The Department of Energy (DOE) Office of Clean Energy Demonstrations (OCED) is considering establishing a Demand-side Support Mechanism to support reliable demand for hydrogen at DOE-supported Regional Clean Hydrogen Hubs (H2Hubs). The Agency will seek an independent Implementing Entity (or Entities) to implement a DOE-designed and DOE-funded demand-side support mechanism to support the development of the H2Hubs. DOE will commit up to $1 billion to the mechanism.

The demand-side support mechanism will provide multi-year support for clean hydrogen produced by competitively selected projects affiliated with H2Hubs. It will facilitate bankable clean hydrogen demand from a diverse set of offtakers. It will help diverse entities leverage the full potential of clean hydrogen, including non-profits, local government, and Tribes, and facilitate the use of clean hydrogen across various sectors of the economy, such as in industrial processes, manufacturing and heavy-duty transportation.

The mechanism could include one or more design factors such as pay-for-delivery contracts, offtake backstops, feasibility funding to support analysis by offtakers, or other measures that strengthen demand for clean hydrogen and increase revenue certainty for H2Hubs. The mechanism will enable private sector financing and expedite progress to Final Investment Decision for H2Hubs. Based on demonstrated performance and experience gained with the H2Hubs Demand-Side Support Mechanism, DOE may consider similar mechanisms for other technologies and clean energy products in the future.

Tools that mitigate market risk for clean energy technologies during scale-up could meaningfully accelerate commercialization of these technologies, especially in clean hydrogen. DOE’s Pathways to Commercial Liftoff Report and National Clean Hydrogen Strategy and Roadmap for clean hydrogen both highlighted the lack of long-term offtake as a critical barrier to the near-term expansion of the clean hydrogen economy.

A recent DOE Request for Information on the use of demand-side support measures in supporting clean energy technologies emphasized these issues, with respondents highlighting the benefits of well-designed measures that can tackle revenue certainty issues that arise as a result of the natural imbalance between supply scale-up and demand formation in emergent clean energy markets. This initiative underscores DOE’s commitment to addressing barriers to commercialization identified in the Liftoff Reports.

DOE has determined a demand-side support mechanism can facilitate achievement of statutory goals to accelerate the commercialization of clean hydrogen and facilitate a clean hydrogen economy while fostering the development of robust private sector demand for clean hydrogen products. Public input is needed to ensure DOE is aware of and considering a broad set of program design factors consistent with statutory authority. DOE will also consider a broader set of potential options to deliver this support (e.g., funding to the H2Hubs for this work or potential blended capital options).