DOE Moving Forward to Implement Significant Hydrogen Programs: Seeks Public Input
By John Decker, Alan Alexander, Margaret Peloso, Eamon Nolan, Jamie Tabb, Tyler Robinson, and Andrew DeVore
On February 14, 2022, the Department of Energy (“DOE”) issued two Requests for Information (“RFIs”) related to its rollout of significant hydrogen programs. The RFIs seek input from the public (including “industry,” “energy users” and “other stakeholders,” which would include the financial sector) regarding the (1) solicitation process and structure of the DOE’s future Funding Opportunity Announcement (“FOA”)1 for the creation of Regional Clean Hydrogen Hubs; and (2) DOE’s Clean Hydrogen Manufacturing Initiative and Clean Hydrogen Technology Recycling Research, Development, and Demonstration Program (“Clean Hydrogen RD&D Program”); the Clean Hydrogen Electrolysis Program; and new Buy American and related employment considerations. The RFIs are the DOE’s first major push to implement several new hydrogen programs funded by the Bipartisan Infrastructure Law.
President Biden signed the Infrastructure Investment and Jobs Act, referred to as the “Bipartisan Infrastructure Law,” on November 15, 2021. The new law emphasizes that hydrogen “plays a critical part in the comprehensive energy portfolio of the United States” and that hydrogen can be produced from a variety of clean sources, including renewables and fossil fuels with carbon capture utilization and storage.2 Among other legislative actions, the Bipartisan Infrastructure Law amended the Energy Policy Act of 2005 to add: a new Section 813 to provide $8 billion for the creation of at least four Regional Clean Hydrogen Hubs; a new Section 816 to provide $1 billion for a Clean Hydrogen Electrolysis Program; and a new Section 815 to provide $500 million for the Clean Hydrogen Manufacturing Initiative and Clean Hydrogen RD&D Program.3
Congress also put DOE on the clock. Under the law, DOE has until May 14, 2022, to solicit proposals for the Regional Clean Hydrogen Hubs and to publish a technologically and economically feasible strategy and roadmap to facilitate the widescale production, processing, delivery, storage, and use of clean hydrogen. The agency has until May 14, 2023, to select at least four Regional Clean Hydrogen Hubs from the proposals that are to be submitted this year.
Luckily for the DOE, it had a head start on the congressionally-mandated deadlines. On June 7, 2021, the DOE announced its Hydrogen Energy Earthshot, which seeks to reduce the cost of clean hydrogen by 80% to $1 per one kilogram in one decade.4 Last year the agency issued an RFI to solicit analysis on the characteristics of projects that could implement specific regional clean hydrogen deployments over the coming years to further the Hydrogen Energy Earthshot goals (“Hydrogen Shot RFI”).5 The intent to issue an FOA stemming from the Hydrogen Shot RFI was cancelled after the passage of the Bipartisan Infrastructure Law and has substantively been replaced with the agency’s two recent RFIs. However, the agency presented its findings on the Hydrogen Shot RFI in December, stating that it received over 200 responses identifying near-term clean hydrogen demonstration sites across the country.6 The results helped the DOE launch its H2 MatchMaker tool, an online database for hydrogen suppliers, consumers, connective infrastructure, and other stakeholders to self-identify. DOE hopes that the tool will facilitate regional hydrogen team formations that will submit proposals to create a Regional Clean Hydrogen Hub.
RFI on the Regional Clean Hydrogen Hubs
The Bipartisan Infrastructure Law defines “Regional Clean Hydrogen Hubs” as networks of clean hydrogen producers, potential consumers, and connective infrastructure in close proximity. The production hubs must (a) demonstrably aid the achievement of the clean hydrogen production standard (defined as 2 kg CO2e/kg H2 at the point of production) under the law; (b) demonstrate the production, processing, delivery, storage, and end-use of clean hydrogen, and (c) be developed into a national clean hydrogen network to facilitate a clean hydrogen economy.
DOE envisions issuing a solicitation for Regional Clean Hydrogen Hubs in a single, multi-year FOA.7 As explained in the RFI, the Regional Clean Hydrogen Hub FOA will include annual open and close dates for different “launches” between FY2022 and FY2025. Launches 1 and 2 would solicit, select, and deploy the hydrogen hubs. Launches 3 and 4 would solicit and select new technologies and partners that could be incorporated into the hubs selected in the earlier launches. The DOE would evaluate the applications based on plans for “Phase 1” and “Phase 2” activities undertaken as part of Launches 1 and 2. Phase 1 would involve hub planning and design activities, and Phase 2 would involve development and build-out of the hubs. Although the law requires the selection of at least four regional hubs (FY 2023), the DOE has a goal of awarding six to ten hub projects by the end of Phase 2 (FY 2026).
Prior to implementing its Regional Clean Hydrogen Hub FOA strategy, DOE is seeking responses to 40 questions covering five general categories:
- Category 1: Regional Clean Hydrogen Hub Provisions and Requirements – Questions include what should qualify as “close proximity” in context of the hub requirements and whether DOE should define the region or allow applicants to do so; whether it would be more effective to select four hydrogen hubs that each produce a certain, minimum level of hydrogen or six to ten hubs of varying size; and what the ideal timing and desirable features, terms, and conditions of off-taker agreements would be.
- Category 2: Solicitation Process, FOA Structure, and Hydrogen Hubs Implementation Strategy – Questions include what funding mechanisms are best suited to achieve the purpose of the hydrogen hubs (e.g., Cooperative Agreements, Grants, Other Transactions Authority); what mechanisms the DOE can use to help facilitate teaming, in addition to its already launched H2 MatchMaker tool; and what iron, steel, manufactured goods, or construction materials will be crucial to the building out of the hydrogen hubs, and how the hubs could work to procure these items domestically.
- Category 3: Equity, Environmental and Energy Justice (“EEEJ”) Priorities – Questions include what strategies, polices, and practices can the hydrogen hubs deploy to support EEEJ goals; what EEEJ concerns or concerns are most relevant for the hydrogen hubs; and how DOE can support meaningful and sustained engagement with disadvantaged communities.
- Category 4: Market Adoption and Sustainability of Hubs – Questions include what mechanism (e.g., tax incentives, offtake structures, contracts for difference, etc.) would be valuable to incentivize market-based supply and demand; if DOE requires a market analysis as part of the application process, what should the analysis include; and how can a hydrogen hub demonstrate economic viability that will endure after the DOE funded phases and how should the FOA and selected projects be structured to ensure an economically viable outcome.
- Category 5: Other – DOE is seeking any additional information and input that respondents believe would be valuable to help the DOE in developing the Regional Clean Hydrogen Hub FOA.
The Regional Clean Hydrogen Hubs RFI was issued on behalf of the Energy Efficiency and Renewable Energy Hydrogen and Fuel Cell Technologies Office, the Office of Fossil Energy and Carbon Management, and the Office of Nuclear Energy, in collaboration with a new DOE office – the Office of Clean Energy Demonstrations (“OCED”). The OCED was created by Congress under the Bipartisan Infrastructure Law to bridge a gap between the Loan Programs Office, which supports the financing of clean energy technological advancement capable of large‑scale deployment and the Advanced Research Projects Agency-Energy which promotes and funds research on advanced energy technologies.8 The DOE hopes that successful demonstrations through the OCED will lead to further private sector financing and large-scale technological deployment. The Bipartisan Infrastructure Law issued $21 billion in funding to the OCED, including the $8 billion line item for the creation of Regional Clean Hydrogen Hubs.
Responses on the Regional Clean Hydrogen Hub RFI are due by March 8, 2022.
RFI on the Clean Hydrogen RD&D Program, the Clean Hydrogen Electrolysis Program, and new Buy American and Related Employment Considerations
The RFI regarding multiple clean hydrogen programs seeks to align the goals of the Hydrogen Energy Earthshot and the Bipartisan Infrastructure Law’s prioritization of the advancement of domestic manufacturing and recycling of clean energy technologies, including fuel cells, storage equipment, and other hydrogen-related components.9 The RFI seeks input on three specific topics: (1) the Clean Hydrogen Manufacturing Initiative and Clean Hydrogen RD&D Program; (2) the Clean Hydrogen Electrolysis Program; and (3) the new Buy American and related employment considerations.
Clean Hydrogen Manufacturing Initiative and Clean Hydrogen RD&D Program
The Clean Hydrogen Manufacturing Initiative and Clean Hydrogen RD&D Program include objectives to advance new equipment manufacturing technologies and techniques for clean hydrogen processing, delivery, storage, and use equipment, as well as materials and component recycling processes.10 The goal is to enable the development and demonstration of manufacturing and recycling technologies that would decrease costs and increase hydrogen system efficiencies, thereby supporting market competitiveness. The DOE is seeking responses to 43 questions covering eight topics, including how to increase the efficiency and cost-effectiveness of the manufacturing process, identifying key domestic supply chains for materials and components, and identifying clean hydrogen manufacturing opportunities in economically distressed areas.
Clean Hydrogen Electrolysis Program
An electrolyzer is a system that produces hydrogen by means of using electricity to split water into hydrogen and oxygen.11 The goal of the program is to reduce the cost of clean hydrogen produced using electrolyzers to less than $2/kg of hydrogen by 2026. The DOE is seeking responses to 45 questions covering ten topics, including what demonstration projects could enable and/or validate progress towards the $2/kg goal, what the potential human and environmental impacts of scaling electrolyzer technology would be (especially on disadvantaged communities), and what hydrogen storage requirements will be needed with future electrolyzer installations.
New Buy American and Related Employment Considerations
Pursuant to the Bipartisan Infrastructure Law, beginning May 14, 2022, each agency must ensure that none of the funds made available for a federal financial assistance program for infrastructure may be obligated for a project unless all of the iron, steel, manufactured products, and construction materials used in the project are produced in the United States.12 Waivers to the rule may be granted if (1) applying the domestic content procurement preference would be inconsistent with the public interest; (2) the types of iron, steel, manufactured products, or construction materials are not produced in the United States in sufficient and reasonably available quantities or of a satisfactory quality; or (3) the inclusion of iron, steel, or manufactured products, or construction materials produced in the United States will increase the cost of the overall project by more than 25 percent.13
The RFI includes seven questions relating to the new Buy American requirements, including what circumstances would lead a respondent not to procure such goods domestically for their project, what manufactured goods are crucial to the industry in which the respondent works and which the respondent would not typically seek to procure domestically, and whether the respondent would consider working with local coalitions to meet hiring needs.
Responses on this RFI are due by March 29, 2022.
Each RFI states that the DOE may, but is not required to, issue an FOA in the future based on the content and responses to the RFI. However, given the deadlines that the agency is under as a result of the Bipartisan Infrastructure Law, it is highly likely that the agency will issue FOAs by May 14, 2022. Once the FOAs are released, the application process can take a few months and includes up to five stages: (1) concept paper stage (not required for some FOAs); (2) full application stage; (3) selection stage; (4) negotiation stage; and (5) the project performance stage. Parties considering projects that may benefit from DOE funding and parties that anticipate participating in the hydrogen economy should consider self-identifying using the H2 MatchMaker tool and responding to the RFIs (linked here) as they present the best opportunity to influence how the DOE crafts the forthcoming FOAs.
1 FOAs are publicly available notices of grant availability which include the goals, deadlines, eligibility, and reporting requirements.
2 Pub. L. No. 117-58, Div. D, Title III, §§ 40311(a)(1) and 40311(a)(3) (Nov. 15, 2021).
3 Id. at § 40314.
4 Hydrogen and Fuel Cell Technologies Office: Hydrogen Shot, Dept. of Energy (June 7, 2021), https://www.energy.gov/eere/fuelcells/hydrogen-shot.
5 DE-FOA-0002587: Regional Clean Hydrogen Analysis NOI (2021), https://eere-exchange.energy.gov/.
6 DOE Update on Hydrogen Shot, RFI Results, and Summary of Hydrogen Provisions in the Bipartisan Infrastructure Law, Dept. of Energy (Dec. 8, 2021), https://www.energy.gov/sites/default/files/2021-12/h2iq-12082021.pdf.
7 DE-FOA-0002664: Bipartisan Infrastructure Law (BIL) – 2022 Regional Clean Hydrogen Hubs Implementation Strategy RFI (Feb. 14, 2022), https://eere-exchange.energy.gov/Default.aspx#FoaIda1255029-22c4-4c18-9e90-356e92cbb795.
8 Pub. L. No. 117-58, Div. D, Title III, § 41201.
9 DE-FOA-0002698: Bipartisan Infrastructure Bill (BIL) – RFI on Clean Hydrogen Manufacturing, Recycling, and Electrolysis (Feb. 14, 2022), https://eere-exchange.energy.gov/Default.aspx#FoaId5d96172f-e9b6-48ff-94ac-5579c3531526.
10 Id. at 4.
11 Id. at 10.
12 Pub. L. No. 117-58, Div. G, § 70914(a).
13 Id. at 70914(b).
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.