This week, the Biden administration announced several actions to expand its support for the clean energy economy. While much of the focus has been on solar energy, the White House also made important announcements for the hydrogen industry and reiterated its support for permitting clean energy generation and transmission on federal lands. This alert focuses on those latter announcements.
Hydrogen
The Biden administration authorized use of the Defense Production Act (DPA) to increase domestic manufacturing of electrolyzers, fuel cells and platinum group metals to produce and utilize hydrogen. In a memorandum to Secretary of Energy Jennifer Granholm, President Biden stated that increasing federal purchases and purchase commitments of these technologies and raw materials is the most “cost effective, expedient and practical alternative” for meeting the United States’ future supply needs. The Department of Energy (DOE) welcomed the authorization, stating the United States needs to significantly expand new manufacturing, processing and installation capacity to decrease reliance on imports of these critical parts and prevent significant price increases as demand expands. By fostering domestic manufacturing of key components to expand hydrogen generation via the DPA, DOE emphasized it would encourage use of strong labor standards and community benefits agreements to support domestic workers. It also built on the administration’s prior commitments to responsible deployment and environmental justice in other sectors by stating the DPA tools should be used to “support low-income communities who have been hard-hit with pollution.”
The DPA was originally enacted in 1950 to mobilize domestic resources to support the United States in the Korean War. Subsequent amendments to the law expanded its purview to ensuring the United States maintains a strong domestic industrial base to supply materials and services for natural defense and to respond to disasters. “To further assure the adequate maintenance of the domestic industrial base, to the maximum extent possible,” the DPA mandates that “domestic energy supplies . . . be augmented through reliance on renewable energy sources (including solar, geothermal, wind, and biomass sources), more efficient energy storage and distribution technologies, and energy conservation measures.” Though the DPA requires expansion of clean energy production, storage, distribution and conservation, invoking the DPA to catalyze production of clean energy equipment is a novel approach. However, it provides an avenue for the Biden administration to advance its clean energy agenda through the executive branch instead of trying to break an increasingly gridlocked Congress.
In addition to the White House’s authorization of the DPA, DOE announced its intent to distribute $8 billion in funding to develop regional clean hydrogen hubs via its H2Hubs program. Each hub will connect hydrogen producers and consumers to accelerate adoption of the fuel. The Energy Policy Act of 2005, as amended by the 2021 Infrastructure Investment and Jobs Act, defines “clean hydrogen” as “hydrogen produced with a carbon intensity equal to or less than 2 kilograms of carbon dioxide equivalent produced at the site of production per kilogram of hydrogen produced.” Though the focus is on direct production emissions, DOE stated it intends to evaluate the full lifecycle emissions of each hub proposal and will give preference to those applications that reduce greenhouse gas emission across the entire lifecycle. DOE will accept proposals for hubs that can produce at least 50‒100 metric tons of hydrogen per day and consider the Biden administration’s commitment to environmental justice and underrepresented communities when reviewing the proposals. This week’s announcement is intended to provide funding seekers with guidance as they develop their proposals ahead of DOE’s formal funding opportunity announcement this fall. Previously announced regional projects like the Western Inter-State Clean Hydrogen Hub will benefit from the additional direction.
Clean Energy on Federal Lands
In the same announcement, the White House reiterated its commitment to permitting projects that produce and transmit clean energy on federal lands. Five key agencies—the departments of Interior, Agriculture, Defense, Energy, and the Environmental Protection Agency—are collaborating to expedite and increase the efficiency of environmental reviews for clean energy project proposals on federal lands. DOE is similarly seeking to efficiently collaborate with states, tribes, industry and other stakeholders to accelerate construction of transmission infrastructure to transport clean energy for use around the nation. The delays and roadblocks for permitting conventional renewable energy generation and transmission projects on federal lands will similarly stymie hydrogen projects, including DOE’s plan for regional hydrogen hubs, unless DOE firmly establishes itself as the leader and coordinator.
This week’s announcements indicate the White House’s governmentwide approach to incentivizing a transition to clean energy and tackling climate change is picking up steam. Hydrogen, including the planned hubs, continues to play a key role in these efforts. Notably, the practical funding level of the DPA authorization will be constrained by the DPA’s budget. Congress has appropriated approximately $888 million for total DPA spending, but clean energy programs will compete for funding with other DPA priorities including producing COVID-19 vaccines, alleviating the shortage of baby formula, and supporting domestic mining and processing of strategic and critical minerals. Legislation is pending in both the House and the Senate to increase the annual appropriation for clean energy programs under the DPA to $10 million per year until 2030 but has been stalled for many months. Therefore, DOE’s announcement of its intent to pour $8 billion into regional hydrogen hubs may be the best source of funding to accelerate this critical technology.
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