Developers drop out of Appalachian hydrogen hub over strict carbon emission caps
As of November, four partners have backed out of development for a regional network of facilities that will produce, store, distribute and utilize hydrogen as an energy source across West Virginia, Ohio and Pennsylvania.
The project — coined as the Appalachian Regional Clean Hydrogen Hub —- is part of the Biden administration’s crucial strategy to achieve its goal of a 100% clean electrical grid by 2035 as well as net zero carbon emissions by 2050. It’s one of seven hydrogen hubs across the nation selected in 2023 by the federal government to receive nearly $1 billion in funding.
In August, the Department of Energy announced it had awarded $30 million in initial funding for the first phase of the project, but by then at least two developers had already withdrawn from the project over financial concerns.
The sticking point is one of the several federal tax credits created by the 2022 landmark climate bill, which offers companies $3 for every kilogram of hydrogen they produce. The passage of the Inflation Reduction Act hinged on Sen. Joe Manchin’s conditions, including incentives to companies pursuing hydrogen production and carbon capture technologies.
But when the U.S. Department of Treasury released a draft of the tax credit last year; it received sharp backlash from industry and lawmakers over its strict carbon emission limits.
Last year, several senators, including Manchin, urged department officials for laxer rules surrounding the incentive, warning in a letter that the proposed rule “may hamper the development of a robust clean hydrogen market” and “prevent clean hydrogen from fulfilling vital roles in hard-to-decarbonized sectors in line with the Administration’s broader decarbonization efforts.”
In February, leaders of the hydrogen hubs sent a joint letter to the Treasury Department citing the lawmakers’ letter and saying that unless the proposed rules are “significantly revised” many of the projects “will no longer be economically viable.”
Calls for less strict carbon requirements have stirred up concern among environmental justice groups over undermining the policy’s intended climate goals by incentivizing projects that aren’t producing hydrogen with low-to-no carbon and instead are actually emitting substantial amounts of carbon —- further contributing to the climate crisis.
In June, the Environmental Defense Fund, an international environmental group, voiced support for the Treasury Department’s proposed rules but added that the regulations could go further.
Some hydrogen companies and renewable energy developers have also come out in support of the Treasury Department’s proposed rules, even urging the federal agency to adopt “strong rules” without “any harmful and unjustified loopholes” in a March letter.
So far, at least three original projects part of the Appalachian hydrogen hub have been scrapped in part due to concerns over the tax credit.
Chemours spokesperson Cassie Olszewski said in a statement.
The decision to step away from the proposed projects was driven by several factors, leading among them is the lack of progress in addressing concerns with the proposed implementation of the 45V Clean Hydrogen Production Tax Credit,
While the spokesperson for TC Energy did not mention the tax credit in an emailed statement, the company was slated to collaborate with Chemours to develop two hydrogen production facilities near Chemours manufacturing sites in West Virginia. Though the company has dropped out of the project, TC Energy’s spokesperson said the company looks
Forward to future prospects and for commercial drivers to be realized.
Last year, CNX withdrew from a project to manufacture “clean” ammonia with blue hydrogen in Mingo County, also citing the tax credit as one of its reasons for dropping out. CNX is still listed as a project developer though it is not signed on for any specific facility.
As of November, one-third of the original 15 projects making up the regional hydrogen hub has been removed as MPLX and First Mode have also backed out of their original projects.
In an emailed statement, an MPLX spokesperson did not say why the company withdrew from the project, stating that “After careful consideration, MPLX decided to no longer pursue the development of the proposed project that was to be part of the Appalachian Regional Clean Hydrogen Hub.”
CNX and First Mode did not respond to requests for comment.
Shawn Bennett, manager for Battelle’s Energy and Resilience Division, said the loss of developers “opened up an opportunity” to add up to three new projects to the regional hub, adding that they’ve had “overwhelming interest” from companies.
Sean O’Leary, senior researcher at the Ohio River Valley Institute, points to the loss of these projects as proof that the Hub, also known as ARCH2, and its proposed projects are not financially viable.
O’Leary said,
ARCH2’s track record of scrapped projects and developer flight are glaring signs of risk for prospective investors, which is why, despite the federal largesse, the entire ARCH2 enterprise may ultimately amount to no more than a blip—albeit a very expensive one—on Appalachia’s economic and environmental landscape
He added,
But if decision makers help shoehorn hydrogen into the uneconomic applications proposed by ARCH2, taxpayers, ratepayers, and residents could pay the price,
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Developers drop out of Appalachian hydrogen hub over strict carbon emission caps, source
