Hydrogen Investments Are Everywhere. Which Have What It Takes To Succeed?

This post was written by Jake Hiller, Senior Manager at EDF+Business.

Global energy companies are gathered in Houston for the major energy conference CERAWeek, and there’s lots of buzz around hydrogen.

Investments in this potentially climate-friendly technology are surging worldwide, and the U.S. Department of Energy will soon consider which clean energy projects among dozens of applicants should be seeded with billions in federal spending.

The projects under consideration are first-of-their-kind regional “hubs” that will bring innovative technologies like hydrogen and direct air capture together with industrial applications in areas like energy, chemicals and manufacturing, aiming to cluster clean energy supply and demand.

Private sector financing and other cost-sharing mechanisms are crucial components of the proposals to unlock up to $1.25 billion per project in federal grants, making businesses and financial institutions important partners.

The hub approach presents a unique opportunity to bring energy producers, users and other stakeholders into integrated projects where they succeed or fail as one.

This kind of cohesive planning enables partners to work together from the start to set high standards — like centering community and environmental priorities in industrial planning and design — that can benefit businesses, people and the climate.

If done right, these projects could be followed by a far larger wave of transformative investments in clean energy and industry on the path to a net-zero-emission economy.

What does a winning proposition look like?

Last March, I outlined three ways investors could reduce their risk when teams first began competing for $8 billion set aside for hydrogen hubs:

1. Focus on uses where the economics make sense and there are clear advantages for climate and communities. Hydrogen generally offers the most benefit in heavy industry and hard-to-electrify applications. It is not the universal solution that some believe it to be.
2. Keep climate science front and center in hydrogen investment decisions, recognizing that hydrogen is an indirect greenhouse gas that triggers potent warming effects in the atmosphere if it leaks.
3. Support companies that understand the climate significance of hydrogen leaks and commit to high standards for system design, monitoring and repair.

A year later, there’s more to share about how these investments can kick-start a decarbonization revolution that prioritizes environmental and public good alongside economic objectives.

Reinventing industrial development

As investors seek opportunities in these projects, it will be helpful to keep in mind that hub demonstrations will win or lose not only on their economics, but also on their ability to build in transparency, collaboration and peer-driven accountability from the start.

Doing so will better position projects for long-term success in a world that increasingly holds companies accountable for their global and local impacts.

Environmental Defense Fund launched the BetterHubs website to highlight 10 objectives that will be critical to compete in this new landscape and foster a paradigm shift to more collaborative planning.

Investors can use these goals to guide their due diligence as they seek high-performing opportunities in the sector. The objectives are presented in-depth on the site, and are designed to foster transparent dialogue among stakeholders.

For example:

• How will the project partner with affected communities to meet local needs, reduce pollution and other burdens, support economic development, and address concerns across all stages of development?
• How will the project engage with federal, state and local regulators to set and meet high standards for responsible performance?
• How does the project plan to responsibly and equitably source and safely optimize the use of land, materials, resources and local infrastructure?

If launched correctly, these hubs could kick-start decades of additional clean energy investment from governments and private investors alike.

Starting off on the wrong track risks losing not just early investment dollars, but also the chance to avoid the worst impacts of climate change and build a more equitable and inclusive economy. We don’t have time to get it wrong.