Hydrogen Won't Change the World

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February 2021 Philippe Roos


The idea that hydrogen might one day replace fossil fuels has knocked around since the 1970s. But not much came of it 50 years ago, and the overblown hopes ended in disappointment. Fast forward to 2021 and carbon-free hydrogen is now touted as a core component of the energy transition. What are the chances this time around? Advocates argue that conditions are today much more auspicious, and there are plenty of announced projects to point to. There is earnest talk of a future clean "hydrogen economy" that would transform the planet (NE Dec.3'20). And yet. Indications are that while carbon-free hydrogen has good growth potential in niche areas such as long-duration electricity storage and heavy industry, it isn’t going to be huge or provide a full-sized escape hatch for today’s oil and gas industry.

Even the most optimistic forecasters are fairly measured in their enthusiasm, doubting that so-called green and blue carbon-free hydrogen production will reach 100 million tons per year -- the current level of global hydrogen demand -- before the late 2030s. Even by 2050, there is a rough consensus that hydrogen will still account for just 5%-6% of the world's final energy demand. That's enough to sustain a sizable industry. And hydrogen presents an interesting diversification opportunity for oil companies. But it's not going to change the world.

The irony here is that the coming ubiquity of cheap solar energy will make green hydrogen competitive, while at the same time curbing hydrogen's potential to penetrate many markets. Cheap renewable energy will soon make green electrolytic hydrogen cheaper than its clean blue and grubbier gray cousins produced from natural gas, with or without carbon capture, respectively. The twist is that using hydrogen only makes good sense where direct electrification is really difficult, and cheap solar makes electrification easier. Already, battery electric vehicles seem unbeatable in personal transportation, and clean, inexpensive electricity solidifies this lead. The same is true in many other consumer applications.

There are some limited openings for clean hydrogen of one type or the other in segments such as residential heating, where it is possible to mix hydrogen into the natural gas flowing through the gas infrastructure. Tests of this are already being conducted around the world. But using electricity to make the hydrogen only to burn it in a boiler is far less efficient than simply using an electric heat pump. In fact, using electrolytic hydrogen in this way is less efficient by a factor of four -- at least -- which means that heating a home with hydrogen would consume four times as much electricity as using a heat pump.

Heat pumps are expensive, for sure, but hydrogen would also require new equipment. A group of French gas network operators suggested in a recent report that it would cost little to inject up to 20% hydrogen into gas grids. However, anything higher would require "significant investment" in downstream industrial and residential equipment, in particular -- everything from industrial ovens to domestic boilers.

Parallels can perhaps be drawn with what is happening in liquid transportation fuels, where ethanol and biofuels are being blended into gasoline. That's great for emissions and the climate, but it isn't stopping the accelerating electrification of cars. Hydrogen could, in a similar way, capture 10% or 20% of the mix that's distributed by natural gas utilities, which is not insignificant, but it's unlikely to ever achieve 100% penetration.

Where Promise Lies

Electricity storage is the one promising market that will almost certainly materialize for hydrogen. While batteries offer fast responsiveness, they are not well suited for long-term storage, which is something hydrogen does well, even over months. But there's a catch here, too: the need for seasonal storage may prove relatively limited as electrification progresses (WEO Aug.21'20).

Even Greenpeace, in its optimistic Advanced Energy Revolution scenario published in 2015, calculated that only 5% of power generated in 2050 would come from stored hydrogen -- this despite its assumption that huge amounts of hydrogen would be produced by midcentury, particularly for the transportation sector. Hydrogen, for direct use or conversion into synthetic fuels, would in fact consume one-third of all electricity generated in 2050 in the Greenpeace scenario.

That leaves the so-called "hard-to-decarbonize" sectors such as heavy industries as the main hope for hydrogen. But even here there is no certainty or unity of view about hydrogen's potential versus electrification and other routes such as bioenergy and direct carbon capture and storage (CCS). Hydrogen is expected to secure a big role in future freight transport, even though direct electrification and biofuels should not be discounted too soon.

In heavy industries such as steel, hydrogen will compete with CCS. But the jury is still out on the respective merits of a conventional coal-fed blast furnace with CCS versus hydrogen direct reduction of iron ore, a little-tested technology. It’s a paradoxical story similar to that for cheap solar. If CCS becomes easy and inexpensive enough, blue hydrogen could remain competitive against green hydrogen after all and create an ongoing market for natural gas. But cheap CCS also potentially makes hydrogen generally less interesting in industrial -- and possibly power -- applications because “direct” carbon removal at the site of those activities may prove easier and even less expensive.

As the wide range of energy transition scenarios suggest, hydrogen is destined to play a larger role in the future energy mix -- but not the gigantic one that its keenest advocates once dreamed of.

Philippe Roos is a senior reporter at Energy Intelligence based in Strasbourg, France.

Hydrogen, Energy Storage, Electric Vehicles, Corporate Strategy
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