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July 5 -- The Department of Energy (DOE) Office of Clean Energy Demonstrations (OCED) is considering establishing a Demand-side Support Mechanism to support reliable demand for hydrogen at DOE-supported Regional Clean Hydrogen Hubs (H2Hubs).

As part of this process, DOE intends to issue a Broad Agency Announcement (BAA) entitled “Implementing Entity (or Entities) for Demand-side Support Mechanism for Clean Hydrogen Hub Projects”. OCED anticipates issuing the BAA in the summer or early fall timeframe.

The BAA will seek an independent Implementing Entity (or Entities) to implement a DOE-designed and DOE-funded demand-side support mechanism to support the development of the H2Hubs. DOE will commit up to $1 billion to the mechanism.

The demand-side support mechanism will provide multi-year support for clean hydrogen produced by competitively selected projects affiliated with H2Hubs. It will facilitate bankable clean hydrogen demand from a diverse set of offtakers. It will help diverse entities leverage the full potential of clean hydrogen, including non-profits, local government, and Tribes, and facilitate the use of clean hydrogen across various sectors of the economy, such as in industrial processes, manufacturing and heavy-duty transportation.

The mechanism could include one or more design factors such as pay-for-delivery contracts, offtake backstops, feasibility funding to support analysis by offtakers, or other measures that strengthen demand for clean hydrogen and increase revenue certainty for H2Hubs. The mechanism will enable private sector financing and expedite progress to Final Investment Decision for H2Hubs.

Based on demonstrated performance and experience gained with the H2Hubs Demand-Side Support Mechanism, DOE may consider similar mechanisms for other technologies and clean energy products in the future.

Tools that mitigate market risk for clean energy technologies during scale-up could meaningfully accelerate commercialization of these technologies, especially in clean hydrogen. DOE’s Pathways to Commercial Liftoff Report and National Clean Hydrogen Strategy and Roadmap for clean hydrogen both highlighted the lack of long-term offtake as a critical barrier to the near-term expansion of the clean hydrogen economy.

A recent DOE Request for Information on the use of demand-side support measures in supporting clean energy technologies emphasized these issues, with respondents highlighting the benefits of well-designed measures that can tackle revenue certainty issues that arise as a result of the natural imbalance between supply scale-up and demand formation in emergent clean energy markets. This initiative underscores DOE’s commitment to addressing barriers to commercialization identified in the Liftoff Reports.

DOE has determined a demand-side support mechanism can facilitate achievement of statutory goals to accelerate the commercialization of clean hydrogen and facilitate a clean hydrogen economy while fostering the development of robust private sector demand for clean hydrogen products. Public input is needed to ensure DOE is aware of and considering a broad set of program design factors consistent with statutory authority. DOE will also consider a broader set of potential options to deliver this support (e.g., funding to the H2Hubs for this work or potential blended capital options).

To help inform the design of a demand-side support mechanism for the Regional Clean Hydrogen Hubs Program, DOE is seeking public input on potential benefits and risks, operating models, governance structures, and equipped implementing partners. These questions build on DOE’s Request for Information of Use of Demand-Side Support for Clean Energy Technologies but are specifically focused on support for Hydrogen Hub projects.

Responses are due no later than 5:00 pm ET on July 24, 2023 and can be submitted to Demand-Side-RFI-NOI@hq.doe.gov. All responses must be sent either as a Microsoft Word (.doc / .docx) or Adobe Acrobat (.pdf) attachments.

Category A: Most effective demand-side support measure to support H2Hubs

1. What is the most effective way DOE could catalyze durable, bankable demand for clean hydrogen at DOE-funded H2 Hubs? Which of the following potential mechanisms would be most impactful?

Pay-for-difference contracts that provide support to projects based on the price they can achieve in the market
Fixed level of support for projects (e.g., fixed $/kg amount) that stacks on top of other sources of revenue
Funding to support feasibility analysis from potential offtakers near H2Hubs
“Market-maker” for clean hydrogen to provide a ready purchaser/seller for clean hydrogen
Other (please specify)

2. For eligible projects, what competitive process should be used to select projects that will receive demand-side support?

Reverse auction in which projects compete to bid the lowest level of support they need to make their project viable
Request for proposal-like process in which projects apply and are selected based on a variety of factors
Eligibility-based process in which all projects that meet certain threshold requirements receive some form of support
Other (please specify)

3. How can DOE design demand-side support to account for other kinds of support that H2Hubs projects may receive (e.g., tax credits, state and local government incentives, DOE cooperative agreement funding)?

4. How can DOE stucture demand-side support for H2Hubs to best catalyze the formation of a mature commodity market for clean hdyrogen?

How can DOE structure demand-side support for H2Hubs to best catalyze the development of standard contract terms for clean hydrogen?
How can DOE structure demand-side support for H2Hubs to best catalyze the development of price transparency for clean hydrogen? ​

Category B: Implementation of demand-side support measures

1. If DOE were to establish a demand-side support mechanism for H2Hubs with an independent implementing entity or entities, what capabilities and qualifications should DOE prioritize when selecting an entity or entities? Should DOE seek a single entity with national scope or several entities with regional scopes?

2. For any or all of the program design factors selected in response Category A, what existing entities could administer and oversee the demand-side support mechanism? If no existing entity currently exists with the necessary capacity or expertise, how long would it take to establish such an entity or entities? What are the necessary areas of expertise for DOE to prioritize in selecting an independent entity?

3. What are the risks to DOE in partnering with an independent entity to administer a demand-side support mechanism? What governance structures and guardrails should DOE consider in designing a demand-side support mechanism to help maximize impact and minimize implementation risk? Are there any models DOE should look to in establishing a governance structure?
 
NOI: https://oced-exchange.energy.gov/FileContent.aspx?FileID=9a1e375b-218e-4ae7-8fd0-c9a529a404ec
Press release: https://www.energy.gov/articles/biden-harris-administration-jumpstart-clean-hydrogen-economy-new-initiative-provide-market
RFI: https://oced-exchange.energy.gov/Default.aspx#FoaId8e15135b-a033-47ca-9c7a-ebf2e5771a41

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