The Promise of California's Hydrogen Hubs @ ComotionLA

Elise Zoli

In October, California was selected as one of the recipients of 1.2 billion dollars in funding from DOE for hydrogen energy projects. With that announcement, Los Angeles’ Mayor Bass publicly shared at the Port of LA the intention to use that funding to develop a hydrogen hub at the ports and continue to move the ports towards 100 percent renewable energy. In Mid November at CoMotion LA, Michael Galvin of the Port of LA and Elise Zoli of Wilson Sonsini Goodrich & Rosati shared valuable insights into the promise and significance of the seven newly funded hydrogen hubs. What follows is a transcript of the dialogue between Moderator John Rossant and the two panelists. The panel not only highlights the  National Hydrogen Hubs awards goals', but also touches upon: the quest for zero-emission alternatives to battery electric, port decarbonization, the challenge of scaling demand, and the need for a consistent regulatory framework.

John Rossant  

A month ago, as many of you might know, the Biden Administration announced a $7 billion program (part of the Bipartisan Infrastructure Law) to finance seven National Hydrogen Hubs. One of them is here in California. The California Hydrogen Hub, which we’ll talk about here, is in some ways, a game-changer. 

I would like to ask a  few provocative questions to begin:

Why do we need hydrogen hubs in the first place? Why do we need government support for this industry? Why can't the hidden hand of the market  just work its wonderful and mysterious ways, leading us toward the hydrogen economy?  

Michael, I'll start with you.

Michael Galvin 

I think we need hydrogen hubs to create visibility re Hydrogen as means of achieving zero emissions. It's important right now to get people talking about these issues, and it has. The discussions about the hubs started with a variety of different people within our industry as well as other industries that are focused on the delivery of the product. People who have been looking for zero-emission alternatives to battery electric are beginning to have conversations about how we can use hydrogen in that way, and those conversations began almost two and a half years ago with the legislation funding the hubs enacted. So, the awards have helped in getting this conversation going.

As far as the dollar amount, it's a relatively small dollar amount. Whether you look at it in comparison to the amount of money allocated for ports to decarbonize and to become zero emissions, which is in the 30 to 40 billion-dollar range, or the amount of money it's going to take to build out the Hydrogen Hubs in just Southern California, which is probably in or above that range. 

Despite this, the funding gets conversations going and encourages people to work together in solving a variety of issues that are already confronting us as we introduce this new technology in the marketplace. We face all kinds of permitting issues related to storage, transport, and put hydrogen into vehicles at various locations. Although it’s okay to fuel your Myrai at a gas station that has no security control around it. We're going through research right now on being able to bring hydrogen into a very secure container terminal and being able to fuel two or three vehicles at a time because issues of scale are not addressed in current fire codes. 

I think the National Hydrogen Hubs are allowing us to have these conversations and the funding puts the push behind finding solutions to those relatively small problems that we need to resolve to get enough equipment out there to start to build scale. On the demand side, we’re starting to build scale and then letting the hidden hand in which will allow the rest of the market to fall into place to begin producing the modules at a reasonable price. 

John Rossant  

So the goal of all this activity is to reduce the cost of hydrogen? Currently, the market costs are too high relative to gasoline or other energy equivalents. 

Michael Galvin 

That is the goal. But whether or not that dollar amount is going to get you there, I would argue that it's not and I would also argue that depending on where you put the money, there are different ways to subsidize the market. On our end, it’s important that the money comes in because the people who are testing this equipment’s functionality are not making money; its all cost to them. 

Having to go through this process of getting to zero emissions doesn't have a place in the marketplace as there’s no commercialized equipment quite yet. We're pushing and pushing to get them to two milestones: the 2030 milestone on our terminals and for 2035, beyond our terminals. To get them there, they need to mitigate the risk. They need this money so we can push the technology and get the commercial providers to a level of commercialization that's necessary to bring down the cost of the equipment. 

When you have the demand, then eventually, you’ll bring down the cost of the molecules with scale. So that's why it's important-- because it allows for the beginning stage of demand needed to start creating a marketplace where production will chase it, bringing the overall cost down.

John Rossant

Now, Elise….

Elise Zoli  

Could I jump in here? I have three things I think are really important. 

My job is to move money to the innovation sector and the hubs represent three fundamental values; if you haven't thought of them in this way, I encourage you to consider this. 

First, the best science shows that clusters improve efficiency and innovation, and produce better results faster. The whole hub part of this is an important consideration. The second part is that DOE-funded projects outperform their peers-- they fail less, succeed better, and have a slug of non-diluted capital, which is equally important on a competitive basis. That's why folks come to these hubs and that's why I’m fortunate enough to sit with my team, spending a lot of time thinking about these applications as strategic plays for the sector. 

As free advice, you all should think of them in that way as well. 

Thirdly, I want to echo what Michael said, but in crystal clear terms. The private capital that came into the hubs is already in excess of $50 billion nationwide. These hubs created that market-  that is, you know, compared to the $7 billion, we already have a national market that we didn't have before. 

So it's not merely bringing people together, it's not merely improving the US economy,and prosperity, and being globally competitive. I know you know that. By putting those applications out on the street, we already drove the market in a way that we haven't been able to do since the hydrogen economy was first launched in 2005. So there are several reasons to be proud of what's happened, to pay attention, and to continue to watch this market grow.

John Rossant 

Thanks for this Elise, you've long been my go-to person for hydrogen - so much so that CoMotion was instrumental in launching a nonprofit institution in Europe, The Monaco Hydrogen Alliance, three years ago, which looks specifically at renewable hydrogen and mobility. Neon, 

among others, has been a supporter…

Could you pragmatically walk us through explaining what a Hydrogen Hub is? I mean, it brings in a cluster of companies, academic institutions, boards, etc, but how does it work?

Elise Zoli 

First and foremost, like all major government awards, there's a contract at the center; that contract goes to a joint venture, that joint venture can be unincorporated or incorporated, but in most of the hubs, it's either a group of states and governments- and  Michael plays a really important anchoring role in the ARCHES Hub. Or it can also be a consortium of moving corporations, like in the high-velocity hub, where the public - it’s a big team that I'm really proud of; Chevron, Exxon, Sempra, and quite a few others, who are coming together and saying wanting the most innovative companies to advance large projects. That gives those innovative companies the ability to make a difference by producing a commercial product with off-takers. 

So think of hubs as very large, high-quality, innovation-based industrial parks, typically at least $10 billion. What we customarily do is all of the work that enables moving the capital to make them happen and to make sure that the innovation sector has a role to play there.

John Rossant 

Michael, how will we gauge success for the ARCHES Hub? In 3 to 5 years, what are the metrics we will be looking at?

Michael Galvin  

So for us, we'd be looking at large-scale deployment of hydrogen equipment within the port area. So that's container handling equipment. We have about 4000 pieces of equipment between the two ports, LA and Long Beach, which make up the busiest port complex-- both individually and as one and two collectively in the Western Hemisphere. 

For us, it's getting a significant amount of that equipment turned over with hydrogen equipment. So, in 5 years, we want to displace 20% of that equipment with hydrogen equipment. I think we have gone a long way to start building the market for that and showing that we can do that in a very resilient format - that’s a promise for hydrogen. 

For us really, we’re also looking to be able to continue to do what we do with the strong labor force that we have today without totally changing the way we operate today. That would be a success for us if we could see a large percentage of that turnover in that time frame while seeing 20% of our 20,000 drayage trucks turn over as well. 

The real market demand piece is in the drayage and long-range trucking, that’s where the largest piece of the market is. The port is a mover and a precedent maker in the environment; so it’s important that we change our equipment. It's also important for the communities that we live and work in to get better air, but it's a tiny piece of the demand market to build up the scale that’s necessary to allow economics to take over and allow the molecule costs to be the driver for why people want to change over.  But the second piece is much more important… the drayage and long-range trucking transition is really the large piece to get this market moving. 

John Rossant  

Elise, the Europeans in particular have been up in arms over the last couple of years about American government subsidies going into this industry. They feel they're getting shut out. 

Do you think that this is going to be a continuing issue with the $7 billion federal government funds for the hydrogen hubs? 

Elise Zoli  

So yes, and no. 

I ordinarily would give you one digital answer but the United States welcomes Europe and other leading companies in the space willing to commit to the United States. But they want to see that commitment to manufacturing domestically and to being a presence. I think of that as routine trade behavior, so that's the “no” part of it. 

Given that process, I think we would all agree there's something different about hydrogen. So the United States is the origin species for hydrogen innovation. It’s a NASA technology that’s gone to the moon several times and it powers virtually anything you've ever seen.

John Rossant   

Modern fuel cells were an outgrowth of the Apollo space program.

Elise Zoli  

I believe that’s exactly right, Gemini and Apollo. So there's a real belief that losing this sector would be tantamount to being unAmerican so you're going to see a little more toothiness around hydrogen. I just want to say we talked about the Toyota Mirais and PEM fuel cells, the first generation of fuel cells matters; but when you talk about long haul trucking and leaning into the nerd that I am, solid oxide fuel cells and low-temperature solid oxide fuel cells, can burn hydrogen here where you have the fueling stations and multi-fuel burners. So if they're taking the load to Canada, they'll burn whatever's in Canada, which can be vegetable oil or diesel, and they'll do it efficiently. 

To not understand how the current generation of solid oxide fuel cells is the future of hydrogen, I think, is to miss some of the forest for the trees around the molecule alone. 

I know Michael would say this, but when he talks about drayage, the existing $4 trillion in US diesel infrastructure can be repurposed to move hydrogen and we probably shouldn't squander that infrastructure without darn good reason. So, part of what you see with hydrogen is a series of extraordinarily high-quality efficiencies that are going to change the way we move goods; and that's part of the hub's really have to scale to be able to produce the equipment, including the drayage equipment & long-haul trucks. 

For anyone who was here last year, the Kenworth Toyota truck was here and it has a SOFC APU-- it’s a magnificent machine, and seeing a million miles on it is absolutely glorious.  When you talk to the guys who drive the trucks, and I'm from a construction family, they get knocked to hell in a truck. If you've never driven a truck, it's like flying a small craft. It's a lot of bounce for the forward momentum. With the fuel cells, the electric drive train fundamentally alters the driver’s experience. The emissions that are going to be major in industrial centers are non-trivial benefits for low-income and disadvantaged communities that tend to surround these places. There will be benefits to the ways we enjoy the outdoor space and to what we hear and see around us. 

I'll make a plug every day for hubs any day because, in my experience, they work. I think it's also important to see the long-term vision and to understand what the benefits are in terms of that greater vision.

John Rossant   

In terms of a long-term vision, how much of a bipartisan consensus is there in this country? We have a Republican Party, very gungho in support of the oil and gas industry. Would you anticipate the calling back of any funds, if they will, ending the earmarks for the hubs? Is there any way that's possible? 

Michael Galvin

I have a different slant on that regarding the color system of hydrogen and surrounding politics. We have extreme concerns in a patchwork of places in California right now, in regards to what type of hydrogen we should be using at any given time..when the reality is that you can't find any hydrogen below 30 dollars a kilogram right, which is sort of crazy. We're implementing regulations that are related to politics and there’s a general misunderstanding of the marketplace that exists today. 

So, I think it’s imperative that we get political support at a high level to regulate the industry, similar to how the energy grid is regulated in California. To ensure consistency in that approach, because you cannot politically hold hydrogen to a standard below what the electrical grid is held to right now. These things need to match up. 

I think that political parties generally need to get together to an agreement nationally, or at least, at the state level first. Either way, we need to get to that point; and I don't know what's going to happen. We need to get inexpensive hydrogen into the system and, I tell people all the time, let's figure out how to get it into the trucks and equipment first, then stop emitting emissions out of those trucks to benefit the users and communities. Then let's worry about greening the feedstock after that. But if you try to do it the opposite way, we're gonna kill the market before it even starts.

John Rossant

Elise what's your take?

Elise Zoli 

I'm not a political being, I’m a technical being. Occasionally, I am a fusion and fission girl. For 20 years, I've done as much of the nation's fusion and fission as you can do. I think calling hydrogen pink is a distortion of every scientific reality principle; and practically speaking, I think most of us would like to see renewable and nuclear-based hydrogen as low emissions as possible. . All of us would like to get rid of the color scale and politics around it. 

My overwhelming sense is that this is a debate that few politicians have. Most of America decided long ago that addressing the climate crisis is not the main event- which is addressing the climate crisis.  

So my view is that we're going to keep forging ahead. The seven hubs represent seven different regional values and industrial focuses, too. I think there's almost no chance you take away the big money. Would there be a shift in the value around blue hydrogen in a Republican administration? Maybe. But, the Pacific Northwest Hub is large-scale hydro-backed and many folks don’t think large-scale hydro qualifies as renewable. 

There's way too much infighting and I think if we could have a bigger tent and do exactly what Michael suggests, which is to focus on the molecules, on getting the equipment that can use the molecules efficiently, and move the infrastructure a great leap forward, we're all going to be happier for it.

John Rossant   

I'm going to take a few questions from the crowds. 

Question #1

I had some questions specific to ports. So you mentioned repurposing some of the existing infrastructure. I'm wondering about the electric landscape --you have companies putting in hubs to charge the trucks.

So, when you're looking at hydrogen infrastructure and a mix of interests of who owns and who controls assets in those high-traffic areas, how, Michael, are you looking at prioritizing and working with those different parties to have both electric infrastructure and hydrogen -- given the time aspect and rollout of things?

Michael Galvin  

The ports are technology agnostic which means that we're chasing all technologies that can get us to zero emissions and of those 4000 pieces of equipment, the majority of them are not heavy duty, they are medium to light duty-- that’s the place where manufacturing makes a lot more sense. The duty cycles are also not as demanding or variable, so we're focused on that aspect as part of our solution. We're working with LADWP to drop in about $300 million of infrastructure to our terminals to make sure that they're minimally where they need to be on the electrical side. 

On the hydrogen side, we see great promise on the heavy-duty because of its durability. We have pieces of equipment that need to run 20 hours a day, but if they're doing 20 hours of one thing versus another thing, that duty load is twice as much. It needs to be extremely durable and predictable, and we can’t have situations right now technology-wise. Not to mention the charging infrastructure that would be used for all that as well. 

It’s a whole retooling of the way we do things but we see that promise there. We're focused on providing both opportunities and seeing what technology takes off, can be produced cheaper on a commercial scale, and which kinds are retrofittable because we want to put these pieces of diesel equipment out of use. 

If we're just replacing, that pipe is going somewhere else to a different port that's less regulated than we are, maybe even in another country. Regardless, we need to find those retrofit opportunities because we’re decommissioning; we're finding that we can now do that at a cheaper rate than buying a new piece of heavy-duty top-hand, which is a very large forklift. 

In all those cases it is important to understand that we don’t own anything equipment-wise as a port landlord. We own land that is leased out to terminals and those terminals have truckers calling on them with concession agreements. So, we can regulate how they come into the port, and what kind of protective equipment they use, but at the end of the day, all of those entities need to be able to buy this equipment at a reasonable rate. That's important and the cost of whatever energy source is important as well. The hubs are important because they allow convening power to bring all these voices to the table to figure out how we get all the pieces together. 

We can figure out how to get large-scale storage in the desert to work with a large-scale pipeline and reenter the system, allowing it to be distributed around. We see hydrogen able to act as a drop-in for diesel and that's from an infrastructural and operational perspective. We don't have to change the way we do things. We don’t need large-scale storage down at the ports. 

We can do it the way we do it today-- a tube truck can go and pick up that hydrogen at a local fueling depot and bring it down to the ports. So all of that can work and we don't have to reinvent the wheel when there are significant ways that will help you get there faster. It’s not only trucks and drayage but it’s also the obligation of ports and cities to impose renewable energy.

Right now, we have a very significant electrical grid in the city of Los Angeles. The City of Long Beach does not have the same opportunity because they use California Edison. The ability to get energy down to our facilities is much different for both sides. We have structure and power close by so we just need to drop it to them far away. That's even a longer-term budget to get it down there. 

So where does hydrogen play a role there? It enables them to continue to plug in the ships by using a 1.5-megawatt fuel cell, taking load off of the grid that way. So that's an opportunity where we may not need immediate proximity; they all share the same environment and community. It's all about figuring out ways to take the load off when you can and provide that power in a different place. 

On the shipping side, we're really in the beginning stages of figuring out what those fuels in the future are going to be but hydrogen derivatives are going to play a role there. We see a much larger potential opportunity to build out demand and to bring that production of those molecules back to the United States where they don't exist today because most of the shipping fuels are actually purchased outside of the United States.

David Abel, VX News:

Firstly, I want to commend this panel; but secondly, I’d like to learn more about the other six hubs and their promises.


It's such a great question and I want to answer it directly. 

I also want to say that I think the one thing that we did wrong if we could go back and recreate the universe, as important as the Toyota Mirai is, I think we got lost in the passenger vehicle competition with electric vehicles, and while it's the same drivetrain, I would have much preferred, if I had been supreme dictator, to get started with the heavy equipment. It's really where we belong with hydrogen and also with electricity production. So some of the Southern-based Midwestern Hubs are focused on electricity production, and they're going to blend in hydrogen. They're going to keep their baseload power, they don't have a solar strategy and in some cases, they don't have a great wind future. They don't have large-scale hydro, they're facing droughts, and the blending of hydrogen starts at 20%, and moves to 70% in three years and in 10 years, 100%. That is their plan for reducing fossil usage and maintaining the equipment that currently exists today with new burners. 

In the west, you're seeing renewable electric-based electrolysis that focuses on green hydrogen. On the Gulf Coast, the large-scale infrastructure for moving hydrogen and a focus not only on how you manage the molecule but also liquid organic hydrogen carriers and some really interesting work there. In Pennsylvania, you're seeing more of a traditional blue hydrogen focus and they believe that pairing of carbon capture and sequestration with some blended hydrogen is a future that we should look at. It is a high-quality interim step. 

I think that there are quite a few university-led initiatives that are really about process, great leaps forward in TRL levels, and equipment and component manufacturing in a way that we don't have today. I think all of those are valuable and there is good diversity. 

The DoD believes, and I certainly believe, that by picking seven hubs as opposed to 50 state-based hubs, you're achieving the cluster value and are more likely to make better leaps forward that allow cross-hub collaboration, technology sharing, and you know, overall cost reduction with some of the tax credits that also apply here to that buck per kilogram, on schedule, which is ideally in a decade.

“There's way too much infighting [concerning Hydrogen]... [If we] focus on the molecules, on getting the equipment that can use the molecules efficiently, and move the infrastructure a great leap forward, we're all going to be happier for it.” - Elise Zoli & Michael Galvin