrogen producers, potential clean hydrogen consumers, and connective infrastructure located in close proximity.”
  • Establishment: DOE will support establishing at least 4 Regional Clean Hydrogen Hubs that:
    
    • Demonstrably aid achievement of the clean hydrogen production standard (2 kg CO2/kg H2);
    • Demonstrate the production, processing, delivery, storage, and end-use of clean hydrogen; and
    • Can be developed into a national clean hydrogen network.
  • The DOE will select hubs using the following criteria:
    
    • Feedstock Diversity Requirement: To the maximum extent practicable, there will be:
      
      • One hub that demonstrates clean hydrogen production from fossil fuels;
      • One hub that demonstrates production from renewable energy; and
      • One hub that demonstrates production from nuclear energy.
  • End-Use Diversity Requirement: To the maximum extent practicable, there will be:
    
    • One hub that demonstrates end-use of clean hydrogen in electricity generation;
    • One hub that demonstrates end-use in the industrial sector;
    • One hub that demonstrates end-use in the residential and commercial heating sector; and
    • One hub that demonstrates end-use in the transportation sector.
  • Geographic Diversity Requirement: To the maximum extent practicable, each hub:
    
    • Will be located in a different region of the United States; and
    • Will use energy resources abundant in that region.
  • Employment: The DOE will give priority to hubs likely to create opportunities for skilled training and long-term employment of the greatest number of regional residents.
• Funding: The DOE may make grants to each selected hub to accelerate commercialization of, and demonstrate the production, processing, delivery, storage, and end-use of, clean hydrogen.
• Implementation Process:
  
  • DOE will solicit proposals for and select the Regional Clean Hydrogen Hubs.
    
    • Hydrogen Hubs solicitation: By May 14, 2022.
    • Selection of Hydrogen Hubs: By first anniversary of submission deadline.
  • DOE will establish H2 Matchmaker, a voluntary tool to facilitate hub formation.
    
    • The vision for H2 Matchmaker is that it will serve as an interactive online map and database containing self-reported hydrogen producers, consumers, infrastructure operators, and other stakeholders.
    • The goals for H2 Matchmaker are to:
      
      • Assist with the formation of high-quality teams for hydrogen hubs and provide broader hydrogen stakeholder tracking and support for future efforts;
      • Increase regional hydrogen project awareness and opportunities for technology developers and suppliers;
      • Foster partnerships and catalyze investments and deployment of hydrogen production, storage, and distribution infrastructure by region; and
      • Promote regional business development opportunities by providing hydrogen supply and demand maps for current and planned projects.
    • The Matchmaker Process:
      
      • H2 stakeholders submit key data;
      • The data is then compiled into the H2 matchmaker database;
      • The maps are updated and published to the website; and
      • The maps are updated on a weekly basis and can be used by the stakeholders to help in the formation of partnerships.

• Clean Hydrogen Carbon Intensity
  • DOE, in consultation with EPA, will develop an initial standard for carbon intensity of clean hydrogen production by May 14, 2022.
  • The initial standard must:
    
    • Support clean hydrogen production from fossil fuels with CCUS, hydrogen-carrier fuels (including ethanol and methanol), renewable energy (including biomass), nuclear energy, and other methods determined by DOE;
    • Define “clean hydrogen” to mean hydrogen produced with a carbon intensity of 2 kg or less of carbon-dioxide equivalent produced at the site of production per kg of hydrogen produced; and
    • Consider technological and economic feasibility.
  • The standard will be updated after 5 years.

• Clean Hydrogen Electrolysis Program
  • By February 12, 2022, DOE will establish a research, development, demonstration, commercialization, and deployment program for purposes of commercialization to improve the efficiency, increase the durability, and reduce the cost of producing clean hydrogen using electrolyzers.
  • The goals of the program are:
    
    • To reduce electrolyzer-produced hydrogen cost to less than $2/kg by 2026; and
    • Any other goals determined appropriate by DOE.
  • The Program will focus on:
    
    • Low-temperature electrolyzers, including liquid-alkaline electrolyzers, membrane-based electrolyzers, and other advanced electrolyzers;
    • High-temperature electrolyzers;
    • Advanced reversible fuel cells;
    • New highly active, selective, and durable electrolyzer catalysts and electro-catalysts that:
      
      • greatly reduce or eliminate the need for platinum group metals; and
      • enable electrolysis of complex mixtures with impurities, including seawater;
  • Modular electrolyzers for distributed energy systems and the bulk-power system;
  • Low-cost membranes or electrolytes and separation materials that are durable in the presence of impurities or seawater;
  • Improved component design and material integration;
  • Clean hydrogen storage technologies;
  • Technologies that integrate hydrogen production with:
    
    • Clean hydrogen compression and drying technologies;
    • Clean hydrogen storage; and
    • Transportation or stationary systems; and
  • Integrated systems that combine hydrogen production with renewable power or nuclear power generation technologies, including hybrid systems with hydrogen storage.

[1] Remarks by President Biden at the Virtual Leaders Summit on Climate Session 5: The Economic Opportunities of Climate Action (April 23, 2021).

[2] Infrastructure Investment and Jobs Act, H.R. 3684, 117th Cong. § 40313 (2021).

[3] H.R. 3684 § 40314 (2021).

[4] Id.

[5] Id.

[6] H.R. 3684 § 40315 (2021).

[7] Id.