Two decades ago, well before the current electric vehicle (EV) upsurge, hydrogen was a conceptual pillar of the clean energy movement. In his 2003 State of the Union address, then-President Bush said, “A simple chemical reaction between hydrogen and oxygen generates energy, which can be used to power a car, producing only water, not exhaust fumes.” The president then declared that, with a new national commitment, “the first car driven by a child born today could be powered by hydrogen, and pollution-free.”
Prophetic words indeed, but only the “pollution-free” part. So what happened in the ensuing years? Why are most of today’s green vehicles powered by electric batteries rather than hydrogen?
There are a couple of major reasons. First, oil prices fell precipitously from a high of $140 per barrel in the summer of 2008 to just $42 per barrel in the winter of 2009, dulling the zeal for hydrogen. Second, and more broadly, when countries and companies began to take serious steps toward decarbonization, they turned to electric batteries (and wind and solar as well) because the technology was more efficient and less costly than hydrogen.
In short, hydrogen got left behind. Today, however, this ubiquitous energy source is receiving a boost, and the gap between it and the frontrunners appears to be narrowing.
Hydrogen Characteristics
Hydrogen, with its single proton, is the simplest known element in the universe. It also is the most common, making up roughly 75% of all normal matter by mass and more than 90% by the number of atoms.[1] The sun and other stars are essentially big orbs of hydrogen in a plasma state.
Hydrogen, however, exists on Earth not in its natural form but in combination with other elements. The primary example is hydrogen combined with oxygen to form water. Additional examples include hydrogen combined with carbon, resulting in coal, petroleum, and natural gas.
Hydrogen’s fondness for other elements makes it a good energy carrier. When run through a vehicle’s fuel cell, for example, hydrogen combines instantly with oxygen, generating electricity to power the drivetrain and expelling water vapor out the tailpipe.[2]
Hydrogen Liftoff?
A significant factor standing in the way of widespread hydrogen use is a shortage of fueling stations. As of the end of 2022, California had only 55 operational public hydrogen stations, with another 76 funded but not yet built. Forty-five new public hydrogen filling stations were opened in Europe in 2022, representing a 22% increase from 2021. The total number of stations in Europe is now approximately 250. In 2022, 130 new hydrogen filling stations went into operation worldwide, raising the total to 814. By stark comparison, the United States has more than 100,000 gas stations.[3]
Cost is another factor hampering the widespread adoption of hydrogen fuel. According to the California Hydrogen Business Council, “a kilogram of hydrogen costs between $10 and $17 at California hydrogen stations, which equals about $5 to $8.50 per gallon of gasoline.” By contrast, the cost of charging an EV at home is akin to paying only $1 to $2 per gallon.
Yet another factor: The traditional method of producing hydrogen with fossil fuel results in significant quantities of greenhouse gas emissions.
Many companies are now working to reduce or eradicate such factors. One company, for example, is producing hydrogen at the pump site rather than offsite, using feedstock sourced from cow and pig farms, food waste, and landfills. This approach aims to reduce transportation costs and carbon use and increase the reliability of the hydrogen supply.
In addition to such private sector initiatives, public sector entities are funding hydrogen innovation at an unprecedented level. It is no surprise, then, that many commentators surmise that we are on the verge of a hydrogen upsurge.
Public Sector Opportunities
The U.S. federal government is investing billions of dollars in grants, tax credits, and loans to help transform clean hydrogen into a planet-friendly alternative to fossil fuels.
The recently enacted Inflation Reduction Act (IRA) includes tax incentives supporting clean hydrogen projects. For example, a new 10-year production tax credit will subsidize production costs to levels essentially on par with traditional production methods. (Read this previous Update for more information regarding the IRA and clean hydrogen.)
The Infrastructure Investment and Jobs Act (IIJA), passed in late 2021, includes $9.5 billion for clean hydrogen technology development. The IIJA program focuses comprehensively on factors that are “common to the development of hydrogen infrastructure and the supply of vehicle and electric power for critical consumer and commercial applications.” It envisions widely adopted use of distributed hydrogen electricity generation and storage.
The IIJA parses out $8 billion for six to 10 regional clean hydrogen hubs that will broaden the use of clean hydrogen in the industrial sector. The legislation includes an additional $1 billion for a hydrogen electrolysis program designed to reduce the costs of hydrogen produced from clean energy, along with $500 million for clean hydrogen recycling and manufacturing programs. The hubs will be complex webs of clean hydrogen producers, with at least one hub powered by fossil fuels, renewable power, or nuclear power. Their common objective is the demonstration and advancement of clean hydrogen technology through production, processing, delivery, storage, and end use, eventually leading to the development of a national hydrogen network.
Public Sector Obligations and Risks
Much of the competition for federal grant funding occurs through evaluations of applications in response to U.S. Department of Energy (DOE) funding opportunity announcements (FOAs). The following is a brief sketch of some of the obligations and risks tied to these opportunities. Experienced grant recipients will recognize most, if not all, of these.
Notable Obligations
- Cost share
- Maintenance of an adequate accounting system
- Procurement of supplies and services from contractors using (in certain instances) competitive procedures
- Performance in the United States
- Buy America requirements
- Reporting of subject inventions
- Domestic manufacturing commitment for subject inventions
- Community benefits plan
- Prohibition on certain telecom and video equipment made in China
- Various flow-down obligations to subrecipients and (on a more limited basis) contractors
Notable Risks
- Government rights in subject inventions
- Government rights in technical data and computer software
- False Claims Act (FCA) liability[4]
The above is a short outline of DOE clean energy obligations and risks. For more description, see the attachment at the end of this article.
Closing Thoughts
There have never been more federal funding opportunities than now for companies operating in the hydrogen sector. The government is investing billions of dollars to reduce financial risk and promote hydrogen advancement. Creative companies with innovative solutions—solutions effectively explained to government evaluators—stand to do well.
Such opportunities, though, like proverbial lunches, are not free. Companies pursuing them should understand well and embrace wholly the obligations and risks tied to the receipt of federal dollars. Here, we have touched on only some of them, providing, we hope, a platform for further research and planning. Much more information is available within the pertinent FOAs published at the EERE Funding Opportunity Exchange and Grants.gov, along with the grant regulations at 2 CFR Parts 200 and 910 and the DOE guidance.
DOE, Office of Energy Efficiency and Renewable Energy, FOAs
Endnotes
[1] Under current theory, normal matter constitutes less than 5% of the universe. The rest is dark energy and dark matter.
[2] An informative piece on how fuel cell hydrogen vehicles work can be found here.
[3] Generally, stations have to be built and pumps made available before consumers will consider buying hydrogen-powered vehicles. Worldwide, there are only about 56,000 hydrogen passenger vehicles on the road, according to a recent study by Information Trends. Roughly 54% of these have been purchased in the last two years, indicating accelerating demand. It appears that a more promising future for hydrogen, at least in the near term, is in long-haul trucking. This educated guess is both regulation-driven, on the one hand, and practicality driven on the other. On the regulation side, for example, California requires significant carbon reductions by 2030 and will allow only zero-emission heavy-duty (Class 8) trucks at its ports by 2035. On the practicality side, these large, workhorse trucks require 5,000-pound batteries, according to testimony from an industry expert at a recent Senate hearing. The witness added, “The amount of lithium, cobalt, graphite that has to go into them is not readily available. We’re also not sourcing that in the U.S.” Another witness commented, “As you look at Class 8 tractors on the highways, if we want to get to a zero-emission vehicle, we’re already in a place where we can utilize hydrogen—paired with a fuel cell—and maintain the same drivability, the same refueling time, regardless of the [outside] temperature.”
[4] For more information on the FCA, see this previous Update.