An Urgency for Connective Hydrogen Infrastructure

The criticality of pipelines and storage to scaling North American clean hydrogen markets drives a pressing need to establish a vision for development and a roadmap for implementation.

Hydrogen midstream infrastructure — the pipelines and storage resources that sit between hydrogen’s supply and end use — plays a central role in developing a resilient, liquid, and low-cost hydrogen market. Yet for all the talk about hydrogen’s supply and demand, there has been far less attention on the connective tissue that bridges the two together. The criticality of pipelines and storage to clean hydrogen development coupled with the notorious complexity of building large–scale infrastructure projects throughout North America create an urgency to initiate conversation, planning, and collaboration around midstream infrastructure development today.

Infrastructure Unlocks Resilient, Liquid, and Low-Cost Clean Hydrogen Markets

Why do we need hydrogen pipelines and storage? After all, aren’t clean hydrogen projects developing via “hubs” to co-locate supply and demand and minimize transportation needs? Can’t clean hydrogen be produced anywhere the sun shines or the wind blows, offering an alternative to the inherently centralized extraction and production of fossil fuels and a reduced need for connective infrastructure bringing such supply to demand?

Hydrogen midstream infrastructure plays an important role in scaling up and maturing the market for clean hydrogen for several reasons, including:

• Expanding possible business models as co-location of supply with demand is not always viable. Although colocation reduces transportation costs, it might lead to higher production costs through reliance on more expensive electricity or more expensive hydrogen storage; sunny and windy regions are often far from demand, and low-cost geologic storage is geographically limited. Assuring the production of a “clean” molecule for participation in low-carbon markets can provide additional geographic restrictions. Gas-based processes must either utilize or sequester the captured carbon dioxide in underground geologic storage reserves. Electrolysis (the process of using electricity to split water into hydrogen and oxygen) must use clean power in keeping with regulations, which can include a geographic boundary where new clean electricity must be sited relative to the electrolyzer, like in Europe.
• Enabling the delivery of hydrogen with the reliability required by off-takers (end-users) and heightening system–wide supply resiliency.
• Transitioning the market from bilateral agreements to a liquid market where new suppliers and off-takers can more easily enter and experience reduced exposure to financial risk. It can enable clean hydrogen to become a tradable commodity bought and sold in a similar manner to natural gas.
• Reducing the total public and private spending required to meet decarbonization targets. The European Hydrogen Backbone initiative found €330 billion in savings by developing an interconnected hydrogen network throughout the continent rather than a country-by-country, individualized approach to meet the same climate targets. When hydrogen needs to be moved in large volumes, pipeline transportation is the lowest-cost option for doing so.

Turning Opportunity into Reality

By 2030, the US Department of Energy estimates that 50 percent of all investments needed to scale the clean hydrogen market must flow to midstream infrastructure or end-use, totaling between $40 to $110 billion. The mere 1,600 miles of privately owned hydrogen pipeline and the small quantity of salt cavern resources both found exclusively in the Gulf must start to expand into a broader network within hubs, between hubs, and across major supply and demand centers in North America.

This significant investment opportunity is met with a simple reality that no part of large-scale infrastructure development, especially pipelines, is particularly simple nor fast. Even front runners like SoCalGas, which started planning their Angeles Link hydrogen pipeline several years ago, will likely not be able to put steel into the ground before 2030. We need to identify ways to expedite the pace of infrastructure development to ensure clean hydrogen can be deployed at the speed and scale necessary to reach net zero goals.

To ensure swift and equitable development, communities must be holistically engaged throughout the project development process to ensure their voices are equally represented. Project developers must accelerate timeframes and shorten permitting processes. States and countries must streamline regulations and establish a clear regulatory body. Hydrogen producers, off-takers, and infrastructure developers must strengthen their coordination, as well as develop a trained workforce, and deploy a tremendous amount of capital.

Experiences in Europe Show the Value of Early and Coordinated Infrastructure Planning

Although building infrastructure in North America faces different policy practicalities, regulatory frameworks, business models, and market readiness than in Europe, we can learn several things from Europe to inform how to accelerate development and address core barriers.

Europe is well underway with planning and development of hydrogen infrastructure, in part driven by outcomes of the European Hydrogen Backbone (EHB) initiative that Guidehouse has actively supported for the past 3–4 years. The EHB took a coordinated approach to identify infrastructure needs and minimize barriers to implementation. It is often cited as underpinning plans for European pipeline project development happening today.

An early-stage deployment plan can facilitate jumping past patchwork interconnection challenges and provide a roadmap for strategic development and investment. A shared vision can focus the market on the most needed and impactful infrastructure corridors to simplify project planning and enhance coordination across players. When effectively done, this plan requires a systemic approach, engaging multiple stakeholders to build an understanding of what an optimal rollout for industry, offtake, community, and legislators looks like alongside knowledge of what infrastructure is critically needed. Taking a holistic lens toward infrastructure development early in the process can minimize external impact and maximize system benefits.

A Plan for North America

North America can build off the European experience to ensure hydrogen hubs and projects do not encounter barriers that will hinder growth in supply or demand-side adoption. Guidehouse and RMI are initiating a North American Hydrogen Backbone collaborative to create an enabling framework for transparent and certain midstream infrastructure development. One key element of this collaborative is to engage diverse stakeholders early, including communities, independent developers, utilities, off-takers, regulators, and broader civil society, to:

• Determine the most cost-effective connective infrastructure needed for natural gas, electricity, and hydrogen to ensure that the supply can be delivered optimally to needed demand locations and ensure an equitable rollout of infrastructure for local communities.
• Identify pipeline corridors that can rely on retrofitted natural gas pipes versus those that require newly built hydrogen pipes to minimize the need for new infrastructure development and evaluate the tradeoffs of moving energy via hydrogen or electricity to service demand.
• Establish a shared vision of the prioritized North American infrastructure needs by 2050 to support clean hydrogen development for net-zero alignment.
• Craft an implementation roadmap centered around the business models, regulations, policies, and community engagement practices necessary to enable swift and just realization of the infrastructure vision.

Through this process of holistic, multi-stakeholder collaboration, and infrastructure vision-setting and road mapping, North America will be better positioned to accelerate the development of clean hydrogen and realize its potential for scaled deployment. These actions will ensure a verdant and sustainable market that helps to secure strong offtake with clear delivery conditions. Midstream infrastructure developers will get clarity on regulatory regimes and business models to start planning and investing in hydrogen infrastructure. Project developers will see reduced risk to development and potentially easier access to financing, having certainty that storage and delivery infrastructure will be available to resiliently bring hydrogen to off-takers at the needed volumes. Off-takers will be able to access lower-cost hydrogen supply found in regions of strong resources that would otherwise be unattainable without interconnected infrastructure. Communities will also ensure that the benefits of clean hydrogen’s development can flow through to them.

Clean hydrogen market development and economy-wide decarbonization. We invite interested national and regional private players and civil society to collaborate on this opportunity to create a shared vision of needed infrastructure and bring it into reality to accelerate the energy transition. Please reach out to Oleksiy Tatarenko (otatarenko@RMI.org) or Lisa Frantzis (lfrantzis@guidehouse.com) to learn more.