NM and partners left out of hydrogen hub funding

Oct. 13—The White House announced $7 billion in funding for seven regional "hydrogen hubs" across the nation early Friday morning, none of which include New Mexico or the other three Rocky Mountain states that jointly competed for grant awards.

New Mexico, Colorado, Wyoming and Utah — which formed the Western Inter-State Hydrogen Hub, or WISHH, coalition last year — had jointly applied for $1.25 billion in federal awards to help finance eight different hydrogen projects in the region, including four in New Mexico.

The U.S. Department of Energy is administering a total of $8 billion in funding for hydrogen-hub development projects, which was included in the federal Infrastructure Investment Act approved in 2021.

The department received nearly 80 proposals last fall to fund hydrogen hubs across the nation. WISHH was among 33 that the DOE later invited to submit detailed project plans as finalists for consideration, but the coalition didn't make it across the finish line.

During a Friday morning news conference in Albuquerque to announce the launch of a new Climate Investment Center, Gov. Michelle Lujan Grisham said in an initial response to the DOE funding news that New Mexico expects to continue working with the other WISHH states and the private sector to advance regional hydrogen projects.

"I'm disappointed, but not deterred," the governor said. "My gut tells me their (DOE's) sense was we could do it without them."

Later on Friday, the governor said all the private companies involved in New Mexico's WISHH-connected hydrogen projects remain on board.

"We agree: our bullish outlook has not changed and we will continue to move forward," Lujan Grisham said in a statement.

Those four projects include:

Libertad Power, which plans to build a hydrogen-based production plant near Farmington to supply fuel for hydrogen-powered trucks;A plan by renewable developer Avangrid to build two production facilities in San Juan and Torrance counties;A Navajo Agricultural Production Industries project to convert some farm operations to hydrogen;A Tallgrass Energy project to convert the coal-fired Escalante Generating Station near Grants, which shut down in 2020, into a hydrogen-production plant to supply fuel to restart the facility using hydrogen to run the turbines.

The winning hubs

Of the seven hydrogen hubs that did receive DOE awards — which range from $750 million to $1.2 billion — five include multi-state coalitions based in the Northeast, the Appalachian region, the Midwest, the North-Central zone, and the Pacific Northwest. In addition, single state-level awards went to California and Texas.

A total of 16 states will benefit, helping to finance dozens of projects to build hydrogen production facilities and support infrastructure to supply fuel for power generation, transportation, and heavy industrial processes like steel and cement production, among other things.

When counting matching funds from grant recipients and other private-sector investment plans, a total of nearly $50 billion could be pumped into building a sustainable hydrogen economy across the U.S. in the coming years, according to the White House. And that, in turn, could create tens of thousands of jobs while eliminating 25 million metric tons of carbon emissions per year — equal to annual emissions from roughly 5.5 million gasoline-powered cars.

It's part of a strategic, nationwide initiative to use hydrogen as a relatively clean fuel to help lower or eliminate emissions in hard-to-decarbonize sectors, displacing fossil fuels in everything from long-haul trucking, maritime shipping, and aviation to power generation and chemical and fertilizer production. Supporters consider it critical for the nation to reach net-zero emissions by mid-century.

Controversy

But many environmental organizations are opposed, largely because most hydrogen today is produced by pulling hydrogen molecules out of the methane in natural gas, which emits substantial carbon in the process. And, to trap those emissions, industry plans to use carbon capture and sequestration technology — a controversial system that must yet be proven viable on a commercial scale.

Environmentalists prefer electrolysis technology, which pulls hydrogen molecules from water — eliminating carbon emissions in the process — as long as electrolyzer facilities are powered up with solar, wind and other renewable generation, and not by fossil-fuel plants.

Friday's funding announcement generated broad criticism from environmental organizations, because most award recipients do plan to use natural gas-based production, commonly called "blue hydrogen," alongside electrolysis production, dubbed "green hydrogen." In fact, only two awardees — California and the Pacific Northwest hub, which includes Washington, Oregon and Montana — plan to exclusively rely on green hydrogen.

The Institute for Energy Economics and Financial Analysis, or IEEFA — a national think tank that favors renewable energy — released a report in September that says natural gas-based hydrogen could actually increase carbon emissions when accounting for life-cycle production, which encompasses methane leakage from extracting, compressing and transporting natural gas to hydrogen plants.

"Our research has shown that the government is significantly understating the impact of blue hydrogen on global warming," IEEFA analyst David Schlissel said in a statement Friday. "The reality is that blue hydrogen is not clean or low-carbon. Pursuing this technology is wasting precious time and diverting attention from investing in more effective measures to combat global warming like wind and solar resources, battery storage and energy efficiency."

Local projects push forward

In New Mexico, only Tallgrass Energy's plan to convert the Escalante Generating Station to hydrogen production and generation is based on natural gas, or blue hydrogen. All the others are green, electrolysis-based projects.

Nevertheless, many local environmentalists remain opposed, calling even green hydrogen a "risky" distraction from solar, wind and battery development. Many have united into a "New Mexico No False Solutions Coalition," which protested against the state's hydrogen plans during the governor's Friday morning press conference.

But the developers behind all four projects remain determined to push forward, said Secretary James Kenney of the Environment Department, which has spearheaded New Mexico's participation in the WISHH coalition.

"The governor and I spoke with each of the companies this morning, and all of them remain committed," Kenney told the Journal. "I think we have a path forward. We'll look for other funding to help get their projects jump started."

Indeed, Libertad Power — which plans to build green hydrogen-production plants in San Juan County — remains on track, said Managing Partner Joe Merlino.

"Obviously we're disappointed," Merlino told the Journal. "We thought the WISHH proposal had a compelling case for funding, especially given how far it got in the competitive funding process. But now that the awards have passed us by, we're still moving forward."

Libertad is working with some major industry players, such as Hyundai Motor Co. and the nationwide fueling-services company Diesel Direct, to build a new hydrogen-fueled "Southwest Clean Freight Corridor" to run from the Port of Los Angeles to West Texas. The corridor would provide hydrogen-fueling stations along all major highways to support heavy-duty, long-haul trucks.

Merlino said the project is still critical for the region.

"Both Texas and California got hub awards, but that leaves a major gap in Arizona and New Mexico," Merlino said. "Our freight corridor still has a lot of value."

Forthcoming federal tax credits for hydrogen production will also help propel existing and future projects. Those tax incentives — included in last year's Inflation Reduction Act — will award credits on a sliding scale based on the amount of carbon released during production, with credit eligibility capped at a maximum of four kilograms of carbon emissions for every one kilogram of hydrogen produced. Up to $3 per kilogram will be awarded for the cleanest hydrogen, and 60 cents for hydrogen that hits the carbon emission ceiling.

With the DOE hub awards now in place, environmentalists will push for strict federal requirements on producers to prove they've met the low-carbon intensity guidelines to receive tax credits, said Sierra Club Rio Grande Chapter Director Camilla Feibelman.

"The hydrogen tax credit will have even deeper impact than the hydrogen hub awards for investors and developers seeking federal funding for their projects," Feibelman told the Journal. "We don't see these projects going away. But we do hope the federal government will have very strict requirements for carbon reduction related to those projects."