California’s Hydrogen Hub Has Arrived - What Comes Next

Last year, the Department of Energy approved California as one of seven hydrogen hubs across the nation and promised billions in investments. This July, California officially launched the first phase of the project as state policymakers and local transit agencies worked to get ready. What happens now?

By Arianna Smith
Managing Editor
Transit California

For California's hydrogen fuel production, capacity building, and procurement, highly-anticipated projects and investments are now being developed, while additional funds and proposed policy changes may be on the way.

As previously covered in Transit California, transit agencies are already investing in hydrogen passenger vehicles and fueling infrastructure to help meet the state's climate action goals - including the goal to reach carbon neutrality by 2045 and to reach a 48% reduction in greenhouse gasses by 2030. The planned expansion of clean hydrogen production and conveyance could address the sometimes prohibitive costs and improve access to infrastructure and fuels. Proposed legislation moving through the California legislature could bring further changes.

Here's what transit agencies need to know as they make choices for their own low- and no-emissions projects.

California Officially Launches the First H2Hub - What Now?

In October 2023, Californians celebrated the state's selection by the US Department of Energy's (DOE) Office of Clean Energy Demonstrations (OCED) as one of seven Regional Clean Hydrogen Hubs (H2Hubs) located around the nation. The Alliance for Renewable Clean Hydrogen Energy Systems (ARCHES) led the application process for the award.

At the time, policymakers and transit leaders hailed the award as a landmark investment that would remove major barriers that keep operations from transitioning away from conventional fossil fuels and over to clean hydrogen, including bringing down the cost of hydrogen per kilogram and building out the capacity of the hydrogen fuel supply.

On July 17, 2024, ARCHES and DOE jointly announced the signing of a $12.6 billion agreement which made California the first awarded project location to formally launch its hub and begin Phase 1 of the project. Up to $1.2 billion will come from DOE made possible by the Bipartisan Infrastructure Law, while $11.4 billion will come from public and private matching funds.

Governor Gavin Newsom said of the announcement, "California is revolutionizing how a major world economy can clean up its biggest industries. We're going to use clean, renewable hydrogen to power our ports and public transportation - getting people and goods where they need to go, just without the local air pollution. Thanks to the Biden-Harris Administration, California is excited to pioneer this world-leading initiative that'll show other states and countries what's possible when you prioritize clean energy and public health."

"The Department of Energy's announcement to fund ARCHES is a monumental step forward in the state's efforts to achieve its air quality, climate and energy goals, while improving the health and wellbeing of Californians and creating new green jobs across the state," added Angelina Galiteva, CEO of ARCHES.

The ARCHES organization is now tasked with managing Phase 1 of the California Hydrogen Hub project. During Phase 1, ARCHES and stakeholders will be involved in planning and development activities. The phase will last up to 18 months and is anticipated to cost $186 million, with $30 million awarded from OCED. OCED notes that additional funding for the project is subject to future award negotiations at the end of each project phase.

The H2Hub will ultimately result in a network of clean hydrogen production sites "with the ultimate goal of decarbonizing public transportation, heavy duty trucking, and port operations by 2 million metric tons per year-roughly the equivalent to annual emissions of 445,000 gasoline-powered cars," according to the OCED project fact sheet.

Of specific interest to transit agencies, California's project envisions over 60 hydrogen fueling stations for over 1,000 fuel cell electric buses, as well as 5,000 Class 6-8 trucks. Already, the following regional transit agencies have entered a partnership with the Hub: AC Transit, Foothill Transit, Fresno Area Express, Gold Coast Transit, Livermore Amador Valley Transit Authority, North County Transit District, Omnitrans, Orange County Transportation Authority, Riverside Transit Agency, Santa Cruz METRO, SamTrans, San Joaquin Regional Transit District, and Sunline Transit Agency. ARCHES will have a committed contract with each of these thirteen agencies to buy fuel cell buses, as well as to build and upgrade infrastructure - all with an eye towards bringing costs down for the agencies.

In addition to specific transit operations, the project will include a variety of sites that will produce clean hydrogen, generate power using clean hydrogen, and replace equipment at the Ports of Long Beach, Los Angeles, and Oakland. At least 10 sites across California will produce hundreds of metric tons per day of clean hydrogen, which will be produced with renewable electricity and from biogenic sources. Although ARCHES is still determining these sites, most will likely be located in the Central Valley. Clean power - initially using hydrogen blended with natural gas, and eventually transitioning to 100% clean hydrogen - will be generated at several locations across the state, including Los Angeles and Lodi in the Central Valley. Existing diesel-powered cargo-handling equipment at the state's major ports will be replaced with hydrogen fuel cell technology to help reduce particulate matter and other pollutants.

Although it is not yet one of the agencies that have signed on to partner with ARCHES, the Sacramento Regional Transit District (SacRT) recently received a federal grant that provides an example of the way agencies will be funded for the transition to as the Hub is developed. On July 9, 2024, SacRT received nearly $77 million from the Low or No Emission Grant program at the US Department of Transportation to purchase new hydrogen fuel cell buses that will replace older and higher-emission buses, modernize a bus maintenance facility, and start a workforce development program.

"This funding is a pivotal step in our journey towards a greener, more sustainable future," said SacRT General Manager/CEO Henry Li. "By integrating hydrogen fuel cell technology into our bus fleet, we are not only improving the reliability and efficiency of our services but also contributing significantly to the improvement of air quality in our region."

State Legislation Could Further Change the Hydrogen Fuel Policy Landscape

SB 1420, authored by Senator Anna Caballero, revises the state's renewable hydrogen requirements that were originally set in statute in 2006. According to the bill's most recent committee analysis, it "[eliminates] or revises several conditions that currently apply to hydrogen claimed as "renewable" for purposes of the 2006 law requiring 33.3% of hydrogen dispensed at public fueling stations to be renewable" and "[provides] for expedited California Environmental Quality Act (CEQA) and California Energy Commission (CEC) review for hydrogen production facilities that have received state or federal funding." The scope and content of the measure has been revised significantly since it was originally introduced in February.

Upon the announcement of California's Hub launch, Senator Caballero linked her legislation to the future of the Hub in a press release: "It is clear that the production of cleaner, locally produced hydrogen is the pathway for California to successfully meet our ambitious climate goals. I authored SB 1420 to allow California to fully leverage its federal grant award and to create the highest environmental standards for hydrogen production in the world. This is an opportunity to reduce our dependence on fossil fuels, clean our air pollution problems and provide high road, green, union jobs."

The measure is supported primarily by local chambers of commerce, local governments, individual transit agencies, hydrogen producers and biogenic source creators, automakers, and educational institutions. It is opposed primarily by environmental organizations and environmental justice organizations.

The Association is currently neutral on the bill and does not have an official position. The Association may update its official position during the month of August when the Legislature returns from summer recess and concludes its scheduled business for the 2023-34 session. Individual transit agencies can weigh in on the legislation while being sensitive to concerns of their local communities.

SB 1420 passed the State Senate on a vote of 30-1 with 9 not voting. It passed two legislative policy committees in the State Assembly and now awaits a vote in the Assembly Appropriations Committee. The measure must pass the Assembly no later than August 31 for consideration by the Governor to be signed into law. If signed, SB 1420 would go into effect on January 1, 2025.

Keeping Up with the Hydrogen Discussion

Now that Phase 1 of the H2Hub is underway in California, OCED has announced a virtual community briefing on the California project on Monday, August 5 at 12:00. Interested transit agencies can register here.

At the Association's 2023 Annual Conference & Expo, ARCHES leaders provided important updates regarding the state's selection as a hub; undoubtedly, the topic will once again be discussed and featured at this year's signature event that will be held on November 20-22 in San Jose.

The Association's State Legislative Committee and advocacy staff will continue to monitor SB 1420 as it is considered in the Legislature. Interested Association members are encouraged to reach out with questions and comments about this or any other bill.

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