Paul Rodden • Season: 2024 • Episode: 282
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Welcome to The Hydrogen Podcast!
In episode 282, The US Department of Energy makes a huge hydrogen demand side announcement. Will this new consortium be able to jumpstart demand? Or will the three pillars stand in the way? I’ll go over the announcement and give my thoughts on today’s hydrogen podcast.
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Transcript:
The US Department of Energy makes a huge hydrogen demand side announcement. Will this new consortium be able to jumpstart demand? Or will the three pillars stand in the way? I’ll go over the announcement and give my thoughts on today’s hydrogen podcast.
So the big questions in the energy industry today are, how is hydrogen the primary driving force behind the evolution of energy? Where’s capital being deployed for hydrogen projects globally? And where are the best investment opportunities for early adopters who recognize the importance of hydrogen? I will address the critical issues and give you the information you need to deploy a cap. Those are the questions that will unlock the potential of hydrogen, and this podcast will give you the answers. My name is Paul Rodden, and welcome to the hydrogen podcast.
In a press release on January 17, from The U.S. Department of Energy (DOE) Office of Clean Energy Demonstrations (OCED) today announced the selection of a consortium to help accelerate commercial liftoff of the clean hydrogen economy and support the launch of the Regional Clean Hydrogen Hubs (H2Hubs), funded through President Biden’s Investing in America Agenda. The consortium—which consists of the EFI Foundation (EFIF), a leader in clean hydrogen economy development, in partnership with the commodity markets information experts S&P Global (S&P) and the financial exchange operator Intercontinental Exchange (ICE)—will design and implement demand-side support mechanisms for unlocking the market potential of the H2Hubs.
Over the next six to nine months, DOE will work with the consortium and the H2Hubs to design robust demand-side support measures that will facilitate purchases of clean hydrogen produced by H2Hub-affiliated projects to reduce climate pollution, create good jobs, support clean air, and advance U.S. competitiveness in various end use sectors, including energy-intensive industry and heavy-duty transportation. The team will also develop an operational plan for how to administer these mechanisms once finalized.
Developing a hydrogen demand-side initiative is critical to enhancing the early commercial viability of the H2Hubs, as demand formation for new energy sources often lags the creation of new reliable supply. Demand-side support and other “demand pull” measures bridge the gap between producers, who need medium- to long-term offtake certainty for a significant portion of their projected output to secure financing to build a project, and buyers, who often prefer to buy on a short-term basis for energy inputs that are beginning to be produced at scale, like clean hydrogen. “Demand pull” measures have been a valuable tool in the scale-up of renewable energy technologies like wind and solar.
EFIF, S&P, and ICE will leverage their deep expertise in clean hydrogen, project finance, and commercial contracting to support design of measures to de-risk clean hydrogen projects and increase demand certainty. The consortium will help craft demand-side support agreements for clean hydrogen projects affiliated with the H2Hubs to unlock final investment decisions and catalyze the formation of a mature clean hydrogen market. Ultimately, the demand-side initiative will support the growth and sustainability of the H2Hubs program by providing improved offtake certainty to help hydrogen producers attract private sector investment and end-use buyers. It will also lay the foundation for broader private sector scale-up and use of the clean hydrogen market by providing price transparency and standardized contracts for the projects it supports.
Funded by President Biden’s Bipartisan Infrastructure Law and managed by OCED, the H2Hubs are a critical component of the Administration’s efforts to build a strong, American-led clean hydrogen industry that drives the global clean energy transition while also creating high quality jobs and delivering healthier communities in every pocket of the nation. The H2Hubs also reinforce the President’s deep commitment to invest in America’s workforce, jumpstart local economic growth, and establish the U.S. as a leader in the clean energy technologies of the future.
Okay, so along with this press release one of the consortium members EFI Foundation also had a release giving a bit more detail on the hydrogen demand initiative and their press release starts off EFI foundation lead group selected by Department of Energy for hydrogen market demand project. They write The Hydrogen Demand Initiative (H2DI), a coalition led by the EFI Foundation (EFIF), has been selected by the U.S. Department of Energy (DOE) to help accelerate commercial adoption of clean hydrogen. The Hydrogen Demand Initiative (H2DI) will see EFIF work in partnership with commodity markets information firm S&P Global (S&P); financial exchange operator Intercontinental Exchange (ICE); the modeling and analysis group of the MIT Energy Initiative; and Dentons, the world’s largest law firm with experts in energy regulatory issues. The partnership will be charged with designing and implementing demand-side support mechanisms for enhancing the market potential of the Regional Clean Hydrogen Hubs (H2Hubs).
“The EFI Foundation has a deep knowledge of the challenges involved in a robust domestic clean hydrogen industry, as outlined in our 2023 report, The U.S. Hydrogen Demand Action Plan,” said Ernest Moniz, the 13th U.S. Energy Secretary and CEO of EFIF. “EFIF analysis identified hydrogen as a key breakthrough opportunity for transitioning to a net-zero economy in our 2019 report, Advancing the Landscape of Clean Energy Innovation, which was prepared for Breakthrough Energy in partnership with IHS Markit (now part of S&P Global). We’re excited to work with partner organizations with expertise in project finance, regulation, and multisector modeling to lower the risks associated with clean hydrogen investments and facilitate sustainable demand. We have a project team already in place to stand up H2DI over the coming months.” H2DI is designed to be a high-impact hydrogen demand-side effort to leverage private investment effectively and efficiently to support commercial deployment of clean hydrogen by the seven regional hubs and surrounding areas.
“We see the regional hubs as the engines for clean hydrogen market formation in the United States,” said Alex Kizer, EFIF’s Chief Operating Officer and the Managing Director of H2DI. “EFIF and its terrific team of partners will target these federal resources to support clean hydrogen offtake and lasting cost curve reductions.” EFIF will draw on its extensive body of analytic work on related issues, including carbon capture and storage, technology innovation, market development, environmental justice, and clean energy finance to inform the analyses performed for the project. The project team will work closely with DOE and the H2Hubs to build a coalition of partners and a broader network of organizations to maximize the impact of the $7 billion federal investment in hydrogen.
“We will be using our long-standing expertise designing and operating trading platforms, building liquidity for nascent products and growing them into benchmarks,” said Gordon Bennett, Managing Director of Utility Markets, ICE. “We are excited to be working with the Department of Energy and the project partners to develop and unlock demand for a hydrogen market in the U.S.” Saugata Saha, President, S&P Global Commodity Insights, added: “We are excited to be part of this initiative with EFIF, leveraging the depth and breadth of our Energy Transition and Sustainability capabilities to explore the future of clean hydrogen.” The release also states each partner brings a unique set of expert knowledge to H2DI, The EFI foundation Lead H2DI and manage activities; perform financial and commercial analysis; and develop community engagement strategies. s&p Global Perform market assessments; evaluate financial workflows; engage stakeholder community for input; provide and manage data. Ice will Build market and products (incl. mechanism’s governance program); operate demand-side mechanism platform; provide and manage data. MIT Energy Initiative will Perform techno-economic analysis of hydrogen demand-side; perform greenhouse gas lifecycle accounting, as well as granular sector “coupling” modeling (gas, electric, CO2, end-uses) using the modeling platform SESAME (Sustainable Energy Systems Modeling Environment).
And lastly determines who will advise on National Environmental Policy Act, Federal Energy Regulatory Commission and other regulatory and due process issues, develop contracts, support monitoring, reporting and verification and create operational requirements. Okay, so the US with another announcement to boost the hydrogen economy in the US this coming roughly a month after the Treasury released their polarizing three pillar guide of which we are about halfway through the comment period.
And viewing this release through the lens of the three pillars has me wondering this. If the Treasury makes no changes in how hydrogen operators will be able to take advantage of the 45 V tax credits. Will this endeavor by the DOE be kneecapped at the start or will they look to it leverage the hub develop moments that are able to ramp up production at the best price point, ie the hub’s using hydrocarbon feedstocks.
I know that long term contracts are the holy grail to get this economy kickstarted from the operator viewpoint, the demand side will want optionality. So they don’t get stuck with a long term price point on hydrogen that will continue to drop over time as it becomes more commodity driven. Now either way, this hydrogen initiative is going to be a vital step in building demand side opportunities.
Now, ultimately, we want the market to build demand. But since we have a 2030 target to go after, I understand the urgency to build market space at an accelerated rate. Now, I’m looking forward to seeing this consortium progress. And I will make sure to make it a point to relay any news I come across to all of you. All right. That’s it for me, everyone. If you have a second, I would really appreciate it.
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So until next time, keep your eyes up and honor one another. Hey, this is Paul. I hope you liked this podcast. If you did and want to hear more. I’d appreciate it if you would either subscribe to this channel on YouTube, or connect with your favorite platform through my website at www.thehydrogenpodcast.com. Thanks for listening. I very much appreciate it. Have a great day.
