President Joe Biden will announce in Philadelphia on Friday the recipients of $7 billion in federal grants for the development of regional hydrogen hubs, advancing a key part of his administration's broader plan to decarbonize the U.S. economy.

Seven proposed hubs spanning 16 states from Pennsylvania to California were selected in the program, intended to jumpstart the production of "clean hydrogen" along with the infrastructure needed to get it to industrial users like steelmakers and cement plants. Some 79 proposals had initially applied for the money.

"The regional hydrogen hubs will kickstart a national network of clean hydrogen production, consumers and the connected infrastructure necessary, while supporting the production, storage and delivery and end use of clean hydrogen,” a senior administration official said.

Hydrogen is produced by electrolyzing water, and the fuel can be considered clean – or low emissions -if it is produced using renewable energy, nuclear energy or gas with carbon capture technology attached.

The Biden administration has set a target to increase clean hydrogen output to 10 million tonnes by 2030, and 50 million by 2050, up five-fold from today - and considers the fuel an ideal option for cutting emissions from tough-to-decarbonize industrial users.

Industry representatives have expressed concerns about the economics of rapid development, citing high interest rates, inflation, and uncertainty around permitting and access to additional federal subsidies.

The hub selections will now kick off a long process that includes multiple phases, from design and development to permitting, financing and construction.

The hubs selected will serve the mid-Atlantic, Appalachian, Midwest, Minnesota and Plains states, the Gulf Coast, Pacific Northwest and California. The two largest projects include $1.2 billion each for Texas and California - the former an oil giant and the other a green energy leader.

Each of the proposed projects involve dozens of partners from energy companies to local and state governments.

Administration officials have touted the program as one of the biggest investments ever in U.S. clean manufacturing. The grants are expected to leverage over $40 billion in private investment, generate tens of thousands of jobs and create a national hydrogen economy.

“This federal investment is significant because it complements and it unlocks so much private investment and investment from the states," said Chris Hannan, president of the State Building and Construction Trades Council of California, a partner in the ARCHES hub which is among the recipients.

"This starts the process to drive down the cost of hydrogen," he said.

U.S. hydrogen industry players are also awaiting guidance from the Treasury Department on how to access additional subsidies created by last year’s Inflation Reduction Act. Those rules are expected at the end of this year.

Environmentalists want Treasury to require that the tax credits, worth up to $100 billion, only go to hydrogen producers that use new sources of clean electricity instead of tapping power already on the grid.

"We need rigorous guardrails to ensure that U.S. hydrogen does not create an emissions mess, and that we are not subsidizing hydrogen that is clean in name only," said Rachel Fakhry, policy director for emerging technologies at the Natural Resources Defense Council.

Most of the selected hubs include the use of natural gas to power hydrogen production, which administration officials said would need to install carbon capture technology to qualify.

(Reporting by Valerie Volcovici; editing by Diane Craft)