Green hydrogen is not yet commercially viable and will not be until governments put regulations and incentives in place that allow it to compete with cheaper grey hydrogen made from unabated fossil fuels, according to Siemens Energy CEO Christian Bruch.
Despite the hundreds of gigawatts of green hydrogen projects in the pipeline and national clean H2 strategies in countries representing more than a third of the world's population, there is not yet a commercial case for renewable hydrogen, Bruch told US business news channel CNBC’s Sustainable Future Forum on Tuesday.
“We need to define boundary conditions which make this technology and these [use] cases commercially viable. And we need an environment, obviously, of cheap electricity and in this regard, abundant renewable energy available to do this. This is not there yet.”
Marco Alverà, CEO of Italian gas distributor Snam, added: “The capital is there and it’s waiting to be invested. What’s lacking are the projects that are bankable.
“Now to make them bankable we need two things. We need the fine print in the regulation where we have the incentives or quotas that make certain percentages of hydrogen mandatory, for instance in pipelines with blending, or in the fuel sector for trucks or the shipping sector. Or you have incentives to cover the difference between the fossil fuel cost and the hydrogen cost.”
He explained that bankable projects need defined revenues, but that these “still depend on some form of either incentive or obligation… because the grey is cheaper than the green”.
“So you need the fine print in the policies to incentivize or make it mandatory to switch from grey to green, to switch from gas to hydrogen, to switch from coal to hydrogen, and then it will happen very fast.”
Once the “policy nudges” are in place, green hydrogen volumes can be quickly ramped up, said Alverà, one of the most prominent proponents of converting natural gas grids to run on 100% hydrogen.
“And the sooner we do that, the better, because if we bring the hydrogen revolution forward by ten years, and we can do that with only, we think, $12bn of capital deployed in building the electrolysers at scale, we can save, we think, over $2trn of [greenhouse gas emissions] abatement cost.”
Bruch agreed that if green hydrogen projects become bankable, finance will be readily available.
“The biggest problem is, at the current boundary conditions, there’s not yet a commercial case for green hydrogen. Marco was alluding to the fine print and regulations — this is exactly what is needed now.”
‘Cars are a very, very difficult use case’
Bruch added that he did not support the use of green hydrogen in cars.
“On private cars, or passenger cars, it’s a very, very difficult use case,” he explained. “It’s not the use case I would go to first.”
As Recharge recently wrote, battery electric vehicles are a far more efficient and cheaper option than hydrogen-powered fuel-cell cars.
“I think it’s much more reasonable to talk about hydrogen use either in... heavy duty mobility or in certain industrial applications.
“We talk about green steel or green refining processes, which are much more reasonable, much more CO2 effective, and offer a much more beneficial cost environment to make green hydrogen possible.”