The Hydrogen Hubs’ Success Relies on Proper Management

The Department of Energy (DOE) is trying a groundbreaking approach to accelerate the deployment of transformative, low-carbon technology at scale—vast, multi-level demonstration projects such as the $8 billion hydrogen hubs (H2Hubs) program. There are over 40 hub objectives and expectations are running high. It’s critical that the program prioritizes the delivery of commercially-viable low-carbon hydrogen and develops the market ready to buy it.

This matters as the H2Hubs are a major investment and a key piece of the strategy to create a sustainable regional ecosystem where hydrogen is a clean energy carrier, delivering or storing tremendous amounts of energy. The H2Hubs could play a central role in reducing the emission of greenhouse gases (GHG) and other pollutants from hard-to-decarbonize sectors like steel, chemicals, and heavy transportation. H2Hubs are also a trial of the impact of demonstration programs more broadly. Can they help important technologies make the jump to commercial viability?

There are a number of formidable challenges, as the markets for low-carbon hydrogen don’t yet exist, technologies haven’t been demonstrated and integrated at scale, key infrastructure components are missing, and alternative (although dirtier) sources of hydrogen are cheap and well-established in markets. The cost of low-carbon hydrogen will be substantially more expensive than incumbent sources initially. So unless the technologies and business models are able to deliver the same quality hydrogen at the same price, or price-performance-parity (P3), they will require ongoing subsidies or regulatory help to compete. The creation of new markets for low-carbon hydrogen will develop slowly if the price is too high, opting instead for incumbent processes such as steam methane reformers. As the rate of market adoption is tied to the rate of GHG reductions, it’s important to reduce the price as soon as possible. It’s essential then that DOE prioritize achieving P3 to prove that low-carbon hydrogen is commercially viable and hence, sustainable.

A recent ITIF report explores management principles for ensuring success. The report provides the following priorities:

1. DOE must prioritize the economic sustainability of the H2Hubs while also showing they can eliminate GHGs.
2. The management approach needs to provide sufficient oversight without impairing an agile approach or day-to-day decision-making.
3. Outside expertise should be leveraged via recruiting experienced industrial hires and effectively using an external expert board.
4. DOE should utilize its strong position when negotiating with the hubs before AND after selection.
5. DOE should take a pro-transparency position, insisting that key data be shared to facilitate learning and leverage to other hubs.

Determining priorities does not mean that other objectives are unimportant or can be ignored. Prioritizing does not sideline social justice, environmental, and workforce objectives. Yet, hubs that don’t yield a viable product or don’t develop a clean hydrogen market will fail to be successful and the large GHG reduction potential will be missed. It will be a hard road to commercial viability for all these hubs, but DOE must focus on achieving P3.

Effective management of the H2Hubs program is therefore doubly significant; a successful program would directly accelerate decarbonization, and success would further show that demonstration programs can work. If the pre-commercial or market boundary can be crossed with the help of such programs, we can expect to see many more, in other sectors as well. That has implications far beyond the H2Hubs, beyond DOE, and even beyond the federal government.