Hydrogen Hub Awards Highlight Opportunity for Midstream and Chart

The U.S. Department of Energy, or DOE, recently announced $7 billion in funding for several key hydrogen hubs around the United States. These hubs are designed to help the U.S. administration achieve its goal of 10 million tons per year of hydrogen production by 2030. The effort was extremely competitive as nearly 80 bids were submitted in November 2022, before being whittled down to the seven eventual winners. The $7 billion for funding the hubs will now enter a negotiation stage. Collectively, the hubs are expected to produce about 3 million tons of hydrogen per year and eliminate 25 million tons of carbon dioxide emissions annually. None of our fair value estimates or moat ratings are affected.

There are multiple opportunities for potential partners, in our view. Chart Industries has opportunities to win content on all seven projects. Williams is linked to the Pacific Northwest Hydrogen and the Appalachian Clean Energy hydrogen hubs. Williams’ involvement includes hydrogen pipelines, fueling stations, and CO2 storage. Energy Transfer is part of the Gulf Coast Hydrogen hub located in Houston, and TC Energy TRP is one of the major partners in the Heartland Hydrogen hub.

The DOE’s goals for the program are fairly broad and consider both feedstock diversity as well as end user diversity. At least one hub, the Appalachian Clean Energy hub, will rely on natural gas to produce hydrogen, taking advantage of its ample access to natural gas resources in the Appalachian region. In contrast, the Pacific Northwest hub is expected to use renewables to produce hydrogen. The Gulf Coast hub is expected to use both renewables and natural gas and target industrial efforts, including fuel-cell trucks, refineries, and petrochemicals. The Heartland hub targets the agricultural sector for decarbonization, including fertilizers.