Have you ever asked yourself what can the $ 10 B actually purchase?
Consider this for a moment. The Biden Plan looked at funding between six and ten hydrogen hubs within a universe of 18 hydrogen hubs. A DOE map shows the proposed hubs and none are located on the eastern seaboard. The closest ones to cities like Boston, New York, Philadelphia and Washington, DC is in Allegheny County (Pittsburgh), PA. The nearest hubs to Atlanta, Tampa, Miami and Jacksonville is in Mobile, AL. Clearly, the market needs to move product to those large metropolitan areas.
One possible solution is to insert hydrogen into the nearly 305000 miles of existing natural gas lines. Given the density of hydrogen relative to methane, you have a practical limit of about 20% hydrogen before you need to modify compressors and valves. Since hydrogen has a lower BTU value to methane, this means than the practical limit is closer to 7% by volume. So, why don’t we increase the number of natural gas pipelines and insert hydrogen? While environmentalists say natural gas is bad, it is better than coal and home heating fuel. In 21-22, the average cost to build a natural gas pipeline in the Great Lakes states and in the North East was $ 8.5 million per mile. Adjusting for inflation to 23-24 time period, $ 10 million per mile sounds about right. So, the $ 10 B would pay for about 1000 miles of new pipe or about 55 miles per hub. That is slightly longer than the distance from Baltimore to Washington, DC.
If we were to build a new hydrogen only line, what would it look like? There are currently 1600 miles of hydrogen only pipelines in the US virtually all in the Houston area going through Lake Charles. The DOE has estimated that a new gaseous hydrogen line would cost about 10 percent more than a new natural gas line. This would imply that some 900 miles of new pipe could be built or 50 miles per hub.
So, what happens if we move it by truck or rail. The cost of a trailer or rail car handling pressurized hydrogen gas or refrigerated liquid hydrogen is not cheap. The average between the two types is about half a million dollars.
Suppose we ignore the transmission issue altogether and focus on local distribution, what does $ 10 B purchase? According to the DOE’s 2021 report, the cost to construct a retail level filling station using compressed hydrogen is $ 1.5 million. The cost for a single liquid filling station ranges from $ 1.9 million to $ 2.4 million. If you use a standard $ 1.75 million as an average, you end up with about 5700 filling stations. The US current has about 145000 filling stations.
Now, these numbers assumed that the grants covered the entire cost of a project. If we said that the project owners paid 75% and the grant made up the difference, it only increases the coverage by four. We are still short on pipelines and your local gas stations.
This line of thinking was purely restricted on using hydrogen to support cars. No consideration was given to competing demands from the demands for fast charging BEV outlets.
I had a conversation yesterday with a Green Bond financier who report that he already has about $ 6 B in projects going in for funding requests. He was told by the DOE that they have 4 persons who will be processing some $ 300 B in capital projects fighting over the $ 10 B.
The clear takeaways should be that the amount of support for the infrastructure grants is not sufficient to meet the ambitious goals set out by Biden. Further, the amount available to project developers is not assured given the competition. Also, we should keep in mind that the roll out, if it is not scuppered by the GOP’ Freedom Caucus, will take longer than anticipated.
Food for thought.
