Sector Spotlight: Clean Hydrogen

In this post, I’m diving into how the DOE Loan Programs Office (LPO) is supporting U.S. clean hydrogen projects.

To meet President Biden’s goals to achieve a clean grid by 2035 and reach net zero emissions economy-wide by 2050, an array of decarbonization technologies — including clean hydrogen — will play a critical role. This is particularly true in difficult-to-decarbonize industrial and chemical processes like ammonia production and oil refining, as well as transportation use cases such as heavy-duty trucking and aviation fuels. DOE’s Hydrogen Shot has set the goal of reducing the cost of clean hydrogen by 80% to $1 per 1 kilogram by the end of the decade.

As we describe in our LPO Tech Talk on Clean Hydrogen, the clean hydrogen sector includes low carbon intensity production, either through electrolysis using carbon-free electricity like nuclear, wind, or solar; or by steam reforming natural gas, biomass, waste coal, or other materials and capturing and storing or utilizing the carbon. The DOE National Clean Hydrogen Strategy and Roadmap provides a snapshot of hydrogen production, transport, storage, and use in the United States today and explores the potential for clean hydrogen to contribute to national goals across multiple sectors, with strategic opportunities for 10 million metric tonnes annually (MMTpa) of clean hydrogen by 2030, 20 MMTpa by 2040, and 50 MMTpa by 2050. Using clean hydrogen can reduce U.S. emission approximately 10 percent by 2050 relative to 2005. 

The Department recently highlighted the opportunities and challenges associated with scaling the clean hydrogen economy (for both private and public sector capital allocators) in the launch of its Pathways to Commercial Liftoff reports. The reports emphasize that the United States clean hydrogen market is poised for rapid growth: Project announcements are accelerating, and investors are actively engaged, partly because of new policy tools like H2 Hub funding, the hydrogen production tax credit (PTC), the carbon sequestration credit (45Q), and decarbonization goals across the public/private sectors.  Taken together, these incentives and policies will kick-start the transition from high carbon intensity to low carbon intensity hydrogen in sectors that already use H2 today, and they will make it possible for more nascent segments (e.g., transportation use cases, seasonal energy storage) to scale-up.

But, like all clean energy technologies, challenges remain if we want to see the clean hydrogen economy accelerate. As the Clean Hydrogen Liftoff report attests, hydrogen is a complicated value chain: We need to bring down production costs, scale midstream infrastructure, and secure long-term offtake. In production, the opportunity is large. We have the opportunity to scale from 0 MMTpa of clean H2 production today to 10 MMTpa in 2030 and 50 MMTpa in 2050. For midstream infrastructure, the industry faces high costs and limited value chains from a single producer to a couple of offtakers. And in end use, long-term offtake agreements can help derisk projects for private sector investors. These and other issues are broken down in the Clean Hydrogen Liftoff report, which will be updated regularly as the sector evolves and additional industry feedback is incorporated in this analysis.

Moreover, as part of President Biden’s Investing in America agenda, DOE announced $7 billion to launch seven Regional Clean Hydrogen Hubs (H2Hubs) across the nation and accelerate the commercial-scale deployment of low-cost, clean hydrogen.

DOE’s Office of Clean Energy Demonstrations (OCED) manages the H2Hubs program and will provide project management oversight for the projects selected to produce clean hydrogen; demonstrate end uses; generate training opportunities and good-paying, high-quality jobs; reduce emissions and pollution; and ensure tangible benefits flow to local Hub communities. Learn more about the seven H2Hubs selected for award negotiations here.

Also, in the last year LPO has closed its first loan to a clean hydrogen project, to Advanced Clean Energy Storage, in Title 17 Clean Energy Finance Program. Through Title 17, LPO can finance a variety of production and storage projects, including clean hydrogen production facilities (e.g., clean electricity plus electrolyzers) and storage facilities (e.g., salt caverns).

LPO also can support other projects across the clean hydrogen supply chain, including through the Advanced Technology Vehicles Manufacturing Loan Program. These include direct use in fuel cell-powered advanced technology vehicles, like heavy-duty vehicles; and through indirect use via synthetic fuels, like in sustainable aviation fuel (SAF) or maritime fuels.

LPO is uniquely situated to help support key parts of the clean hydrogen value chain in order to reach our decarbonization goals. As of the end of March 2023, requested financing from LPO for hydrogen sector-based projects via active loan applications totaled over $3.5 billion. For more current details, view LPO’s Monthly Application Activity Report, which explains the level of interest from applicants for LPO financing and what technology sectors have been most actively engaged with LPO.

This blog was originally published on April 14, 2023, and is periodically updated.