Clean Hydrogen Deployment Act of 2021

To direct the Secretary of Energy to establish a pilot program to enter into contracts for payment of costs associated with using eligible hydrogen, and for other purposes. 1. Short title This Act may be cited as the Clean Hydrogen Deployment Act of 2021 2. Clean hydrogen contract for differences pilot program (a) Establishment of pilot program The Secretary, acting through the Assistant Secretary of the Office of Fossil Energy and Carbon Management and in consultation with the Assistant Secretary of the Office of Energy Efficiency and Renewable Energy and other relevant offices within the Department of Energy, shall establish a pilot program to enter into contracts, on a competitive basis, with entities for payment of costs associated with the production or purchase of eligible hydrogen that is used in projects carried out by such entities. (b) Selection (1) In general Not later than 2 years after the date of enactment of this Act, the Secretary shall enter into at least 5 contracts under the pilot program established under subsection (a), with each contract term for a period of no longer than 5 years. (2) Applications In selecting entities to enter into contracts with under the pilot program established under subsection (a), the Secretary shall ensure— (A) at least 1 entity selected will carry out a project that uses eligible hydrogen as a feedstock in an industrial application, such as synthesis of ammonia, fuels, or chemicals; (B) at least 1 entity selected will carry out a project that uses eligible hydrogen as a fuel in an industrial application; (C) at least 1 entity selected will carry out a project that uses eligible hydrogen as a fuel in a transportation application, including use at a transportation hub, such as a port, transit depot, or distribution center; (D) at least 1 entity selected will carry out a project that uses eligible hydrogen as a fuel in a power application; (E) not less than 2 entities selected will carry out a project that uses eligible hydrogen produced using electricity, or thermal energy, generated from zero-emission energy sources; and (F) each entity selected addresses any necessary hydrogen storage and infrastructure needs associated with the project, including by procuring those services from other entities. (c) Contract for differences (1) Payment The Secretary shall provide at least one payment annually to an entity with which the Secretary has entered into a contract under the pilot program established under subsection (a). (2) Amount Except as otherwise provided in this subsection, the amount of a payment, with respect to eligible hydrogen used by a project over a designated period of time, as determined by the Secretary, to an entity with which the Secretary has entered into a contract under the pilot program established under subsection (a) shall be— (A) with respect to an entity carrying out a project using eligible hydrogen produced using electricity, or thermal energy, generated from zero-emission energy sources, an amount equal to— (i) the cost of such eligible hydrogen that is produced or purchased, and then used by the project; minus (ii) the applicable fair market value, as determined by the Secretary, to produce or purchase an equal quantity of conventional hydrogen; or (B) with respect to an entity carrying out a project using any other type of eligible hydrogen, an amount equal to— (i) the number that is equal to— (I) the cost of such eligible hydrogen that is produced or purchased, and then used by the project; minus (II) the applicable fair market value, as determined by the Secretary, to produce or purchase an equal quantity of conventional hydrogen; multiplied by (ii) the number that is equal to— (I) 1; minus (II) as determined by the Secretary, the number that is equal to— (aa) the quantity of the greenhouse gas emissions, on a life-cycle basis, associated with such eligible hydrogen that is used by the project; divided by (bb) the quantity of greenhouse gas emissions, on a life-cycle basis, associated with an equal quantity of conventional hydrogen. (3) Alternative amount calculation With respect to an entity with which the Secretary has entered into a contract under the pilot program established under subsection (a) that will carry out a project that uses eligible hydrogen to displace a nonhydrogen fuel or feedstock, the Secretary may determine and apply a formula that is different than the otherwise applicable formula under paragraph (2) for calculating payments to such entity, taking into consideration the differences between the eligible hydrogen to be used in the project and the nonhydrogen fuel or feedstock being displaced with respect to— (A) cost; (B) emissions; and (C) heating value, as applicable. (4) Additional payment To the extent appropriations are available, and notwithstanding subsection (d), the Secretary may provide a payment to an entity with which the Secretary has entered into a contract under the pilot program established under subsection (a) at the beginning of such contract— (A) that is additional to any other payment under this subsection; (B) that is not more than 50 percent of the expected total payments for the first year of the contract; and (C) for capital expenditures or procurement of services related to the project carried out by such entity, including equipment and infrastructure for storage, delivery, and distribution of eligible hydrogen. (5) Applicable fair market value Before entering into a contract with an entity under the pilot program established under subsection (a), the Secretary shall communicate to such entity the expected dollar amount of, and method for calculating, the applicable fair market value of conventional hydrogen or a relevant displaced fuel that will apply for the duration of such contract for the purposes of this subsection. (d) Maximum payment per year (1) In general The amount of payments to an entity under a contract entered into under this section (other than a payment described in subsection (c)(4)) shall not exceed $50,000,000 per year. (2) Payment adjustment Subject to the availability of appropriations, the Secretary may increase the maximum amount of payments described in paragraph (1) to an entity to up to $100,000,000 per year, as determined appropriate by the Secretary. (e) Applications To be eligible to enter into a contract under this section, an entity shall submit an application to the Secretary that includes— (1) a description of the applicable project; (2) the location of any facility included in the project; (3) the method of production, including expected feedstocks, and expected cost, of eligible hydrogen to be used in the project; (4) a description of any infrastructure and equipment investments, including modification, conversion, and retooling, that will be done to support increased use of eligible hydrogen at any facility of the project; (5) an estimate of annualized expected greenhouse gas emissions associated with the production of the eligible hydrogen expected to be used in the project, calculated using methods and procedures determined appropriate by the Secretary; and (6) any additional information determined to be appropriate by the Secretary. (f) Priority In selecting entities to enter into contracts with under this section, the Secretary shall give priority to an entity based on— (1) with respect to the project to be carried out by such entity using eligible hydrogen, the extent to which such project would— (A) use hydrogen as a fuel or feedstock as a portion of total fuels or feedstocks used at the facility; (B) use eligible hydrogen as a portion of total hydrogen used at the facility; (C) support or encourage future use, commercialization, or cost reduction of eligible hydrogen and associated infrastructure, including development of centralized hubs for hydrogen production, distribution, delivery, and storage and use of existing infrastructure; (D) reduce greenhouse gas emissions; (E) seek to mitigate emissions of nitrogen oxides from the production and use of eligible hydrogen; and (F) seek to source fuels and feedstocks used in the production of eligible hydrogen that are associated with fewer greenhouse gas emissions; and (2) the extent to which such entity commits to making or contracting for additional investments to support the production, distribution, delivery, storage, and use of eligible hydrogen, including modifying, installing, and constructing equipment and infrastructure. (g) Assurances Before entering into a contract under this section with an entity that will produce or purchase, and then use eligible hydrogen produced from fossil fuels where carbon capture technologies are used during the production of such eligible hydrogen, the Secretary shall secure a written assurance from such entity that such entity shall seek to ensure— (1) the reduction of upstream fugitive greenhouse gas emissions associated with any feedstock used in the production of such eligible hydrogen; and (2) with respect to the carbon dioxide captured from the production of such eligible hydrogen, the long-term storage or utilization, if such utilization results in long-term storage, of such captured carbon dioxide, where such captured carbon dioxide is stored in a manner that the Secretary determines is consistent with existing relevant regulations for long-term storage of carbon dioxide and is otherwise appropriate. (h) Report to Congress Not later than 1 year after all funding made available for the pilot program established under subsection (a) is expended, the Secretary shall submit to Congress and make available to the public a report that describes— (1) any challenges or benefits that entities under such pilot program reported with respect to the integration or use of eligible hydrogen; (2) an assessment of the national market potential for eligible hydrogen; (3) an assessment of barriers and opportunities for widespread use of eligible hydrogen; (4) recommendations for how future Federal, State, and local programs can best support the adoption and widespread use of eligible hydrogen; and (5) any other data and analysis the Secretary determines to be necessary to describe the implementation, outcomes, or effectiveness of such pilot program. (i) Definitions In this Act: (1) Conventional hydrogen The term conventional hydrogen (2) Eligible hydrogen The term eligible hydrogen (A) means hydrogen, the production of which releases at least 80 percent less greenhouse gas emissions into the atmosphere per kilogram of hydrogen as compared to the production of conventional hydrogen, as determined by the Secretary taking into consideration greenhouse gas emissions released from— (i) the applicable hydrogen production facility; (ii) the production of electricity consumed in the applicable hydrogen production process; (iii) conventional hydrogen production facilities; and (iv) the production of electricity consumed in conventional hydrogen production processes; and (B) includes hydrogen produced using electricity, or thermal energy, generated from zero-emission energy sources. (3) Secretary The term Secretary (j) Authorization of appropriations There is authorized to be appropriated to carry out this Act— (1) $375,000,000 for fiscal year 2022; and (2) $250,000,000 for each of fiscal years 2023 through 2026.

Summary: Clean Hydrogen Deployment Act of 2021 This bill requires the Department of Energy's Office of Fossil Energy and Carbon Management to establish a pilot program that supports the development of clean hydrogen as an energy source. Under the pilot program, the office must enter into contracts with entities to pay for their costs associated with the production or purchase of clean hydrogen. Clean hydrogen must be produced with at least 80% fewer greenhouse gas emissions than conventional hydrogen.