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On October 16, President Biden and Energy Secretary Jennifer Granholm announced that seven regional H2Hubs were selected to receive $7 billion in Bipartisan Infrastructure Law (BIL) funding to accelerate the domestic market for low-cost, clean hydrogen.1 These selected H2Hubs now enter a negotiation phase with the U.S. Department of Energy (DOE).
Receiving a grant award from the DOE will be a significant milestone for any H2Hub by enabling — and in some cases, accelerating — the development of the H2Hub’s projects and catalyzing the region’s hydrogen economy. However, being a DOE awardee also entails monitoring and adhering to many regulations in order to maintain compliance. These multi-faceted requirements outlined in the Funding Opportunity Announcement (FOA) range from safety to community benefits to cybersecurity.2
Here, we offer insights into the most critical requirements to maintaining compliance with the DOE FOA requirements once an H2Hub successfully receives a grant award from the DOE.
1. Cybersecurity Plan: In an increasingly digitized world, cyber threats pose a genuine risk to operations and intellectual properties. Establishing a robust cybersecurity plan is a requirement prior to award issuance. H2Hubs must implement a plan that covers all associated technologies within hub projects and identifies risk associated with all H2Hub members.
Recommended Action: Having a plan is one thing; adhering to a plan is another. H2Hubs will need to build a governance plan to ensure compliance across all stakeholders. As attack vectors constantly evolve, continuous improvement will be a cornerstone to a successful cybersecurity plan. Moreover, due to the nature of H2Hubs with independent sites, networks, and software, a multi-layered security protocol is also critical to long-term safety. Engaging with cybersecurity experts early on can identify potential vulnerabilities and offer tailored solutions.
2. Lifecycle Analysis: A significant imperative from the DOE is the Hydrogen Shot a goal of producing 10MMT of $1/kg clean hydrogen by 2030—the H2Hubs are intended to be a step in achieving this goal. The H2Hub FOA set a carbon intensity goal of less than 4 kg Co2eq/kg H2 for hydrogen production. However, aside from the current use of the Greenhouse gases, Regulated Emissions, and Energy use in Technologies Model (GREET), the lifecycle analysis software that was required as part of the H2Hub application, there not currently a unified methodology on carbon intensity calculations for low-carbon fuels such as hydrogen.
Recommended Action: H2Hubs are encouraged to document the standard methodologies by which carbon intensity calculations will be consistently reported across their projects and the H2Hub as a whole. Monitoring and continuous improvement of these methodologies will be expected. As such, H2Hubs are encouraged to employ advanced monitoring tools and build a plan for integration with reporting systems to ensure consistent and transparent emissions data.
3. Environmental Impacts and Benefits: While calculating greenhouse gas emissions for hydrogen production is the first step in determining the environmental impacts and benefits, H2Hubs must consider broader environmental requirements, from resource consumption patterns to sustainable waste management. They must not only be able to demonstrate the benefits of the H2Hub but also must calculate and describe the potential impacts from land and water usage to increase in NOx emissions.
Recommended Action: By building on the development of application materials, hubs must employ proactive strategies to minimize the environmental impacts. Using the lifecycle analysis and framework will allow H2Hubs to develop a comprehensive view of the project's environmental footprint, aiding in identifying areas of improvement and innovation.
4. Permitting: By Phase 2, H2Hubs will be required to have permits in place for construction, so hubs should start applying for permits now. H2Hubs should be meeting with all projects as soon as award negotiations begin to understand major permits required for project completion. Of note, permits are required for interconnection to the electric grid for large electrolyzers and Class VI well permits for blue hydrogen. These two permits have the longest lead time acquisition and are critical path items to project operation.
Recommendation Action: H2Hubs are uniquely positioned to work with local, state, and federal officials to help H2Hub participants navigate the permitting labyrinth. Working with state regulators and proactively marketing your projects will be important for ensuring minimal roadblocks to the projects’ success.
5. Safety Plan: The application mandates a detailed description of safety cultures and history at H2Hub participants. Phases 1 and 2 will require a standardized safety plan that envelops all aspects of operations, ensuring a H2Hub's resilience against unforeseen adversities. Importantly, H2Hubs will need to be prepared to have comprehensive plans that are reviewed by DOE. Additionally, all sites require a hazard and operability (HAZOP) study. Given that HAZOP studies can take months and cost millions of dollars, it is critical these studies be started as soon as possible, and a standardized scope is carried out for such studies.
Recommended Action: H2Hubs should begin now to structure data intake processes and data validation and verification methods. Regular internal safety audits and reviews will be indispensable to ensure that the H2Hubs are meeting the strict DOE safety standards. Furthermore, the H2Hubs have a unique opportunity to include feedback from multiple projects and companies across the H2Hub region to create more dynamic and effective safety protocols.
6. Community Benefits Compliance: All BIL projects are required to have 40% of benefits go to disadvantaged communities, and H2Hubs were required to develop a comprehensive community benefits plan. The best plans outlined metrics and timelines to hold H2Hubs accountable for their societal commitment. However, all H2Hubs will have to now contend with the demanding work of implementing community benefits plans. Many companies have existing community benefits practices, but the depth and complexity required by the FOA may exceed their capability.
Recommended Action: H2Hubs should start laying the groundwork for implementing their community benefits plans during award negotiations. Collaborative and accessible engagements with robust feedback mechanisms will provide the real-time insight needed for H2Hubs to tailor their initiatives effectively. Aligning with communities early and often will set hubs for success.
7. Offtake Requirements: The bedrock of any commercial undertaking in an emerging market is developing offtake commitments. While many H2Hubs will have lined up a robust, diverse customer base, the offtake commitments may not be signed and fully complete. However, to advance into the Phase 2, offtake letters of commitment are necessary.
Recommended Action: H2Hubs should begin to revise their economic models, market forecasts, and supply costs now, as all of these inputs are necessary for forming robust offtake agreements. With changes in the global economic landscape from rising interest rates to continued supply chain constraints it is imperative to continue engagement with key customers for securing offtake.
The landscape for H2Hub compliance is undeniably intricate, but this framework provides a starting point to ensure compliance with the DOE requirements. As a gated funding process, it is important that all DOE requirements are met and that grantees are constantly forecasting requirements for the next phase of funding.
Guidehouse is a global consultancy providing advisory, digital, and managed services to the commercial and public sectors. Purpose-built to serve the national security, financial services, healthcare, energy, and infrastructure industries, the firm collaborates with leaders to outwit complexity and achieve transformational changes that meaningfully shape the future.