Wednesday, March 02

Future Fuels: Powering a Clean Economy with Hydrogen and Ammonia

Event overview

“Utilizing and scaling hydrogen is at a critical moment. The market is clearly excited about low carbon fuels like hydrogen to meet climate goals across all sectors of the economy. Global finance trends are also unlocking immense private sector resources, and government policies are finally supporting and catalyzing new industries.” — Jeremy Harrell, Chief Strategy Officer at ClearPath 

As governmental agencies, the private sector, and public interests push towards decarbonization goals a lot of attention has been given to hydrogen as a clean energy—and rightfully so, as hydrogen and ammonia have the potential to play key roles as carriers and stores of low-carbon energy. What are the opportunities and challenges facing the development of low-carbon hydrogen and ammonia projects? What is the current private and public sector hydrogen landscape? And why is investment in this sector taking off now?

In collaboration with Baker Botts, Dynamo Energy Hub hosted a thought leadership event to answer these timely questions and discuss the viability of hydrogen as a clean energy fuel as well as its role in the energy transition.

From top left to right: Tom Holmberg (Baker Botts), Jeremy Harrell (ClearPath), Natalie Houghtalen  (ClearPath), Frank Schoen (Baker Botts)

Despite the benefits of a hydrogen being well-known for a while, Jeremy Harrell, Chief Strategy Officer at ClearPath and Future Fuels event moderator, explained that the main reason is the sudden influx of public investment. Last year’s Bipartisan Infrastructure Bill allocated $16 billion to the Department of Energy to catalyze and deploy technologies necessary to drive down emissions across sectors of the global economy, in addition to $9.5 billion for hydrogen-based work, over $8 billion for carbon capture, sequestration, and use (CCSU), and $8 billion to build pilot hydrogen hubs.  This funding is critical given most hydrogen fuel currently produced is not net-zero, but with investment, it could be a zero-carbon storable and transportable fuel.  Low carbon hydrogen will be crucial to supporting the decarbonization of hard to abate and tough-to-decarbonize sectors such as long-haul trucking and industrial processes.

Natalie Houghtalen, Policy Analyst at ClearPath, noted how public investment also gives the private market more confidence in the longevity of hydrogen fuel technology. Further, she commented how these investments paired with strong policy incentives can help move early-stage technology to the deployment phase.

“Good policy creates market confidence. The $9.5 billion for hydrogen technologies in the Bipartisan Infrastructure Act is a confidence booster to the private sector.  But even though there’s a lot of momentum around hydrogen, we still need a clear market signal. A clean hydrogen production tax credit would go a long way in getting early movers off the ground.” — Natalie Houghtalen, Policy Analyst at ClearPath

In addition to the increased public investment, hydrogen is also being embraced by the public and private sector due to a push towards American energy independence, financial markets prioritizing ESG investments, and a general increase in climate awareness.  

Credit: Baker Botts

However, there are a few hurdles hydrogen must overcome before the market integrates it as an everyday fuel. One obstacle centers around private sector financing of new hydrogen projects. While government investment in hydrogen fuel is a crucial step in its development, the private sector must also meet this call. Financing projects on an untested energy type can be risky and incredibly expensive — but panelist Frank Schoen, Partner at Baker Botts, sees debt financing as a clear solution to the tentativeness of private investment in hydrogen.

“The addressable market for hydrogen is huge. When you think about the aggregate capex that’s required to develop and build the projects and technologies to serve that demand, there’s a clear and necessary role for debt finance. However, since debt finance tends to be risk adverse, government support, like the DOE loan guarantee program, is a great way to bring lenders to the table and to get them comfortable with new technologies.” – Frank Schoen, Partner at Baker Botts 

Loan programs and tax credits could usher in private investment to the sphere, thereby helping to scale hydrogen fuel at a similar pace wind and solar energy scaled at in the early aughts. One of the potential key drivers of debt financing is the demand side of this market. By sending strong demand signals for hydrogen fuel, the consumer encourages debt financing deals to emerge. The hydrogen production tax credit in the Build Back Better Bill would also help finance these projects, but it is unclear whether that will come to pass.

Another challenge associated with the expansion of hydrogen fuel is the technical challenge of simultaneously scaling both sides of the hydrogen market: production and delivery to end-users. Simply put, it’s a classic supply and demand problem: producers will only produce as much hydrogen as there is demand, and end-users will only demand as much hydrogen as there is available. And this dilemma is exacerbated by the fact that hydrogen fuel is notoriously challenging to store and transport — meaning that even if a producer were to produce enough hydrogen to meet the demand for end-users, if the two are geographically too far apart then transporting the fuel becomes another barrier to hurdle.  However, these problems may be solved by hydrogen ‘hubs’ — geographic regions where hydrogen is produced, stored, and consumed.

Credit: ClearPath

These regional hubs will solve the problem previously outlined by coordinating the simultaneous scaling of production and consumption through connecting potential end-users to producers, which will then generate a more local hydrogen fuel market. This solution will soon be tested, as the DOE has committed to building four hubs in the next 18 months as a pilot program for broader expansion. Places like Texas, Appalachia, and the Gulf Coast have been cited as good options for these pilot programs; but as Tom Holmberg, Partner at Baker Botts, noted it will take groundwork on the end of the developers to get local communities on their side. 

“Moving forward, project developers will need to be very mindful about the siting of projects; they’ll have to engage with local communities to communicate what the purposes of the projects are and work to gain community buy-in.”  — Tom Holmberg, Partner at Baker Botts 

Fortunately, both the short-term and long-term jobs that hydrogen fuel hubs would bring to these regions are a strong selling point. Jeremy closed the panel discussion by perfectly summarizing the key topics of the event: 

“Utilizing and scaling hydrogen is at a critical moment. The market is clearly excited about low carbon fuels like hydrogen to meet climate goals across all sectors of the economy. Global finance trends are also unlocking immense private sector resources, and government policies are finally supporting and catalyzing new industries.” — Jeremy Harrell, Chief Strategy Officer at ClearPath 

Overall, the combined effect of recent public investment, the encouragement of private finance, and potential solutions to the main problems facing hydrogen fuels means that hydrogen is likely to become an increasingly important feature in the energy transition. Those of us at Dynamo Energy Hub look forward to seeing a few entirely different ‘hubs’ in the near future and are excited to see how hydrogen helps drive the renewable energy transition. You can watch the full event recording here. 

Event Description:

With an increasing push towards decarbonization by governmental agencies, the private sector, and public interests, hydrogen and ammonia have the potential to help achieve that goal by playing key roles as carriers and stores of low-carbon energy. This panel will explore the opportunities and challenges facing the development of low-carbon hydrogen and ammonia projects. The panel discussion will address key aspects of developing hydrogen and ammonia projects, debt and equity financing considerations that drive investment in hydrogen and ammonia projects, marketing and contractual considerations, and the existing and future policy landscape in which such projects will be developed.

Event moderator:

Jeremy Harrell, Chief Strategy Officer at ClearPath

Jeremy is the Chief Strategy Officer at ClearPath, where he leads the development, management, and execution of the organization’s strategic plan. In that role, he oversees the organization’s public policy development, government affairs, research, and strategic partnerships, including philanthropic initiatives.

Jeremy serves as a member of the U.S. Department of Commerce’s Renewable Energy and Energy Efficiency Advisory Committee (REEAC). He also plays a leadership role in multiple clean energy industry trade groups, serving as the Chairman of the U.S. Nuclear Industry Council, a leading advocate for American nuclear energy technologies, and Legislative Chair for Geothermal Rising, the largest association for geothermal energy professionals. He is a frequent commentator on clean energy innovation, export financing, and regulatory reforms that accelerate the development of cutting-edge technologies at industry convenings and trade shows, and is frequently featured in national publications including The Washington Post, Politico, Bloomberg, The Hill, GreenBiz, and S&P Global, among others.

Before joining ClearPath, Jeremy advised Congressional leaders, across multiple roles in the House and Senate, on energy, environmental, national security, tax, and transportation policy for a decade.

Event panelists included:

Tom Holberg, Partner at Baker Botts

Tom Holmberg is a partner in the Global Projects Group at Baker Botts. He assists clients with energy projects and transactions around the world. He focuses on the development of liquefied natural gas (LNG), hydrogen, CCUS, and natural gas pipeline projects and transactions. He works with clients at all stages of such projects in areas that include project structuring, contracting, governmental approvals, and the negotiation of commercial agreements and project development documents. He is the co-chair of the LNG, hydrogen and CCUS practice groups.

Mr. Holmberg advises clients on an array of regulatory issues, including contract and tariff matters before the Federal Energy Regulatory Commission (FERC). He also represents clients before the Department of Energy (DOE) for authorizations to export and import natural gas under the Natural Gas Act. He has handled administrative and appellate litigation before the FERC and the courts on these matters. He has also represented clients before FERC in electricity market restructuring proceedings.

Frank Schoen, Partner, Baker Botts

Frank X. Schoen is a partner in the Global Projects Department. Frank represents private equity sponsors and project developers, as well as commercial and investment banks, investment firms and other financial institutions, on project finance, leveraged finance and acquisition finance transactions in the conventional power, renewable energy, oil and gas, and infrastructure sectors. Frank has extensive experience with the development, construction, financing, acquisition, sale and restructuring of large-scale projects.

 

 

Natalie Houghtalen, Policy Analyst at ClearPath

Natalie Houghtalen is a Policy Analyst at ClearPath. As part of ClearPath’s focus on clean energy and industrial technologies, Natalie leads the development of policies to advance hydrogen technologies, clean industrial heat, and integrated energy systems. Additionally, Natalie supports ClearPath’s nuclear energy portfolio. Natalie holds a bachelor’s degree in Nuclear Engineering and Minor in Political Science from Purdue University.