The U.S. Hydrogen Landscape: Forward-looking Investment Outlook-Profiling of U.S. Hydrogen Regions for Lead Generation & Inward Investment Attraction

Investment in green hydrogen in the U.S. has made significant strides over the past couple of years. Additionally, legacy energy companies were able to stockpile substantial capital in 2022 due to high oil prices, which is now being absorbed into the clean tech sector, and green hydrogen is expected to become a primary beneficiary in the coming years according to S&P Global Commodity Insights. Green hydrogen is poised to draw strong growth in investment, driven by the generous hydrogen incentives in the IRA. 

Decarbonization efforts, government targets, and subsidies have led to several high-profile and ambitious project announcements in the sector. Furthermore, green hydrogen produced in certain areas of the US is projected to be more competitive than that produced in mainland China owing to the tax credits the IRA created. The U.S. Gulf Coast currently produces the most competitive green hydrogen in North America, according to Platts, a part of S&P Global Commodity Insights. 

Due to high costs, uncertainties and the evolving nature of the industry, considerable efforts are required to consistently attract innovation and investment. Based on historical/current trends and conversations with potential investors as part of Wavteq’s lead generation business, there are many factors that play a pivotal role in driving such investment.

1. Government / EDOs role in attracting FDI in the hydrogen industry.

The rise in hydrogen projects in the U.S. has been fueled by enthusiastic governmental support. Most high-impact hydrogen projects have high capital and cost requirements necessitating the support of the government and EDOs to provide funds and resources. Examples include:

• U.S. based power company AES Corporation and chemical firm Air Products have partnered to build a green hydrogen production plant in Wilbarger County, Texas. The support of Governor Abbott, state, and local officials as well as the Inflation Reduction Act incentives played a huge role in making the project feasible.
• Plug Power Inc.’s investment in a fuel-cell manufacturing facility in Slingerlands, N.Y was supported by $45 million in Green Excelsior Jobs Tax Credits from Empire State Development, a $5 million grant from Albany County, and a $500,000 infrastructure grant from National Grid. 
• Bakken Energy, the developer of affordable clean hydrogen, has partnered with the States of North Dakota, Minnesota, Wisconsin, and Montana to work on the design of a Heartland Hydrogen Hub. 

Louisiana's emergence as a leader in the energy transition has attracted major investments from legacy companies as well as prospective investments from newer ventures like Clean Hydrogen Works. Clean Hydrogen Works, a project development company established in 2021 that is focused on energy decarbonization solutions, announced it is exploring a plan to build a large-scale hydrogen-ammonia production and export facility in Ascension Parish.

California has long been at the forefront of the clean energy transition. With the goal of 200 hydrogen refueling stations by 2025, the #1 fuel cell market in the U.S., and numerous ongoing hydrogen production and research projects, California is a top contender to lead the hydrogen market in the U.S. The 2021 Infrastructure Investment and Jobs Act (IIJA) allocated $8 billion dollars for the development of at least four regional clean hydrogen hubs as part of the Regional Clean Hydrogen Hubs Program.

Utah proactively pitches itself as a center for hydrogen production to fuel long-distance trucking, boasting the state's position at the crossroads of several interstate highways, its salt dome storage resources, and ongoing efforts to expand and green its logistics sector.

The role of government and economic authorities is evident from almost all instances of high-impact hydrogen project announcements in the U.S. Public and private collaborations are a consistent feature of such undertakings. Thus, regional EDOs and governments can strategically play a huge role in incentivizing further investment in hydrogen projects.

2. Access to Infrastructure and Proximity to End-users

Cost-effective hydrogen transport and storage infrastructure is a major driving factor for hydrogen investments. Access to salt storage is critical to the scaling-up of green hydrogen production as it allows for maximum utilization of electrolyzers and serves as a buffer between variable wind and solar production and the final delivery of green hydrogen to customers.

Plug Power Inc. chose to locate its green hydrogen project on the banks of the Neches River in Jefferson County in Texas, enabling access to reliable power and logistics including rail, marine and existing pipelines that span the U.S. Gulf Coast region. Also, Texas is an attractive region for hydrogen investments because of its natural advantages in cost-effective hydrogen transport and storage, given its extensive oil and gas and hydrogen pipelines, experience in hydrogen storage, salt caverns, and developed port infrastructure. 

Hydrogen is difficult to contain without leakage, causes embrittlement of metal casings, is technically complicated and expensive to liquify, and loses large amounts of energy efficiency when converted to and from a compound such as a liquid organic hydrogen carrier (LOHC) or ammonia. Many of the hydrogen transportation challenges can be addressed by minimizing the distance between producer and consumer. Hence, proximity to end-user markets is vital in driving investments.

E.g.: Easily accessible from Plug Power’s Texas facility, the Port of Beaumont and broader Sabine-Neches Navigation District are home to an array of large-scale industrial facilities in the refining, petrochemical and other sectors that utilize hydrogen for desulfurization and feedstock processing.

An additional instance is Bakken energy that chose to partner with BNSF Railway to support the effective distribution of produced hydrogen. According to Bakken, production is half the battle, effective distribution is a significant challenge that demands proper consideration while locating hydrogen projects.

3. Information Sessions and Participation in Networking events

During our conversations with companies, we have observed that many regions do not have visibility in terms of their incentives, investment attraction policies, etc. and executives have not considered the regions prior to direct outreach. Hence, the dissemination of information is an important part of investment attraction. EDOs and IPAs must continuously participate in networking/industry events as well as host sessions/webinars to gain visibility among investors.

4. Research and Academic Focus

Green Hydrogen is an evolving industry and regions at the forefront of research & development are likely to attract more investments. Research institutes, specialized academic programs, and industry-based training programs not only enable innovative projects but also facilitate the availability of skilled talent for future projects. For instance, the California Energy Commission has invested $242 million to support hydrogen research, development, and deployment projects since 2008 making California a solid prospect for hydrogen investments.

Region-wise analysis of the Hydrogen landscape in the U.S.

The U.S. Department of Energy (DOE) launched the Energy Earthshots Initiative with goals to accelerate advancements of abundant, affordable, and reliable clean energy solutions within the decade. 

The first Energy Earthshot, —the Hydrogen Shot—seeks to reduce the cost of clean hydrogen by 80% to $1 per 1 kilogram in 1 decade ("1 1 1"). Clean Hydrogen is gradually being adopted by industries to reduce emissions. But there are many obstacles to deploying it at scale. Currently, the cost of hydrogen from renewable energy equals roughly $5/kg. If Hydrogen Shot’s 80% cost reduction goal is achieved, new markets will be unlocked for hydrogen, including clean ammonia, steel manufacturing, energy storage, and heavy-duty trucks. This would result in the creation of more clean energy jobs, reduce greenhouse gas emissions, and bolster America’s position to compete in the clean energy market on a global scale. These efforts would also ensure the priority of environmental protection and benefits for local communities.

During the Hydrogen Shot Summit in 2021, the DOE sent out a request for information from hydrogen stakeholders and analyzed the responses to derive insight into how the U.S. hydrogen landscape could develop over the next decade. 

Analyzing the U.S. Hydrogen Landscape - Guide for Prospective Expansion Projects

It is evident from the region-wise analysis that all U.S. regions have the market potential for green hydrogen which can be strategically used to attract investment – combined with incentives. Gulf Coast is positioned for success in green hydrogen. Endowed with infrastructure, it is one of the most attractive regions for investors to explore. Strategic outreach and information sessions focusing on specific incentives and support programs can positively impact interest from investors. It is also noteworthy that the Gulf Coast is positioned to be the center of a clean-hydrogen US export hub, given the region’s ability to potentially compete with likely major exporters (for example, Australia, Chile, and Saudi Arabia) on the delivered cost of hydrogen by leveraging its cost advantages and significant port infrastructure.

The Southwest, Central and Great Lakes regions of the US all boast nuclear resources that can be used to produce hydrogen. The Pacific Northwest, Gulf Coast, Alaska, and Hawaii are eyeing the potential to produce hydrogen using renewable energy. The Southwest has underutilized solar resources, while the central US and New England have abundant wind power. From an environmental justice perspective, the Southwest and Pacific Northwest have identified the potential of hydrogen to support tribal and Latinx communities. Meanwhile, the Gulf Coast has identified opportunities to invest in distressed communities throughout Opportunity Zones. Several Native American tribes and federal representatives have expressed interest in developing hydrogen resources.

Provided below is region-wise representation of findings that can be referenced by investors, stakeholders, policymakers, researchers, and corporates to determine geographical feasibility and location strategy for hydrogen-related expansion projects in North America. 

Current resources and infrastructure:  Gray Hydrogen is produced in LA. There are over 15 miles long of hydrogen pipelines in the LA basin. Additionally, the region has 5 power stations to use H2 and has potential natural reservoirs.

End-use market: The region has significant end-use market potential including usage in LDVs (Light duty vehicles), HDVs (Heavy duty vehicles), aviation, ports, forklifts, steel applications and blending with natural gas.

Current resources and infrastructure:  There are many legacy oil and gas wells, reclaimed water sites, natural gas pipelines, saline aquifers, salt domes and caverns in this region. There are also existing petrochemicals and refining plants producing ~3.6 MT of hydrogen annually. The region has significant employment potential for job creation in Opportunity zones.

End-use market: The region has significant end-use market potential including usage in city transit, industrial forklifts, phosphate industry supporting the agricultural sector, green ammonia production for marine fuel, oil refining and processing, ammonia and methanol production, metallic ore production and food processing.

Current resources and infrastructure: The region has an abundance of hydropower, nuclear and wind. The ports of Tacoma, Richland, Boardman, and Centralia provide strong transport infrastructure. There are many fueling stations planned in WA in the near future.

End-use: The region has significant end-use market potential such as portable and back-up power, data centers, oil refining and port cargo handling, chemicals, and FCEVs. The region’s carbon capture storage potential can transition current oil and gas jobs (estimated 8 jobs/1M invested in H2 infrastructure). 

Current resources and infrastructure: The region overlaps with the Great Lakes region, and has access to significant NG and saline storage; salt, limestone, and sandstone formations for potential CCS or H2 storage.

End-use: The region has significant end-use market potential in power generation, Industry backup power, steel, cement, chemical industries, and decarbonized refining facilities.

Current resources and infrastructure: The region has underutilized solar/wind power, salt deposits and abandoned potash mines for storage, renewable NG from farming and landfills, fugitive gas from shale oil, interstate NG pipelines, developing H2 fueling infrastructure along freight routes to California

End-use: The region has significant end-use market potential for exporting Hydrogen to California, Fuel Cell Electric Buses in Las Vegas and heavy-duty freight vehicles, power generation for the grid, and primary or backup power at remote posts such as U.S. Border Patrol. Carbon Capture Storage and Fugitive gas can transition current oil and gas jobs. 

Current resources and infrastructure: The region has available hydropower and wind in the Gulf of Maine, cross-border cooperative projects with Canada, hydrogen and hydrochloric acid from wastewater and seawater treatment.

End-use: The region has significant end-use market potential for usage in home heating, commercial fishing vessels, backup power, and hydrogen blending in MA and NH. Offshore floating wind installations can create 1000s of new jobs.

Current resources and infrastructure: The region has abundant wind and moderate solar to produce H2, coal resources, uranium ore, NH3 production, plans for nuclear H2 projects, CNG infrastructure in WY and UT that can support the transition to H2, saline formations, salt caverns, and depleted oil fields for potential storage.

End-use: The region has significant end-use market potential for ammonia and ammonium nitrate in fertilizer markets, hydro treatment for low-sulphur road fuels, and conversion of over-the-road motor coaches to FCEVs. Refineries in Montana and ND can transition to renewable H2. There is considerable job creation potential in construction, installation, and operation.

Current resources and infrastructure: The region has the capacity for geothermal, wind, biomass, solar and atmospheric water generation, landfill methane, and solid municipal waste. 100kW ocean thermal energy electrolyzer is under development. There are existing H2 stations and pipelines for storage as well as distribution capacity by trailers and trucks.

End-use: The region has significant end-use market potential for local and public transit, backup power storage for natural disasters, and hydrogen-fueled fishing vessels on the Alaskan coast. Over 800 jobs can be created in economically weak – Oahu.

Author: This article is authored by Harsimran Kaur, Lead Generation Specialist (North America), Wavteq.