While increased US clean hydrogen production is a safe bet, permitting issues, access to capital, and equipment costs are looming bottlenecks. Approximately $7 billion in grants is being disbursed by the Biden Administration as part of the 2021 infrastructure law aimed at jumpstarting clean hydrogen production. The administration’s climate goals are highly contingent on making the cost of clean hydrogen production closely competitive with hydrogen made from natural gas. Yet, investors are wary of structural impediments.  

Recipients of the $7 billion in grants will be energy infrastructure companies, hydrogen suppliers, industrial buyers, and state and local partners. Nearly all the US hydrogen currently produced comes from heating natural gas. This is a highly cost-effective process but the greenhouse gas emissions are considerable. Machines that can split water thereby resulting in green hydrogen are the preferred alternative as emissions are negligible and clean. This is an ideal future for most countries but the process is more costly than the status quo.

One region that is certain to benefit from the subsidy avalanche is Appalachia. West Virginia Pennsylvania, and Ohio are expected to form a regional hub to eventually connect into a larger national network. The “heartland hub” is another funding recipient comprised of North and South Dakota as well as Minnesota. California is its own hub as is Texas, and a hub for Michigan, Illinois, and Indiana make up the midwestern states. 

In terms of private actors, the chemical producer DuPont, a pipeline operator, Enbridge, hydrogen producers Plug Power, Air Liquide, and Air Products and Chemicals, coupled with Chevron and Exxon Mobil are slated to invest over $40 billion across the previously mentioned hubs. Industrial hydrogen buyers will receive an additional $1 billion in incentives to encourage purchases from the hubs.   

At the moment, inflation, the cost of energy, and raw materials are ever-present in conversations with investors. Solar, wind, and hydrogen projects were always a riskier gamble and the rising interest rate environment is only exacerbating the offer. An estimate by the World Platinum Investment Council pegs roughly $300 billion of subsidies currently available for hydrogen projects. This is up nearly 6-fold from just two years ago. Yet, permitting remains slow and is weighing on investors as they consider the alternatives.

Lastly, access to buyers as it relates to hydrogen delivery is a major concern. The wind corridor from North and South Dakota down to Texas is an advantageous region to produce hydrogen. But the buyers of hydrogen – chemical plants among others – are located along the coasts. Policymakers are operating in an unfriendly economic environment but without attractive delivery channels, subsidies alone will not be enough to advance a speedy rollout.