Fossil fuel companies among winners of $7bn in US hydrogen funds

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The Joe Biden administration awarded $7bn to US clean hydrogen projects on Friday, including several involving fossil fuel companies, as Washington moves to build up a sector hailed as key to its decarbonisation effort.

The projects include $1.2bn to a hydrogen hub in Texas that includes oil supermajors ExxonMobil and Chevron as partners. A further $925mn will be granted to a project running through West Virginia, and partnered with Marathon Petroleum and EQT. Both hubs are expected to produce the bulk of their hydrogen from fossil fuels and then capturing the emissions.

Administration officials named seven projects in total, including two that are partially based in the 2024 electoral swing state of Pennsylvania, with others based in Ohio, Texas, North and South Dakota, Minnesota and the Pacific Northwest.

The announcement risks attracting criticism from environmentalists who have pushed the Biden administration to avoid funding as many fossil fuel-based hydrogen projects as possible. The funding, approved under the administration’s Infrastructure Act, stipulates the money must be handed out to hydrogen produced from a wide array of sources and locations.

Nearly 80 projects submitted applications for clean hydrogen hub funding, which marks the largest federal investment in the nascent sector so far. The announcement is one of two heavily anticipated decisions expected by the sector this fall.

Biden’s flagship clean energy bill, the Inflation Reduction Act, contains about $5.3bn in further tax credits for clean hydrogen production and has transformed the US into one of the most cost-competitive markets for the fuel. Big oil groups have joined the lobbying blitz to keep upcoming rules for the tax credit flexible.

Clean hydrogen has long been touted as a potentially revolutionary alternative to fossil fuels, with the promise to power heavy industries and act as a store of energy. Nearly all current US hydrogen production is produced from natural gas that generates large amounts of carbon dioxide.

However, scientists have found differences in how hydrogen is produced can cause the carbon emissions to vary significantly. Whereas so-called “green” hydrogen uses wind and solar energy to power the production of hydrogen, “blue” hydrogen uses natural gas and carbon capture technologies.

Scientists from Cornell and Stanford University estimate the carbon footprint of “blue” hydrogen is 20 per cent larger than burning gas directly for heat.

While US oil majors have bet on hydrogen as part of their decarbonisation strategies, the fuel is expected to play a minor role in meeting the US emissions reductions targets.

The $7bn is also a drop in the bucket compared to the cost to build clean hydrogen facilities, and many analysts have warned the lack of demand-side incentives risk undermining the viability of projects.