The U.S. Department of Energy (DOE) Office of Inspector General (OIG) recently released the results of its year-long investigation of the Regional Clean Hydrogen Hubs (H2Hubs) Program. The report found that the Department’s Office of Clean Energy Demonstrations (OCED), which is responsible for the program, failed to complete required risk assessments and produce a staffing plan. Notably, OCED failed to reassess program risks as the program greatly grew in size and scope, rising from a planned $14 billion portfolio to a $50 billion portfolio. The result of this investigation is part of DOE’s long track record of mismanagement and cost overruns that put taxpayer dollars at risk.

OCED was formed to oversee a suite of large-scale demonstration projects including hydrogen, nuclear, carbon capture, battery storage, etc., funded by the Infrastructure Investment and Jobs Act (IIJA), and for the past three years has been focused on distributing the IIJA’s $8 billion allotment for clean hydrogen hubs. This funding opportunity was announced in September 2022 and concluded in January 2025 when funds were disbursed to the applicants who were selected to build each of the seven clean hydrogen hubs.

Source: DOE-OIG-25-23, “Regional Clean Hydrogen Hubs Program,” Appendix 3

The investigation had two key findings. First, the OCED and the H2Hubs program failed to complete mandatory risk assessments, including an initial assessment and further reassessments. The OCED conducted risk assessments “at the selectee level” but failed to perform a larger programmatic level risk assessment of the H2Hubs program. For example, the report notes that the full impact of the Section 45V Clean Hydrogen Production Tax Credit was unknown to OCED staff, even though the details of the final rule would greatly impact the success of the H2Hubs. OIG’s investigation asserted that this risk could have been identified and mitigated before the issuance of the finalized rule in January 2025 if an initial program-level risk assessment had been conducted as required.

The OCED also failed to conduct comprehensive risk reassessment and instead only monitored known risks and failed to account for new ones. In particular, the OIG noted that the cost-sharing ratio and total portfolio costs for the H2Hubs Program shifted profoundly—­­an incident that should have prompted a risk reassessment, but OCED failed to conduct one. In its 2022 funding announcement, OCED sought a minimum 50/50 government-to-recipient cost share and estimated a total portfolio project cost of $14 billion. However, during the award negotiation process, the cost share changed to 14/86 and total portfolio project cost more than tripled to $50 billion. Per the OIG, “such a significant change in project scope and cost should have triggered a reassessment of program risks.”

This lack of risk assessment of DOE programs is a recurring pattern, as evidenced by multiple investigations by the U.S. Government Accountability Office (GAO). GAO determined in a 2021 investigation that missteps by DOE, as well as other economic factors, were to blame for the failure of 8 of 11 carbon capture and storage (CCS) demonstration projects selected by DOE. DOE used an accelerated negotiation process that led to weak agreements between DOE and awardees. Furthermore, GAO found that DOE increased its cost share allocation, accelerated disbursements of funds, and re-allocated funds in instances when projects were not progressing as scheduled, in violation of Department policies. This led DOE to spend $300 million more than expected on the failed projects.

In a subsequent investigation in 2024, GAO found for a second time that the DOE office tasked with disbursing the majority of awards for CCS research and development projects was not in compliance with DOE risk management policies. Specifically, steps taken by the office to alleviate risks from projects were not recorded as required. The investigation also highlighted the office’s decision to award funds to a $14.6 million project that did not satisfy a set of technical requirements. The project was finished over a year behind schedule and went more than $5 million over budget.

The second key finding of the DOE OIG report was that OCED and the H2Hubs Program failed to produce a detailed workforce plan describing current and future staffing needs. OCED’s approach to staffing amounted to using contractors “for any skillset or knowledge gaps, when necessary.” OCED also allegedly devoted its resources towards issuing grants at the expense of monitoring current staffing capacities and future needs. The report acknowledged OCED’s recent commitment to producing a formal workforce plan in response to a similar inquiry from GAO but also emphasized that the effectiveness of the H2Hubs Program could nonetheless be hindered by OCED’s failure to develop a workforce plan.

In light of the report’s findings, DOE OIG issued two recommendations: complete a risk assessment and subsequent reassessments if needed; and produce a full workforce plan. The OCED Director, in a letter addressing the results of the investigation, agreed with the recommendations and listed two corrective actions that will be taken to fulfill them. These actions are expected to be completed in September and December of 2025, respectively.

DOE OIG’s investigation of the H2Hubs Program has two important implications for taxpayers. First, the investigation itself demonstrates the importance of DOE OIG. TCS has previously highlighted Congress’s hesitation to satisfy DOE OIG’s entire annual budget request. Without full funding, DOE OIG will be unable to effectively oversee all of the programs under the DOE umbrella, including those created as part of the Inflation Reduction Act. This, in turn, may lead to a higher prevalence of careless administrative practices and more wasted taxpayer dollars.

Second, the lack of rigorous risk assessments within OCED demonstrates the importance of having safeguards in place to ensure that taxpayer resources are used appropriately. Disbursing large amounts of funds in a hasty manner without proper risk management, as OCED has done, significantly increases the likelihood that taxpayer dollars will be expended on unrealistic vanity projects that ultimately do not come to fruition. Without oversight from DOE OIG, this outcome is even more likely.

TCS has long been critical of federal subsidies for hydrogen and has previously called on the Department of the Treasury and the Internal Revenue Service to ensure greater accountability and transparency in its implementation of the 45V tax credit. There must be more scrutiny and accountability in the management of taxpayer-subsidized hydrogen programs and tax credits, as this latest report confirms, to ensure that taxpayer dollars are being used effectively and efficiently.