Hydrogen: any colour but grey [NGW Magazine]

Hydrogen’s potential as a major driver of the energy transition has become widely accepted. But there’s little agreement on how to build a “clean” hydrogen industry from scratch.

How to scale up production, lower costs, boost demand and distribute the fuel are among the main questions. A rash of strategies has been adopted in the European Union (EU) in recent months, but the solutions to these fundamental issues remain sketchy and often contradictory.

In June, the German government adopted a National Hydrogen Strategy (Nationale Wasserstoffstrategie). The document offers an outline of a plan for building an industry based on green hydrogen.

The strategy says its goal is for the state to create favourable conditions for the private sector to invest in the production, transport and use of emission-free hydrogen in order to decarbonise branches of the economy (see feature, page ??).

Not long afterwards, the European Commission (EC) unveiled its own plan, dubbed the European Clean Hydrogen Alliance. Part of the €750bn Next Generation EU recovery plan, the EU executive says that the strategy will boost clean hydrogen production in Europe.

Hydrogen’s role either as a feedstock, fuel, energy carrier or storage solution will be encouraged, it says, to help reduce greenhouse gas emissions across the industry, transport, power and building sectors. Burning hydrogen releases clean water and no CO₂.

“Renewable electricity is expected to decarbonise a large share of the EU energy consumption by 2050, but not all of it,” the EC strategy admits. “Hydrogen has a strong potential to bridge some of this gap, as a vector for renewable energy storage, alongside batteries, and transport, ensuring back up for seasonal variations and connecting production locations to more distant demand centres.”

It is this versatility that provides much of the momentum hydrogen is enjoying, points out the IEA.

“Technologies already available today enable hydrogen to produce, store, move and use energy in different ways,” it declares in a recent report. “A wide variety of fuels are able to produce hydrogen, including renewables, nuclear, natural gas, coal and oil. It can be transported as a gas by pipelines or in liquid form by ships, much like liquefied natural gas (LNG). It can be transformed into electricity and methane to power homes and feed industry, and into fuels for cars, trucks, ships and planes.”

Green vs blue

However, as the excitement over hydrogen’s potential mounts, so too has an understanding of just how tough a challenge it is to build a hydrogen industry from almost nothing. That has sparked disagreement over which precise fuels should be supported as a means to developing a green hydrogen economy.

Over 95% of hydrogen consumed around the globe – mostly in energy-intensive heavy industries – is “grey” hydrogen, produced from coal or gas. The IEA estimates that the 70mn metric tons that were produced in 2019 released 830mn mt of CO₂ into the atmosphere.

“Blue” hydrogen – produced from fossil fuels but utilising carbon capture technologies – is a vital step towards expanding the niche industry into a major energy source. It offers a cheaper, faster way to clean up industrial emissions while helping build the demand and infrastructure that will be needed for green hydrogen.

Estimated current costs for grey hydrogen in the EU are around €1.5/kg, depending on gas prices and disregarding the cost of CO₂, according to the EC. Blue hydrogen costs are around €2/kg. Green hydrogen currently costs €3.5-6/kg.

“Developing blue hydrogen is a must, as green hydrogen will not be available in substantial volumes until the power sector is fully decarbonised by renewable electricity, that is, not before 2040, possibly 2050,” writes Ralf Dickel at the Oxford Institute for Energy Studies. “Starting with blue hydrogen will be essential for timely and deep decarbonisation and will pave the way for green hydrogen to enter the market as soon as it becomes possible.”

However, others warn that it’s a predictable part of the fossil fuel industry’s efforts to stay relevant amid the energy transition.

The gas industry’s hyping of its potential low-carbon role is a “dangerous distraction…to keep all kinds of gas, particularly fossil gas, on the energy menu, and help the industry stave off being rendered obsolete by more climate-friendly renewable energy and electrification,” says the Corporate Europe Observatory NGO.

Green for green

Berlin has pledged to put up tens of billions into supporting the development of a hydrogen economy, although for the moment the strategy details spending of only €9bn. The long-term costs of decarbonisation of individual industry sectors are far higher.

Analysts at the Warsaw-based Center for Eastern Studies (OSW) estimate that cleaning up just the steel and chemicals sectors will carry a tab of around €75bn. Across Europe, these two sectors provide the bulk of the current 55 TWh demand for hydrogen.

In a bid to tempt private investors, German hydrogen-based projects will receive preferential treatment from Berlin in applying for EU funds. Operators of electrolysers – which produce green hydrogen by using renewable energy to split water molecules – will be exempted from taxation, which constitutes a fifth of electricity prices in Germany.

The German plan aims to have 5 GW of electrolysis capacity up and running by 2030, equalling annual hydrogen production of 14 TWh. Electrolysis capacity should double by the end of the following decade.

The EU strategy does not name a specific level of public support but it says investment will need to total €180bn to create 4 GW of electrolysis capacity in the next four years, and 40 GW by 2030.

Lobby group Hydrogen Europe – whose members include all of Europe’s energy giants as well as hydrogen players and researchers – estimates that in order to expand the green and blue hydrogen segments in the EU by 40 GW each by 2030 overall investment of €430bn will be needed.

Of that, €145bn should be public money, the trade association says. Scaling up green hydrogen production to 40GW would require €220bn, it estimates.

Overall demand for hydrogen in 2030 is expected to reach around 90–110 TWh. That means that hydrogen produced using fossil fuels will still have a significant role to play.

Essential blues?

Dickel says that dismissing the bulk of the blue hydrogen segment will make a fully-fledged hydrogen economy all the harder to achieve. He says that without this interim step, “the aspirations for hydrogen could falter due to unrealistic expectations based on political, rather than commercial and technical, reality.”

The EC says renewable hydrogen is the focus of its strategy. “It has the biggest decarbonisation potential and is therefore the most compatible option with the EU's climate neutrality goal.”

But gas as feedstock is also needed for the meantime, accompanied by carbon capture and storage or “other forms of low-carbon electricity, to clean existing hydrogen production, reduce emissions in the short term and scale up the market.”

However, even at its current limited scale, global hydrogen production is responsible for 800m mt/yr of CO₂ emissions annually, equivalent to the combined emissions from Indonesia and the UK.

Proponents claim that a move to blue hydrogen could cut most of those emissions. And others suggest that green and blue hydrogen attract specific players: utilities focused on renewables and seeking help to balance power grids on the one hand may favour green, while industrial players seeking to lower their carbon emissions would prefer blue.

The head of RWE’s generation business Roger Miesen noted at a recent event that while his company does note “not think blue hydrogen is bad,” it does consider development of the fuel as more of a job for the oil majors than for utilities.

Building blocks

The 300 electrolysers working in the EU produce less than 4% of the total, according to EU data. The EC strategy estimates that up to €15bn could be invested in electrolysers by 2030. A further €50bn-€150bn could be put into dedicated wind and solar capacity of 50-75 GW.

The momentum towards these targets is building. According to Wood Mackenzie, planned global investment in electrolysers by 2030 is rising. However, their analysts estimate that new capacity is still limited to 8.2 GW.

Still, as those investments take shape green hydrogen costs should start to drop. The IEA forecasts that the cost of producing hydrogen from renewable electricity could fall by 30% by 2030 as a result of declining costs of renewables and the scaling up of hydrogen production.

But replacing just the current 70mn mt/yr global output of fossil-fuel hydrogen with green hydrogen would require 3,600 TWh of renewable energy. That is more than the EU’s total generation capacity.

In addition, clear definitions and certification are needed to facilitate any green hydrogen market. That is the sort of drawn out, dull and bureaucratic process that all but kills widespread public interest but is often key to successful implementation of technology.

Hydrogen Europe predicts EU demand for “clean” hydrogen – which includes blue and green – is likely to rise to 17mn mt by 2030. But to provoke that demand, consumers will need to be able to access hydrogen, and that puts gas players – desperately seeking a way of remaining relevant amid the energy transition – in a position to play a key function.

“The gas industry faces an existential issue, as it needs to find a role within an energy economy that is set to decarbonise rapidly in order for the EU to meet its net zero emissions target by 2050,” writes Dickel.

The EC appears keen to involve the gas industry. It predicts it will cost up to €130bn over the coming decade to build hydrogen distribution and storage facilities and set up refuelling stations for transport.

Using existing gas networks should help the price fall, EU climate chief Frans Timmermans said as he unveiled the EC’s strategy.

“It is important that we look at existing natural gas and LNG infrastructure to see to what extent it is already usable for hydrogen or can be adapted to the use of hydrogen,” he said.

Norwegian consultancy DNV GL says that while around 3% of global energy consumption today is used to produce hydrogen, just 0.002% of this hydrogen, or about 1,000 mt/yr, are used as an energy carrier. The rest is used in industrial processes, mostly as feedstock.

“In a world that is seeking clean energy carriers, hydrogen can carve out a more prominent niche in the energy mix. It is an especially attractive option for countries with an existing natural gas infrastructure, as demonstrated by the UK which is already implementing large scale hydrogen projects,” the DNV GL analysts sum up.

The call to action has clearly been heard, with over a fifth of Europe’s oil and gas players already involved in hydrogen projects, and more than half expecting to enrol in the immediate future.

A group of nine European TSOs announced in mid-July that they are teaming up to modify their gas pipelines to develop a network of hydrogen infrastructure – potentially a tricky technical challenge owing to the smaller size of hydrogen molecules compared with natural gas and the lower energy density per volume.

However, quoting “new research” that “shows that existing gas infrastructure can be modified to transport hydrogen at an affordable cost,” Enagas, Energinet, Fluxys Belgium, Gasunie, GRTgaz, Net4gas, OGE, Ontras, Terega, Snam and Swedegas say they hope to have a network stretching 6,800 km by 2030 and 23,000 km by 2040. Three quarters of these pipelines will be converted gas infrastructure, with new connections to link the networks.

“Ultimately,” the European Hydrogen Backbone group claims, “two parallel gas transport networks will emerge: a dedicated hydrogen and a dedicated (bio)methane network. The network can be used for large-scale hydrogen transport over longer distances in an energy-efficient way, also taking into consideration hydrogen imports.”

The cost of the plan is estimated at €27bn-€64bn, which the group says is “relatively limited in the overall context of the European energy transition.”