Increased Hydrogen Production will Greatly Benefit Supply Chains

Increased Hydrogen Production will Greatly Benefit Supply Chains

Hydrogen production has received a major boost with new federal government grants, which will greatly benefit supply chains. With the recent announcement by the federal government that it would invest $7 billion into efforts to increase hydrogen production, it’s important to understand what this might look like for the supply chain. The administration’s goal is to help move the nation’s supply chains away from fossil fuels, using hydrogen as a key intermediate yet long-lasting step in the process. 

The administration is divvying up the hydrogen production grants between seven regional hubs.

The hubs include hydrogen suppliers and industrial buyers, such as ExxonMobil, DuPont, Air Liquide, and Chevron, among others. Each is expected to partner with the efforts by investing their own dollars into the hubs, to a total tune of $40 billion. Ideally, the money will allow hydrogen to substitute out for oil and gas in shipping, steelmaking, and chemical production. The maritime and trucking sectors are currently working through details on how they will join in the efforts. All told, the parties may produce up to three million tons of hydrogen annually, resulting in the reduction of 25 million metric tons of carbon dioxide emissions. 

California is one of the regional hubs that will receive a substantial grant to build and expand hydrogen projects aimed at public transportation, port operations, and heavy-duty transport. The state will produce hydrogen exclusively from renewable energy and biomass. Much of California’s efforts will be centered on Los Angeles, with the goal of decarbonizing power plants, ports, and trucks. Ports in the area will use hydrogen to electrify equipment for cargo handling and later, in trucks and ships. This falls in step with the ports of Los Angeles and Long Beach’s public goal to have the first zero-emissions cargo handling equipment and trucks—an announcement the ports made six years ago. 

The new grants piggyback on a new trade collaboration called the Transatlantic Clean Hydrogen Trade Coalition (H2TC), which will facilitate the shipment of hydrogen between the U.S. Gulf Coast and Northern Europe. Members of the coalition include ports and energy companies, such as the Port of Corpus Christi, the Port of Rotterdam, Shell, and Apex Clean Energy. The goal is that by 2030, ships will carry up to three million metric tons of hydrogen-derived ammonia and methanol each year. It will help both regions of the globe achieve climate-forward goals. The EU, for instance, has established a plan to import 10 million metric tons of renewable hydrogen per year by 2030. Rotterdam currently stands as Europe’s largest hub for crude oil and oil products, so migrating to hydrogen can help achieve that.

The U.S. Gulf Coast has been growing low-emissions hydrogen production, making it an ideal point of origination for the coalition. Texas, especially, is becoming a hub for alternative fuel. The state and region have developed a system of pipelines and salt-dome storage, along with a knowledge base for producing low-cost, renewable energy sources. Hydrogen has received a major boost with new federal government grants, which will greatly benefit supply chains.