Financing of hydrogen hubs


On June 6th, the US Department of Energy (DOE) published a Notice of Intent (NOI) to release a Funding Opportunity Announcement (FOA) for at least four Regional Clean Hydrogen Hubs (H2Hubs) in the September/October timeframe. The NOI outlined DOE priorities for successful applications for the $8bn authorised by the November 2021 landmark Infrastructure Investment and Jobs Act (IIJA). DOE will award funds between fiscal years 2022 and 2026 for projects executed over 8-12 years. The Department expects to fund between six and twelve regional hub projects over four distinct funding phases. Successive tranches of funding availability will be contingent on successful completion of Go/No-Go decision criteria for each of the following project phases: 

  • Phase I. detailed project planning (12-18 months)
  • Phase II. project development, permitting and financing (2-3 years)
  • Phase III. installation, integration, and construction (2-4 years)
  • Phase IV. ramp-up and sustained operations (2-4 years)

The initial tranche of funding is expected to range between $400-$500m to $1-$1.25bn depending on the quantity and quality of applications received. DOE will prioritise demonstration projects that “encompass hydrogen production, processing, delivery, storage and end-use of clean hydrogen”. Ideally, the hubs will also demonstrate a “balanced hydrogen supply and demand, connective infrastructure, and a plan to be financially viable after the DOE funding has ended”. The IIJA stipulated funding of the following prescriptive clean hydrogen production methods: fossil fuels (with carbon capture), renewable energy, and nuclear energy. End-use applications should demonstrate use cases in the electric power generation, industrial, commercial heating, and transportation sectors. Given the synergies between natural gas and hydrogen use cases, the IIJA stressed - but did not seem to bind DOE - to choose at least two H2Hubs in regions with high natural gas resources, like Texas and Pennsylvania.

Cost-sharing is paramount as DOE outlined financing at a minimum of 50% non-federal cost share, which can be realised as cash or in-kind contributions but cannot include other federal funds (like DOE loans). Environmental justice, lifecycle greenhouse gas emissions reductions, community support, consent-based siting, and the creation of well-paying union jobs are emphasized as key attributes for applications throughout the NOI. The Biden administration’s 'Justice40' Initiative is designed to ensure 40% of IIJA funds are spent in disadvantaged communities and ensure the inclusion of historically underserved populations. Thus, H2Hubs funding is likely to be disbursed in low-income areas.

Successful applications must demonstrate the carbon intensity of clean hydrogen produced to be at or below 2 kilograms of carbon dioxide (CO2) equivalent for each kilogram of hydrogen (H2) produced in order to be considered “clean”. That said, DOE, in concert with the Environmental Protection Agency (EPA), will review the applications to determine if this standard should be lowered. Hydrogen production costs for electrolysers should ideally be less than $2 per kilogram of hydrogen produced (2kg CO2e/kgH2) by 2026. As proclaimed in its Hydrogen Shot, DOE’s long-term goal for hydrogen production costs is at or below $1/kgH2 in ten years.

The application outline for the FOA is iterative, starting in September/October 2022 and requesting full applications around June/July of 2023 as follows:

  • Applicants will be requested to submit concept papers 6-8 weeks after FOA is released
  • DOE will encourage or discourage applications about 4 weeks after receiving concept papers 
  • Applications will be due roughly four months after DOE responds to concept papers 

The NOI is DOE’s blueprint for its upcoming FOA solicitation. That said, some of the NOI priorities and estimates could shift before the FOA is finalised this fall. DOE clearly advocates applicants engage with its H2 Matchmaker online platform in preparation for application. More information is unlikely to be forthcoming before the FOA is released this fall.


The views expressed in this note can be attributed to the named author(s) only.