Could the Biden infrastructure bill drive results for green hydro?January 26, 2022
Now that President Biden has finally been able to sign his long-anticipated $1.2 trillion infrastructure plan into law, it’s a good time to examine it more closely to see what it is offering for the hydrogen economy, and how it might impact people’s decisions whether or not to invest in hydrogen.
What is the infrastructure bill?
In case you missed it, Congress and the House of Representatives have spent a lot of time debating two flagship bills that could make or break President Biden’s administration. The infrastructure bill, which was finally signed into law as the Bipartisan Infrastructure Framework (BIF) in November, funds many infrastructure projects, including roads and bridges, rail development, extending broadband provisioning, and, importantly for hydrogen stocks, green hydro production.
The BIF allocates a total of $9.5 billion to advance the development of hydrogen as a clean energy source and to commercialize its use in a number of sectors, although it had to roll back tax incentives for switching from fossil fuels to green energy. Those measures may be included in a future reconciliation bill.
In good news for hydro energy stocks, the bill includes a clear statement of support that hydrogen plays a critical role in the US’ energy portfolio, and that it can be produced domestically from clean energy sources.
Establishing regional “hydrogen hubs”
The vast majority of the hydrogen funding from BIF — $8 billion over 4 years, to be precise — is earmarked for the establishment of four regional “hydrogen hubs.” These hubs will be built in different parts of the country so as to open up access to new jobs, and include diversity conditions to help test out the most efficient, lowest-cost, and cleanest ways of producing clean hydrogen fuel.
The plan requires that at least one hub will use fossil fuels together with carbon capture as an energy source for hydrogen production (so-called “blue hydrogen”); one will use nuclear energy; and at least one renewable energy. At least 2 of the hubs also have to be close to the US’ large natural gas supplies.
On top of that, the new hubs need to address different end-use purposes; one should focus on enabling hydrogen adoption in the industrial sector, one for transportation, and one for residential and commercial heating.
It’s a complicated order, but it shows that the government wants to quickly identify the most effective option for green hydrogen. Just to prove that everyone involved is taking this seriously, Congress has instructed the Department of Energy (DoE) to solicit proposals for the hubs within 180 days and select the locations within 1 year of the deadline for submissions.
Channeling funding to green hydrogen R&D
Most of the rest of the funding is earmarked for two large projects: the Clean Hydrogen Manufacturing and Recycling Program, which will receive $500 million over 4 years, and the Clean Energy Electrolysis Program, which receives $1 billion.
The Clean Hydrogen Manufacturing and Recycling Program focuses on advancing a domestic green hydrogen supply chain. The funds will be used for grants and contracts for research, development, and demonstration projects at every stage of the supply chain: energy production, processing, storage, distribution, and delivery.
Meanwhile, the Clean Energy Electrolysis Program concentrates on lowering the cost and increasing the efficiency of green hydrogen electrolyzers. The $1 billion will be awarded as grants to organizations that can develop electrolyzers that are more durable, lower cost, and efficient.
Building a national hydrogen strategy
If green hydrogen is going to become a mainstay of the country’s energy mix, it requires a coordinated national strategy. Fortunately, the BIF covers that too, requiring the energy secretary to develop a national energy strategy and roadmap, with the goal of facilitating widespread production, processing, delivery, storage, and adoption of clean hydrogen fuel.
The BIF establishes and expands the DoE’s hydrogen office, so that it can support all this activity in clean hydrogen R&D.
The law also calls for a plan to coordinate the hydrogen work and research carried out by the National Energy Technology Laboratory (NETL), the Idaho National Laboratory, and the National Renewable Energy Laboratory (NREL), as well as other research and educational institutes.
Setting standards for hydrogen production
Establishing standards for the fledgling clean hydrogen sector is just as important as defining sources of investment. It’s crucial to have some kind of official definition for what can be considered truly “green” hydrogen, so that industries can prepare to meet possible new sustainability requirements, and green hydrogen companies can align themselves accordingly.
The infrastructure bill thus sets out a standard for clean hydrogen, defining it as “hydrogen produced with a carbon intensity equal to or less than 2 kilograms of carbon-dioxide equivalent per kilogram.” But it also requires the Energy Secretary to consult with industry and other stakeholders within 180 days to produce an updated version, and to review it again and adjust it as necessary within 5 years.
What does the BIF mean for green hydrogen stocks?
It’s not surprising to see hydrogen companies’ stock prices respond every time there’s news about the progress of the infrastructure bill and its provisions for green hydrogen. Some of the hydro stocks, like FuelCell, PlugPower, and Bloom Energy saw prices rise after the news that the infrastructure plan had been passed. Although there are no guarantees about the future of hydrogen energy, the success of the new BIF could lead more people to invest in the best hydrogen stocks and ETFs and be part of this disruptive technology.
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