Mid Atlantic Hub leadership released an unachievable RFI
Last week the Mid Atlantic Hydrogen Hub recently posted an RFI for purchase of 50 tons per day of clean hydrogen with guaranteed offtake – provided the seller is able to achieve $1/kg “or as close as possible to this target.”
Per unit heat, this is 70% the prevailing cost of natural gas in Pennsylvania[1].
This is before accounting for a chemical plant to convert the gas to H2, the equipment to compress, store, and transport the H2 for the required round-the-clock delivery, man-hours to operate the plant and equipment, and maintenance of all the equipment. The $1/kg price is impossible to achieve in fuel costs alone, and the other costs will balloon far pasts that. Electricity for electrolysis is far more expensive, coming in at over $4/kg for grid electricity alone. See charts below to show fuel/power input OpEx for blue H2 and electrolytic H2.
Electrolysis – multiply the firm regional industrial power cost by 50 to get the OpEx portion of the cost stack. Example: the power cost plus grid fees in Pennsylvania are $0.09/kwh – meaning power would result in $4.50/kg for the H2 before accounting for clean offsets or any equipment. (Source: US EIA and Pennsylvania EIA)
Natural gas: Divide the cost of gas by 5 for blue H2. Example: the delivered industrial natural gas rate in PA averages $11/mmbtu resulting in $2.20/kg before accounting for carbon transport and storage and before accounting for any equipment. (Source: delivered commercial gas prices in US EIA, Pennsylvania EIA, EU commercial trade sources)
$1/kg is not a commercially achievable goal for delivered hydrogen now or in the near future
I was the Director of Analysis in the commercial side of the DOE during H2Hubs and other clean energy programs. I was a lead author on the DOE’s Commercial Hydrogen Liftoff report, and I understand the background here better than just about anyone else. While the Biden administration had an aspirational goal of $1/kg of clean H2 by 2030, that was meant to be at least one project somewhere that achieved that goal. Not every project. Much like the moonshot was not to assure every aircraft could reach the moon, the hydrogen shot was meant to show that in the best case scenario $1/kg could be achieved not in all, most, or even a few cases. Just one.
The goal of the DOE hydrogen hubs was not to get to the $1/kg cost of clean H2, it was to build hubs for hydrogen production and distribution. My team ran immense analysis on all the applications and not a single one had any path towards anything approaching $1/kg. It is not a realistic number.
RFI’s with impossible outcomes are bad for the industry
This RFI is meant to inform a future competitive RFP. An RFP based on the premise of $1/kg clean H2 in the mid-Atlantic will fail. Public failures in H2 further erode the already tattered reputation of the hydrogen industry. A DOE hydrogen hub doing so will erode any trust that the DOE hubs funding was well placed.
$1/kg is impossible anywhere in the world currently, and much moreso in the Mid Atlantic where both power prices and delivered natural gas prices are high.
What next?
This RFI is just that – a request for information. The anchoring of $1/kg or near it will still result in much higher prices in response. How this impacts the following RFP and H2Hub is yet to be seen. I suspect that the 50 tons firm demand will evaporate once the prices come in closer to $4-8/kg for clean H2 in the area.
On that note, I’m not sure what the goal of the hub leadership is with this $1/kg. Possibly they just didn’t do the math that I did above, but an alternative explanation is that this is done in part to manage the current Department of Energy that trying to stall the hubs until all the corporate partners lose patience and leave. If that is the case, the hub leadership could be counter-stalling the DOE until a more friendly Congress or administration comes in. In other words, it might be an action to keep things moving forward while the current administration tries to run out the clock on the DOE H2 hubs – and holding on in the event that either the Senate or House flip blue or get closer to it. Either way, the outcome is that there won’t be much outcome from this RFI.
[1] Delivered natural price in Pennsylvania is $10/mmbtu. 1 kg of H2 has about 1/7 an mmbtu of heat (hhv for the fellow thermo nerds), so 7kg of H2 at $1/kg is 70% the price of delivered natural gas in Pennsylvania per unit heat.
