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Study Finds Economic Concerns Hinder Appalachian Hydrogen Hub Plan

Hydrogen hub projects in Appalachia face setbacks as uncertainties and partner exits challenge their economic viability.
A view of hydrogen storage tanks at a hydrogen plant in Xinjiang, China. Credit: VCG/VCG via Getty Images

Plans to establish a hydrogen “hub” in western Pennsylvania, Ohio, and West Virginia face challenges as one-third of its projects have been terminated and four development partners have exited, a recent report reveals.

The Ohio River Valley Institute, which analyzes the Appalachian economy, attributes these changes in the Appalachian Regional Clean Hydrogen Hub (ARCH2) to uncertainties about potential users and how federal tax credits will apply. The institute has criticized ARCH2, stating it will offer minimal environmental or economic benefits despite consuming $925 million in federal funds.

“Hydrogen hub projects are unraveling due to high costs and uncertain demand,” Sean O’Leary, a senior analyst, stated in the report. “The entire ARCH2 initiative might end up as a minor yet costly blip on Appalachia’s economic and environmental scene.”

ARCH2, part of seven U.S. regional centers, aims to create jobs and reduce carbon emissions by integrating companies to produce, distribute, and use hydrogen. Launched by the Biden administration with a $7 billion seed fund, these projects are essential to its climate goals.

Some hubs aim to produce “green hydrogen” using carbon-free energy sources, while others, like ARCH2, focus on “blue hydrogen,” created by burning natural gas. Critics argue blue hydrogen exacerbates the climate crisis by emitting more carbon.

ARCH2 contends that the report provides a “misleading picture” of its progress, affirming remaining partners’ commitment. “Our project roster has evolved as the H2Hub program rules developed,” said hub leaders. The departing partners hadn’t secured federal funding.

On Oct. 7, ARCH2 issued a request for information for new participants, favoring those proposing multiple steps in hydrogen production. Applications are open until Nov. 8.

The Ohio River Valley Institute reports that five of the 15 initial projects, including a hydrogen storage facility by MPLX and a blue ammonia project by CNX Resources, have been canceled. These were omitted from a recent ARCH2 presentation.

Chemours, one of the companies that exited, cited a lack of clarity on hydrogen tax breaks in the Biden administration’s Inflation Reduction Act as a reason for its withdrawal.

CNX Resources remains a partner but left the blue ammonia project in West Virginia due to tax credit uncertainties, according to Reuters. The Clean Hydrogen Production Tax Credit, valued at $3 per kilogram, remains undefined, affecting U.S. hydrogen infrastructure development.

Energy Innovation Policy & Technology notes that only oil refining and ammonia production have a strong chance of becoming viable hydrogen markets, while other sectors show poor potential.

“Uncertain demand and inexperienced developers are common challenges for clean-hydrogen projects,” O’Leary wrote. The Department of Energy stated it allows program flexibility and focuses on clean hydrogen investment.

Concerns about a profitable hydrogen market also hinder projects like ARCH2, according to Rob Altenburg from PennFuture. He questions hydrogen’s role in the energy transition compared to more immediate low-carbon solutions.

This story was updated Oct. 18, 2024, with comments from ARCH2.

Original Story at insideclimatenews.org

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