Hydrogen has long been touted as a clean alternative to fossil fuels. Now, as major economies prepare green investments to kickstart growth, advocates spy a golden chance to drag the niche energy into the mainstream of a post-pandemic world.
“Green” hydrogen was pushed to the fore on Sunday last week when International Energy Agency Executive Director Fatih Birol said the technology was “ready for the big time” and urged governments to channel investments into the fuel.
Some countries, including the Netherlands, Australia and Portugal, have already begun investing in the technology. Now investors, politicians and businesses are pushing the EU and others to use its post-crisis recovery plan to support hydrogen in areas like trucking and heavy industry.
The promise of hydrogen as a fuel to help power vehicles and energy plants has been a talking point since the 1970s, but it is currently too expensive for widespread use.
Proponents say infrastructure investment and more demand from transport, gas grids and industry will bring the cost down.
Most hydrogen used today is extracted from natural gas in a process that produces carbon emissions, which defeats the object for many policymakers.
However, there is potential to extract “green” hydrogen from water with electrolysis, an energy-intensive, but carbon-free process if powered by renewable electricity.
EU officials, one of whom described green hydrogen as the “holy grail,” said it could replace fossil fuels in sectors that lack alternatives to align operations with the EU’s Green Deal plan to reduce net emissions to zero by 2050.
“Hydrogen could solve a lot of problems. We need everything else as well but the political interest is because to achieve deep energy efficiency and decarbonization, hydrogen seems relatively easy,” said Jesse Scott, a senior advisor at the Berlin-based think tank Agora Energiewende.
“It is less alarming [for policymakers] than some other elements for meeting net zero,” she added, such as carbon removal technology for example.
Momentum appears to be building; European Commissioner for Internal Market Thierry Breton met hydrogen companies online last week to discuss the bloc’s recovery from the pandemic.
“We could use these circumstances, where loads of public money are going to be needed into the energy system, to jump forward towards a hydrogen economy,” said Diederik Samsom, who heads the European Commission’s climate Cabinet.
This could result in hydrogen use scaling up faster than was expected before the COVID-19 pandemic, he added.
The European Commission has earmarked clean hydrogen — a loose term which can include gas-based hydrogen, if fitted with technology to capture the resulting emissions — as a “priority area” for industry in its Green Deal.
Over the past year, several governments, including Germany, Britain, Australia and Japan, have announced or have been working on hydrogen strategies and the pace has picked up over the past month during the pandemic.
Last week, Australia set aside A$300 million (US$195 million) to jumpstart hydrogen projects. Portugal plans to build a new solar-powered hydrogen plant which will produce hydrogen by electrolysis by 2023.
The Netherlands unveiled a hydrogen strategy in late March, outlining plans for 500 megawatts (MW) of green electrolyzer capacity by 2025.
A German hydrogen strategy is expected later this month.
The Dutch government is pushing for the EU to follow suit and present an “action plan” for clean hydrogen, a spokesperson said.
When it comes to transport, hydrogen fuel cells trail electric batteries in the push for greener automobiles, given their higher price and the lack of refueling stations, but proponents see potential for heavier vehicles.
Daimler and Volvo Trucks last month unveiled plans to bring hydrogen fueled heavy-duty vehicles to market within the decade.
Hydrogen gas is already used in industry to produce ammonia, which goes into fertilizers, and methanol, used to make plastic.
A major drawback of the green hydrogen that governments are most interested in, is that it requires a large amount of renewable electricity to produce.
The good news is, renewables prices have fallen sharply in recent years.
According to Bernstein analysts, hydrogen made from fossil fuels currently costs between US$1 and US$1.80 per kilogram. Green hydrogen can cost about US$6/kg today, making it significantly more expensive than the fossil fuel alternatives.
However, increased demand could reduce the cost of electrolysis. Coupled with falling renewable energy costs, green hydrogen could fall to US$1.70/kg by 2050 and possibly under US$1/kg, making it competitive with natural gas.
Higher carbon prices would also encourage the shift.
“Clean hydrogen produced from electricity is around three times more expensive than that from natural gas, but solar and wind costs have decreased in recent years and if they continue to fall, clean hydrogen produced with lower electricity costs would become more affordable,” Capgemini global energy, utilities and chemicals sector leader Philippe Vie said.
“On hydrogen we are right now where we were with renewables in 2000-2005. Ten to 15 years is probably a good time lapse to become competitive,” he added.
Any serious attempt at large-scale use — either in industry or transportation — would also require major infrastructure investments.
For example, power from an offshore wind farm would need to be connected to an electrolyzer that produces the green hydrogen, which would then need to be transported to end users.
Europe has around 135MW of electrolyzer capacity, but planned green hydrogen projects could bring that to 5.2 gigawatts, consultancy Wood Mackenzie said.
However, many projects hinge on further investment partners or subsidies, which advocates fear will be scarcer in the COVID-19-induced economic slump.
“Investments that would have been foreseen to be done now are not made because production is delayed,” said Jorgo Chatzimarkakis, secretary-general of the Brussels-based lobbying group Hydrogen Europe.
To help lower costs, several projects are being worked on across the gas infrastructure, industry, mining and energy sectors.
Royal Dutch Shell and Dutch gas firm Gasunie in February unveiled plans to build a mammoth wind-powered hydrogen plant in the northern Netherlands, capable of producing 800,000 tonnes of hydrogen by 2040.
In Germany, oil refinery Raffinerie Heide is embarking on a project using excess wind energy and abundant water supply in the region to produce hydrogen to make kerosene.
“The price of hydrogen we pay for now is four times natural gas from an external source fed through the pipeline and produced 30km away,” Raffinerie Heide chief executive Juergen Wollschlaeger said.
A big fear for companies in the hydrogen industry is that they will be unable to take advantage of the unique opportunity presented by vast economic stimulus packages, and that governments will favor supporting traditional high-carbon fuel sectors that have been hit hard by a collapse in energy demand.
“For us, that will be the question to be answered in the next weeks. Will the carbon fuel industry succeed in convincing the officials to support them?” Bernd Hubner, chief financial officer of the German green hydrogen start-up Hy2gen said.
Additional reporting by Sonali Paul and Aaron Sheldrick
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