Hydrogen hub in Minnesota and North Dakota wins nearly $1 billion in federal money

Minnesota, North Dakota and South Dakota have been chosen to host one of seven U.S. "clean" hydrogen production hubs, scoring up to $925 million in federal money.

Minneapolis-based Xcel Energy is a primary partner in the Upper Midwest venture — dubbed the Heartland Hydrogen Hub — which would use renewable power and nuclear energy to produce hydrogen in Minnesota.

"The Heartland Hydrogen Hub is game-changing initiative that demonstrates how we're accelerating the development of the next generation of clean energy technology," Xcel's CEO Bob Frenzel said in a statement.

The U.S. Department of Energy (DOE) on Friday announced the winners among 26 hydrogen-hub proposals submitted earlier this year. The regional hubs mark one of the largest federal energy programs ever, with a total investment of $7 billion.

"I made it a goal for our country to get to net-zero emissions no later than 2050," President Joe Biden said in Philadelphia on Friday announcing the hydrogen hubs. "Clean hydrogen is going to help us meet this goal."

Biden said another $40 billion in private spending will help build the regional hydrogen hubs. Companies involved must put up cash to match federal money, and Xcel has said it would go beyond the required one-to-one match, investing up to $2 billion into the Heartland Hub over a decade.

Xcel said it expects to receive a large portion of the federal award for the Heartland Hub, subject to negotiations.

"It's really unprecedented," Greg Chamberlain, Xcel's vice president for clean fuels, said in an interview.

The Heartland Hub will now spend several months negotiating a funding agreement with DOE. Then, the project will go through a detailed planning phase that could last two years, Chamberlain said.

Xcel's hydrogen investments in Minnesota will also need approval from state public utility regulators.

The Heartland Hub anticipates creating around 3,000 construction jobs and 700 permanent jobs, according to the Energy Department.

The Heartland Hydrogen Hub also includes Wisconsin and Montana, Xcel said in a press release. Project development will likely continue in phases through 2035.

"We are quite excited to be part of a hydrogen hub," Christopher Clark, Xcel's president for Minnesota and the Dakotas, said in an interview. "It has been a tremendous amount of work."

Congress approved funding for the hydrogen hubs in the bipartisan 2021 infrastructure law.

The Heartland Hydrogen Hub was shepherded by the University of North Dakota's Energy and Environmental Research Center. Its two main corporate partners are Xcel and a joint venture of Ohio-based Marathon Petroleum and TC Energy, a Canadian pipeline operator.

The two fossil fuel companies have proposed a plant in North Dakota that would produce hydrogen from natural gas, capturing and storing carbon dioxide emissions. Xcel's Heartland Hub proposals don't involve natural gas.

One key Xcel project involves harnessing wind power to make hydrogen for a novel fertilizer factory to be built in Morris, Minn. Xcel also plans to produce hydrogen from nuclear power at its Monticello power plant.

Hydrogen can be a tool to abate climate change along with renewable power. It is seen as critical to decarbonize parts of the economy at a time when companies and states such as Minnesota have set zero-carbon goals.

Clean hydrogen still faces many barriers before it can be a reliable part of the clean-energy equation. There are two main varieties — and both are included in the North Dakota-Minnesota proposal.

"Green" hydrogen is manufactured from renewable energy in an expensive, electricity-intensive process called electrolysis. Roughly two-thirds of total Hydrogen Hub investments are associated with green hydrogen production, according to the Energy Department.

"Blue" hydrogen, a bedrock of North Dakota's Heartland Hub plans, is made from natural gas, the carbon-emitting feedstock of current hydrogen production. However, the blue process captures carbon dioxide emissions from gas and stores them underground.

It's also an expensive process and one that's often panned by environmental groups.

"Blue hydrogen continues to utilize fossil gas," Craig McDonnell, managing director for industry at clean power advocacy group Fresh Energy, said earlier this year. "We don't see that technology as being clean as green, so why do it?"

Much of the hydrogen produced in each hub would be used regionally. In the agriculture-heavy Upper Midwest, there would be a focus on producing hydrogen for nitrogen fertilizer, a mainstay for farmers.

Fertilizer production is seen as a particularly tricky industry to decarbonize.

Xcel's plans include producing hydrogen for ammonia — the key ingredient in nitrogen fertilizer — at a commercial scale. The ammonia would be made into fertilizer by a startup company planning a factory in Morris.

The hydrogen hubs include provisions for ownership of some assets by farmer co-ops and tribal communities, the Energy Department said.

Aside from fertilizer production, Xcel would also use hydrogen as a fuel for its own power plants and heating systems, though that will pose its own set of challenges.

Together, the seven regional hydrogen hubs would aim to produce more than 3 million metric tons of hydrogen per year, which would amount to nearly one third of the 2030 U.S. clean hydrogen production goal, the Energy Department said.

The six other regional hubs will be in Pennsylvania, Delaware and New Jersey; West Virginia, Ohio and Pennsylvania; California; Texas; Illinois, Indiana and Michigan; and Washington, Oregon and Montana.

The largest federal investments — up to $1.2 billion each — would be for the California and Texas hubs.