Matching supply and demand is one of the thorniest problems facing the clean hydrogen sector as it grows from a tiny segment of the global hydrogen sector to the expected multi-billion-dollar industry of the next decade.

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In the coming weeks, the US Department of Energy (DOE) hopes to tackle this problem by allocating $7bn (of a total $8bn pot) across six to ten regional hydrogen clusters, with the aim of incentivising producers, infrastructure owners and offtakers to work together to jointly develop a much-needed hydrogen value chain — allowing them to attract financing, actually build their projects and decarbonise some of the country’s most polluting sectors.

The programme — which was outlined in the 2021 Infrastructure Investment and Jobs Act — has proved hugely popular, with a total of 79 hub proposals lodging initial applications after the Hydrogen Hubs (H2Hubs) budget was announced in September 2022, which the DOE whittled down to 33 as part of its process of “encouraging” preferred schemes to make full application.

In the end, 22 proposals publicly announced that they were applying in full and the DOE is now tasked with picking the winners — and rejecting at least half of them, possibly even more if more hubs made applications under the radar.

All of which begs the question: Which hubs are likely to be successful? And, importantly, on what basis will that be decided?

Rystad Energy has identified ten hub proposals — out of the 22 known to have applied in full — which look most likely to make it over the finishing line, and shared its findings with Hydrogen Insight (see table below).

US hydrogen hubs: Rystad's most likely winners

California: Alliance for Renewable Clean Hydrogen Energy Systems (ARCHES)

Arkansas/Louisiana/Oklahoma: HALO Hydrogen Hub

Texas/Louisiana: HyVelocity Hub

Pennsylvania/West Virginia/Ohio/Kentucky: Appalachian Regional Clean Hydrogen Hub (ARCH2)

Connecticut/Massachusetts/Maine/New Jersey/New York/Rhode Island/Vermont: Northeast Regional Clean Hydrogen Hub

Illinois/Indiana/Kentucky/Michigan/Missouri/Wisconsin: Midwest Alliance for Clean Hydrogen

Washington/Oregon: Obsidian Pacific Northwest Hydrogen Hub

Colorado/New Mexico/Utah/Wyoming: Western Inter-States Hydrogen Hub (WISHH)

Tennessee/Kentucky/Alabama/Georgia/South Carolina/North Carolina: Southeast Hydrogen Hub

North Dakota/Wisconsin/Minnesota/Montana: Heartland Hydrogen Hub

More details about each project can be found at the bottom of this article.

Selection criteria

The Norwegian research house based its analysis on the DOE’s selection criteria and publicly available information about each hub proposal, as well as data on hydrogen projects under development and existing H2 and carbon dioxide infrastructure.

But although the DOE has firm selection parameters, it is not clear which of these will be prioritised when assessing applications which all meet some of the requirements but not others.

And the requirements are firm. Supply-side projects at the hubs must produce at least 50-100 tonnes per day (equating to 18,250-36,000 tonnes per year if operated 365 days per year) and include end uses compatible with local demand, as well as utilising potential or existing infrastructure such as hydrogen or carbon dioxide storage.

Hubs must also be able to demonstrate carbon dioxide-equivalent emissions reductions on a well-to-gate basis, and be prepared to match federal funding with state-level or private funding.

And the final suite of chosen projects must also meet the DOE’s four technical criteria:

  • Geographic diversity in which hubs are spread throughout the US, including at least two in regions with abundant fossil gas resources
  • Feedstock and production pathway diversity, with at least one each specialising in fossil fuel-derived low-carbon hydrogen (such as blue hydrogen made with carbon capture and storage), nuclear-power derived (pink) hydrogen and green hydrogen made with renewables.
  • End-user diversity, demonstrating the use of hydrogen in power generation, resident and commercial heating, and transport
  • Employment, providing training and long-term jobs

The importance of geography

Most likely, the federal agency will give special consideration to its geographic diversity objectives on political and economic grounds, Marina Domingues, senior analyst at Rystad’s Clean Tech team, tells Hydrogen Insight.

“The encouraged hubs have, individually or collectively, already met the production, end-user, and employment requirements defined by the DOE, since the program allowed for hubs to complement each other in these criteria,” says Domingues. “Geographic diversity, however, is where these hubs compete as some encouraged hubs are regionally overlapping, such as some applicants in Gulf Coast and East Coast. Making decisions based on geography can also prevent competition between regions and reduce scepticism about politically-driven choices for the US hubs.”

In general, hub applications are concentrated in the densely populated Northeast, the Atlantic coast and the Gulf Coast.

But the federal agency will be strongly incentivised to spread cash throughout the country, especially in deprived areas in need of regeneration, and the DOE will be additionally keen to ensure that hubs aren’t competing for supply from local hydrogen producers.

This means that even some projects which meet the criteria will not make the final cut — while some less robust projects could end up with federal funding.

For example, there are three applications on the fossil-gas rich Gulf Coast , which all benefit from access to 12 existing hydrogen and CO2 infrastructure, in-built demand from the host of refineries and abundant gas resources — but only one of these has made it on to Rystad’s list, the HyVelocity Hub in Texas and Louisiana, which includes oil giants Chevron and ExxonMobil among its participants.

Meanwhile, four relatively small hubs without the backing of deep-pocketed energy giants or industrial conglomerates have made it on to the list, on account of the impact it could make to the local area and their relatively disparate locations.

And projects in regions with nuclear power, such as the Northeast and Midwest are also more likely succeed on account of their potential for pink hydrogen projects, which would not need expensive new nuclear infrastructure.

The DOE is also supposed to be prioritising hubs that align with its Hydrogen Shot programme, which aims to bring the cost of clean hydrogen down to $1/kg within a decade — with the help of $750m in financial support for electrolysis and fuel cell technologies.

‘Green bias’

Despite the US’s history of gas production and the DOE’s emphasis on prioritising gas-producing regions, there is a slight bias towards renewable and bio-reformation production pathways among the hubs, which together make up 62% of all applications.

Fossil-fuel-focused hubs, meanwhile, make up 38% of applications (see chart below).

In total, there are around 130 green hydrogen projects announced in “member states” (defined by Rystad as states in which a hub application is located), compared to approximately 90 blue H2 schemes, roughly a 60:40 split.

Count of announced hydrogen projects in member states. Photo: Rystad Energy

But the risk of the DOE’s holistic selection process means that the DOE could end up subsidising lower-quality hydrogen hubs projects at a much higher cost — because they lack existing infrastructure and proper competition, Domingues tells Hydrogen Insight.

“The identified hydrogen hubs have varying contributions toward nationwide hydrogen deployments,” she explains. “Broadly speaking, these hubs can be divided into two categories: those with an extensive list of partner companies and financial resources, and those that are seeking to attract industries and develop capabilities to create local economic and employment opportunities.”

“While both groups fit [the] DOE’s criteria, when exclusively looking into reducing market barriers and hydrogen production costs, hubs less engaged with industrial partners may hinder the country’s hydrogen economy development.”

Rystad also has doubts about the financial impact the H2Hubs cash on its own, pointing out that if ten projects are selected, they could be in line for around $700m each — a drop in the ocean when combining multiple clean hydrogen projects, infrastructure and end users.

Moreover, the DOE has not made clear how the cash will be allocated within individual winning hubs, or how it will manage fund allocations to companies, such as Exxon or Air Products, which are associated with more than one application.

The biggest impact of the hubs will be to encourage the financial sector to top up investment in clean hydrogen, in a sector where banks have been reluctant to shoulder technical or volume risk, Domingues says.

In fact, the scheme is likely to generate significantly more investment than the federal government puts in. The DOE has already estimated that the 33 “encouraged” hubs have committed around $33.5bn of state-level and private investment, more than four times’ the $7bn committed by the energy department.

“The hubs will show the financial community where they can invest their money and get their return,” Domingues tells Hydrogen Insight. “It reduces the technical risk because the government is investing, and because demand is baked in to the proposal it makes hydrogen projects more bankable.”

Full details of Rystad’s most likely winners:

1) California: Alliance for Renewable Clean Hydrogen Energy Systems (ARCHES)

ARCHES is focused heavily on green hydrogen and is likely to benefit from supply from California’s 16 renewable H2 and two blue hydrogen schemes, as well as its two existing hydrogen pipelines and established hydrogen vehicle refuelling infrastructure. It also has good geological conditions for underground storage, Rystad says.

ARCHES has more than 100 participants, including retail giant Amazon, electrolyser manufacturer Plug Power, Australian gas company Woodside and industrial gas firms Air Products and Air Liquide. It also counts Michelin among its participants, most likely due to the state’s single turquoise hydrogen project, which could produce solid carbon for use in tyre manufacture.

2) Arkansas/Louisiana/Oklahoma: HALO Hydrogen Hub

Arkansas, Louisiana and Oklahoma have combined under a single hub umbrella, formally supported by 50 participants including oil giant Shell, Woodside, Air Products, utility NextEra and oilfield services firm Baker Hughes. The three states have a combined total of ten green and 15 blue hydrogen projects within their states, and benefit from existing CO2 transport infrastructure.

3) Texas/Louisiana: HyVelocity Hub

Located to the south of the HALO hub, HyVelocity is one of three applicants located on the Gulf Coast and the only one among them to be selected by Rystad as a potential H2Hubs winner, on account of its 80 supporting participants, including universities, potential offtakers and local government. There are a total of 22 green hydrogen and 16 blue H2 schemes in the area, and it is also backed by oil giants Chevron and Exxon as well as renewables developers Orsted and AES.

4) Pennsylvania/West Virginia/Ohio/Kentucky: Appalachian Regional Clean Hydrogen Hub (ARCH2)

The hub is one of two Appalachia-based applications spanning some of the most economically deprived regions of the US and encompassing abandoned coal mines and territories of indigenous peoples. Its socio-economic profile and high density of industry means that the region is a prime location for those hoping to benefit from hydrogen production tax credits and investment tax credits (which are available for solar, geothermal and fuel-cell energy).

ARCH2, which has a strong focus on fossil gas-based H2 and its use in chemicals, has 15 partners, including electrolyser producers Plug Power and Bloom Energy as well as Air Liquide, chemicals firm Chemours and a host of upstream oil and gas producers such as founding member EQT.

5) Connecticut/Massachusetts/Maine/New Jersey/New York/Rhode Island/Vermont: Northeast Regional Clean Hydrogen Hub

This is one of three East Coast (or mid-Atlantic) applicants in the final 22, all of which have been identified by Rystad as most likely to utilise the area’s nuclear power infrastructure to produce pink hydrogen.

The state government-led Northeast Regional Clean Hydrogen hub is competing for a $1.25bn share of the hub money, focusing on green and pink H2. It has signed over 100 memoranda of understanding with partners including electrolyser manufacturer Nel and Air Liquide, Orsted, Equinor and Constellation, which has been trialling the production of nuclear-derived hydrogen at its New York state nuclear power plant.

6) Illinois/Indiana/Kentucky/Michigan/Missouri/Wisconsin: Midwest Alliance for Clean Hydrogen

The hub is targeting hydrogen production from three different production pathways — green, blue and pink.

Backed by six states, the hub could help decarbonise a vast swathe of emissions-intensive and hard-to-abate users across the US Rust Belt, including steel manufacturing, cement and chemicals production, and, like the Appalachian applications, would be politically desirable for federal funding due to its socio-economic profile.

The Midwest Alliance is backed by 70 members — comprising hydrogen producers, end users and public bodies — including nuclear power plant operator Constellation, Air Liquide, steel producer ArcelorMittal, EU-funded research institute EIT InnoEnergy, Plug Power and ExxonMobil.

7) Washington/Oregon: Obsidian Pacific Northwest Hydrogen Hub

The Pacific Northwest is rich in solar, wind and hydropower, but the Obsidian Hub is targeting both green and fossil-based hydrogen production — and plans to use H2 to power one of the US’s largest data centres, in Seattle.

The project, which wants $700m from the H2Hubs pot, aims to set up industrial parks in Oregon and Washington state to house ammonia plants for fertiliser production, fed by a hydrogen pipelines from green hydrogen production plants. It is backed by just one sponsor, Oregon-based solar producer Obsidian Renewables, and is one of two hub proposals located in the US Northwest.

8) Colorado/New Mexico/Utah/Wyoming: Western Inter-States Hydrogen Hub (WISHH)

The four states backing the WISHH hub benefit from good geologic conditions for underground carbon sequestration or hydrogen storage, as well as existing CO2 pipelines that can be used in the manufacture of hydrogen-based synthetic fuels, Rystad believes.

Led by the state government of Colorado, WISHH hopes to grab a $1.25bn grant to develop at least eight hydrogen-based projects across four states, including the production of green hydrogen and biomass- and fossil gas-based H2, and a hydrogen blending project.

9) Tennessee/Kentucky/Alabama/Georgia/South Carolina/North Carolina: Southeast Hydrogen Hub

The region plays host to several fertiliser production plants that could be decarbonised with green ammonia produced from renewable hydrogen, but the biggest draw for federal funding for the Southeast Hydrogen Hub could be the impact it would have on the local economy.

Five regional utilities are behind the scheme, which aims to develop a “green hydrogen network” across all six states.

10) North Dakota/Wisconsin/Minnesota/Montana: Heartland Hydrogen Hub

Heartland Hydrogen, backed by four northern states, is focused on the production of hydrogen-based synthetic fuels, and the use of H2 in long-haul trucking.

Engineering firm Cummins, which is developing a hydrogen-powered internal combustion engine for trucks, is among the hub’s partners, alongside Mitsubishi.

According to Rystad, the corn-belt states are well positioned to provide biogenic CO2 for synthetic fuel production, as well as stimulating demand for hydrogen-based fertilisers.