Concerns About Appalachian Hydrogen Hub as Companies Drop Out; New Participants Sought
A report from a group that looks at economic conditions in the Appalachia region of the U.S. says a hydrogen hub proposed for the area already faces significant challenges. The Ohio River Valley Institute in a research brief published this month said five of the 15 originally proposed projects in the hub have been canceled, and four project development partners already have left the hub.
The Appalachian Regional Clean Hydrogen Hub (ARCH2), encompassing locations in western Pennsylvania, Ohio, and West Virginia, is one of seven regional sites in the U.S. chosen by government officials to generate, distribute, and consume hydrogen. The Biden administration last year said the Appalachian site would receive as much as $925 million in federal grants, as part of a multibillion-dollar outlay from the Infrastructure Investment and Jobs Act for hydrogen projects. The administration said the hydrogen hubs were a key element of its strategy to combat climate change.
ARCH2 officials in September said the hub is “a collaborative initiative between the United States Department of Energy [DOE], private industry, state and local governments, academic and technology institutions, non-profit organizations, and community groups working together to build a safe and sustainable clean hydrogen ecosystem in Appalachia.”
The Ohio Valley research group in its report, released October 11, said “Hydrogen hub projects are unraveling due to high costs and uncertain demand. If decisionmakers ignore economics and shoehorn hydrogen and CCS [carbon capture and storage] into uneconomic applications with federal dollars, taxpayers, ratepayers, and residents could pay the price.”
Sean O’Leary, author of the Ohio Valley report, wrote, “Uncertain demand, under-capitalized and inexperienced project developers and uneconomic applications aren’t peculiar to the ARCH2 hydrogen hub. Across the nation and around the world, these and other issues are causing clean-hydrogen projects to struggle in their pursuit of financing.”
The report said two development partners still involved in the project “are in states of chronic financial crisis … two more have never developed or managed a significant industrial facility.” The report also said, “And two of the principal uses to which the surviving projects propose to put hydrogen are described by respected industry analysts as ‘uncompetitive’ and ‘terrible.’ ”
Project Update
ARCH2 leadership team members on September 18 gave an update on the project, and acknowledged the hub is looking “for up to three” new projects that would be built in southwestern Pennsylvania, West Virginia, or eastern Ohio as part of the initiative. The group said the new projects would replace several that are no longer part of ARCH2.
Don LaMonaca, director of Batelle’s critical infrastructure businesses and an ARCH2 executive board member, as part of that update said the hub will move forward in four phases, with the first phase expected to take from 18 months to 36 months as project developers start detailed work on their business, financing and management plans, and engineering designs. The second phase will include finalizing financing and permitting. The third phase is construction, expected to take two to four years. The final phase, which also could take two to four years, will be the start of operations.
ARCH2 officials on October 7 issued a call for information from any new parties that would like to join the project. The group on its website said it “is accepting submissions for a Request for Information (RFI) to identify clean hydrogen projects that will drive the future of sustainable energy in Appalachia. Up to $110 million in federal funding is available for up to three innovative projects.”
The group said it is “seeking innovative proposals to add to our portfolio that demonstrate excellence in hydrogen production, processing, delivery, storage, and/or end-use.” ARCH2 said it would accept submissions through November 8. The group also said, “ARCH2 encourages submittals from entities not currently part of ARCH2.”
Uncertainty About Tax Breaks
Chemours, a chemical company that is backing away from the ARCH2 project, in a recent statement said it could not continue because the Treasury Dept. has still not issued clear guidance about tax breaks for hydrogen producers. The tax breaks, included in the Inflation Reduction Act (IRA) established in 2022, provide a production credit for each kilogram of qualified clean hydrogen produced by a taxpayer at a qualified clean hydrogen production facility.
Chemours, headquartered in Wilmington, Delaware, in a statement said, “We remain committed to supporting the growth of the hydrogen economy and the broader clean energy transition despite the decision to step away from the projects under the Appalachian Regional Clean Hydrogen Hub (ARCH2).”
ARCH2 officials in a statement said the Ohio Valley group’s Oct. 11 report presents a “misleading picture of ARCH2’s progress,” adding, “It should not come as a surprise that our roster of projects has evolved over time as the rules and requirements of the H2Hub program have been developed and refined. In a large portfolio of innovative, complex initiatives, adjustments were expected.”
Reuters reported that CNX Resources is still a development partner of ARCH2, but did pull out of a blue ammonia project at Adams Fork, West Virginia, due to uncertainty about the tax credit. The Adams Fork project is no longer included in the ARCH2 hub. Blue ammonia is a low-carbon alternative to traditional ammonia that is produced by capturing and storing carbon dioxide emissions during its production. It can be burned in power plants, used in fuel cells, and also is used to produce fertilizer.
Economics Questioned
The Ohio Valley group has long been critical of the ARCH2 hub, saying in part that hydrogen and carbon capture “are economic for only a few industries.” The group in its report said the Appalachian Hub “will either … be a small affair that has disappointingly little economic and environmental impact,” or “hydrogen and CCS will be force-fed into applications for which they are not economic, resulting in higher prices, higher utility bills, and higher taxes, with little or no net economic benefit.”
O’Leary wrote, “The entire ARCH2 enterprise may amount to no more than a blip, albeit a very expensive one, on Appalachia’s economic and environmental landscape.”
The report said other companies that have dropped out of the project include First Mode, a global decarbonization technologies company with U.S. offices in Washington state; MPLX, an oil and gas company formed by Marathon Petroleum; and TC Energy, and oil, gas, and power generation group headquartered in Calgary, Alberta, Canada. TransCanada, a pipeline operator, is a subsidiary of TC Energy.
Other organizations have expressed concerns about the hub. Earthworks, an environmental group, in August issued a statement critical of the project after the DOE on July 31 announced $30 million to fund the project’s first phase. The group said, “This announcement comes despite demands from Appalachian-based advocacy groups for a delay in decision-making until transparency and community engagement concerns were met. The communities where the ARCH2 projects are set to be located are already disproportionately impacted by pollution and the volatile economics of extraction-based development from the fossil fuel industry. Phase one, which includes initial planning, design, and community engagement, is expected to last up to 36 months with the subsequent three phases each lasting 2-4 years.”
Anaïs Peterson, the Petrochemicals Campaigner for Earthworks, said, “Doubling down on investments in fossil fuels under the guise of decarbonization during the few crucial years we have to stop a climate catastrophe is a dangerous distraction from real climate action. Giving public money to a methane project that will prolong the impacts of the fracking industry on frontline communities is appalling.
“The Department of Energy should pause this project now, as numerous regional advocates have insisted. For all decisions moving forward, community members, frontline and fenceline residents must be given representation in decision-making in proportion to the impacts this project will have on their communities. Chronic polluters and repeat offenders CNX and EQT should not be trusted to do what is best for the people of Pennsylvania, Ohio, and West Virginia.”
LaMonaca, whose Battelle company is leading ARCH2 as program manager, said the Appalachian hub’s importance is highlighted by its location between two other hubs in the DOE program. The Midwest Alliance for Clean Hydrogen is focused on Illinois, Indiana, and Michigan; the Mid-Atlantic Clean Hydrogen Hub includes Delaware, New Jersey, and Pennsylvania. LaMonaca in the Sept. 18 update said, “ARCH2 is uniquely positioned geographically to facilitate inter-connectivity between hubs to help achieve the vision of a national clean hydrogen network.”
—Darrell Proctor is a senior editor for POWER (@POWERmagazine).