On August 10, 2021, the U.S. Senate passed the Infrastructure Investment and Jobs Act (IIJA) by a bipartisan vote of 69–30. In addition to funding for roads and bridges, the $1.2 trillion infrastructure package includes a number of provisions to spur investment in clean energy innovation technologies—in particular, it provides resources to accelerate research, development, demonstration, and deployment of clean hydrogen in the United States. This includes development of a definition for “clean hydrogen,” clean hydrogen supply chains, regional clean hydrogen hubs, and a focus on commercializing the use of clean hydrogen in transportation, utility, industrial, commercial and residential sectors. This is in line with goals stated during President Biden’s campaign to create “green hydrogen at the same cost as conventional hydrogen within a decade.”
Defining “Clean Hydrogen”
In what would be the first definition for clean hydrogen in U.S. law, the IIJA requires the Secretary of Energy in consultation with the Environmental Protection Agency, to develop an initial standard for the carbon intensity of clean hydrogen production. It initially defines “clean hydrogen” to mean hydrogen “produced with a carbon intensity equal to or less than 2 kilograms of carbon-dioxide equivalent produced at the site of production per kilogram of hydrogen produced.” However, the IIJA provides that the Secretary may adjust that standard after its consultation with the EPA. It also mandates that the clean hydrogen standard be applied to hydrogen produced from “renewable, fossil fuel with carbon capture, utilization and sequestration technologies, nuclear, and other fuel sources using any applicable production technology.”
Regional Clean Hydrogen Hubs
The IIJA requires the Secretary of Energy to solicit proposals for regional clean hydrogen hubs 180 days after its passage, and select four regional hubs within one year from that date. The bill authorizes and appropriates $8 billion for fiscal years 2022-2026 to the newly created Office of Clean Energy Demonstrations under the Secretary of Energy to carry out this program. These hubs will demonstrate the production, processing, delivery, storage, and end-use of clean hydrogen.
The hubs will have to demonstrate feedstock diversity, as the bill requires at least one hub produce hydrogen from nuclear energy, one from fossil fuels, and one from renewables. Additionally, at least one of each of the hubs will be required to demonstrate hydrogen end-use in either electric power generation, industrial sector, residential heating or transportation. The four hubs are required to be located in different regions of the U.S. and, if feasible, there is preference that at least two hubs be located within natural gas producing regions.
The Secretary of Energy, on the recommendation of the Office of Clean Energy Demonstrations, will allocate grants to each regional hub to accelerate commercialization of, and demonstrate the production, processing, delivery, storage, and end-use of, clean hydrogen.
Clean Hydrogen Electrolysis Program
The IIJA also requires the Department of Energy, within 90 days after the bill’s passage, to establish a program to reduce the cost of producing hydrogen through electrolyzers. The goal of the program is to reduce the cost of producing clean hydrogen to less than $2 per kilogram by 2026, and $1 billion has been authorized and appropriated to the Office of Clean Energy Demonstrations for such efforts. Grants will be awarded through the Department of Energy’s Office of Energy Efficiency and Renewable Energy on a competitive basis through contracts and cooperative agreements for projects that demonstrate the production of clean hydrogen through electrolysis and the feasibility of commercial deployment of these technologies. The eligibility criteria for these grants is to be determined by the Secretary of Energy.
Clean Hydrogen Manufacturing Initiative
Also through the Office of Energy Efficiency and Renewable Energy, the government will award multiyear grants to and enter into contracts, cooperative agreements, or any other agreements with eligible entities (as determined by the Secretary of Energy) for research, development, and demonstration projects:
The IIJA authorizes and appropriates $500 million in grants between 2022-2026 at $100 million each fiscal year.
Overall, the IIJA puts a significant investment, $9.5 billion, towards clean hydrogen research, development, and demonstration. The bill is now set to be considered by the House, which may reject the bill, pass it as is, or pass it with further amendments. The IIJA is part of Senate Majority Leader Schumer’s two-track strategy to pass “hard” infrastructure spending in the IIJA and other additional social and clean energy programs through a second budget reconciliation bill. Speaker Nancy Pelosi has indicated she will not bring the IIJA to a vote until House Democrats vote to pass the $3.5 trillion budget reconciliation bill, but she has agreed to take a vote on the IIJA at least by September 27, 2021. While there are no specific provisions for clean hydrogen in the budget reconciliation bill, it currently has a Clean Electricity Payment Program (CEPP) designed to promote all zero-carbon energy sources.
Companies looking to invest in clean hydrogen research and demonstrations projects in the near future should pay special attention to how the statutory amendments proposed in the infrastructure bill play out during House negotiations and may wish to lobby their representatives to shape the outcome of the legislation. Pillsbury has seasoned environmental, energy and public policy attorneys who can assist with such efforts.
Pillsbury’s Hydrogen practice, one of the first launched by an AmLaw 100 firm, brings together experienced practitioners from across corporate and transactional, finance, regulatory, environmental, intellectual property, tax and dispute resolution practices. The team also created and maintains The Hydrogen Map, the first public resource tracking the development of hydrogen projects worldwide.