It’s time to get serious about green hydrogen. And being serious requires a hard look at the facts.
Green H2 — produced from renewable energy — is a clean-burning fuel that can be used for long-term energy storage and to help decarbonise transport, heating and industrial processes such as steel and cement making. It can even be combined with captured CO2 to produce carbon-neutral aviation fuel.
A consensus has therefore emerged that the world cannot be fully decarbonised in the long term without green hydrogen.
However, there is an elephant in the room that must be addressed — producing the vast quantities of green H2 that the world will need would require an absolutely massive amount of renewable energy.
According to the International Renewable Energy Agency (Irena), the world will need 19 exajoules of green hydrogen in the energy system in 2050 — between 133.8 million and 158.3 million tonnes a year.
Recharge calculations show that producing such a volume would require at least 6,690TWh of dedicated electricity every year — the equivalent of 1,775GW of offshore wind farms, 2,243GW of onshore wind, 4,240GW of solar PV or 957GW of nuclear power (see panel below for details)
To put this in perspective, at the end of 2018, the world had installed 540.4GW of onshore wind, 23.4GW of offshore wind, 480.4GW of solar PV and 397GW of operating nuclear reactors, according to Irena and the World Nuclear Association. And virtually all of this capacity is being used to generate electricity, not green hydrogen.
Annual growth rates for wind and solar are increasing, but nowhere near fast enough for the world to be in line with Paris Agreement goals. Terawatts of renewable energy will be needed to produce green hydrogen, but that seems secondary to the demand from the rapidly growing electricity sector, which needs to decarbonise while simultaneously powering ever larger shares of the heating and transport sectors.
“The share of renewables in the world's total final energy consumption has to increase six times faster to meet agreed climate goals,” Irena wrote in a report last year.
Heat, transport and industrial processes can largely be decarbonised through a combination of electric solutions — such as heat pumps, electric boilers and electric vehicles — and green hydrogen produced using electricity.
But if the world is serious about doing this, countries need to massively ramp up their ambitions on wind, solar and other renewable (or nuclear) technologies — not to mention power-network upgrades and grid-balancing measures such as energy storage, vehicle-to-grid and demand response.
Many argue — particularly in the oil & gas sector — that powering a world with a growing population and ever-increasing energy demand is simply not going to be possible with electricity alone.
The International Energy Agency, for example, has consistently stated that the Paris Agreement goals cannot be met without large-scale use of fossil fuels with carbon capture, utilisation and storage (CCUS).
The same argument is being made for clean hydrogen — that the bulk of the required volumes will have to be produced (at least in the short to medium term) by natural gas and CCUS — so-called blue hydrogen.
The arguments for and against blue hydrogen
Today, about 70 million tonnes of hydrogen are produced every year, largely for oil refining and ammonia-based fertiliser production, with 76% derived from natural gas and 23% from coal (mainly in China). For each tonne of “grey hydrogen” produced using these two sources — nine to 12 tonnes of CO2 are released into the atmosphere.
These emissions can be captured, utilised and stored — there are four blue-hydrogen production facilities in the world at present, all in North America. Yet only about 80% of the carbon emitted from the most common H2 production process — steam methane reforming — can physically be captured. This can be increased to 95% by switching to a slightly more expensive process called autothermal reforming, which produces a purer stream of CO2.
Wide-scale blue hydrogen production would therefore still release millions of tonnes of emissions every year. With the UK and the EU aiming for net-zero emissions by 2050, a reliance on blue hydrogen would make such a target extremely difficult.
Continued reliance on natural gas also carries the added risk of methane leakage — a greenhouse gas that is 84 more times more potent than CO2 over a 20-year period — not to mention the geopolitical and energy-security implications of importing the gas from countries such as Russia and Qatar.
There is also the question of whether we want to trust the oil & gas industry to make hydrogen production clean — for decades it has shown that it puts profits before the climate — and it can make much bigger profits from grey hydrogen than blue. The CCUS part of the equation adds 25% to the cost of grey hydrogen, according to Equnior, the world leader in carbon capture and storage.
Steinar Eikaas, vice-president for low-carbon solutions at the Norwegian energy giant, recently told Recharge that blue hydrogen is unlikely to be produced at a meaningful scale without significant financial assistance from governments, as it is not in the oil & gas industry’s interest to voluntarily make its products more expensive.
“It’s all a matter of cost,” Eikaas said. “When I say we will need to charge €40-60 [$44-66 per tonne of CO2 to store it], that’s twice the level of the current ETS [ie, the carbon price within Europe’s Emissions Trading System]. Either you have to have industries that expect the ETS to grow significantly in a few years, or you would need a framework of subsidies assistance — financial contributions from the state — to facilitate the transition.”
And here, he is talking about hundreds of millions of euros of upfront subsidies — for a very wealthy, climate-destroying industry — which could be a hard sell for politicians, far harder than for incremental subsidies for green hydrogen.
In the long term, the gas sector — at least in Europe — wants to replace the methane in its distribution grids with clean hydrogen.
“The existing gas infrastructure can be largely retrofitted and future-proofed to help transport and efficiently store hydrogen across the EU,” said Boyana Achovski, secretary-general of Gas Infrastructure Europe, on Monday [16 March].
Eikass admitted that the carbon emissions from blue-hydrogen production, plus the very real risks of methane leakage, are far from ideal, and stressed that green hydrogen should not be in competition with blue.
“If you only focus on green hydrogen, it will take decades before it starts to really make an impact. By going blue first, we can immediately make an impact on the emissions,” he told Recharge.
“Let's build up the system based on blue, and then gradually we’ll convert it to green once we get the scale on the renewable electricity generation at the right levels.”
There is, however, a problem with that argument. Green hydrogen needs economies of scale to bring down costs, which would be harder to achieve if blue took the lion’s share of the market.
And it cannot be left to the markets to decide because, for the next decade at least, grey hydrogen will be the cheapest option (unless a very high carbon price is introduced).
If governments want to increase the production of clean hydrogen, they will have to make two choices.
The first would be whether to force its use through mandates, similar to the requirements for biofuel blends in petrol and diesel, or through subsidies to make clean hydrogen cost-competitive with grey.
Mandates would be the cheaper option, but would add costs to industry, which could put them at a disadvantage with foreign competitors.
The second choice would be whether to get behind green or blue hydrogen — or both (which would be exceedingly expensive if taking the subsidy route).
Germany looks set to be the first country to make this decision. Its national hydrogen strategy was supposed to be unveiled earlier this month, but has been postponed due to the coronavirus. However, in its most recent draft strategy, seen by Recharge, Berlin explicitly favoured green hydrogen over blue.
“In the view of the Federal Government, only hydrogen produced on the basis of renewable energies (‘green hydrogen’) is sustainable in the long run,” the draft says.
The cost implications
According to analyst BloombergNEF (BNEF), green hydrogen costs between $2.50-6.80 per kilogram today, with the IEA putting the current price of grey H2 production at $1-1.80/kg and blue hydrogen at $1.40-2.40/kg.
At the moment, green hydrogen is largely being produced at pilot projects only, with 252MW worth of electrolysers (the machines that split water molecules into hydrogen and oxygen) installed worldwide at the end of last year — and 3GW due to be completed by the end of 2024.
And, according to the Global CCS Institute, there are four blue-hydrogen facilities in the US and Canada, providing about 3,000 tonnes of the gas per day, with two more plants under construction, adding just over 1,000 tonnes daily.
Three sets of analysts — BNEF, Wood Mackenzie and McKinsey — have issued reports in the past six months stating that green hydrogen could become cost-competitive by 2030 as economies of scale drive down the cost of electrolysers and the price of wind and solar power continues to fall.
BNEF argues that by 2030, the cost of green H2 may fall as low as $1.40/kg, and sink to $0.80/kg by 2050, while WoodMac argues that green hydrogen will be cost-competitive in Australia, Germany and Japan by 2030, if the cost of renewable energy drops to $30/MWh.
But while solar and wind prices are expected to fall, a similar reduction in electrolyser costs is far from guaranteed.
BNEF said the installed capacity of electrolysers could reach 3,000GW by 2050, but such growth would require “government support, technological advances and increased scale”.
“Without political support, a hydrogen economy wouldn’t likely develop”, it added.
As green hydrogen is currently much more expensive than grey, short-term demand for the cleaner product would be limited to perhaps a few niche green products. The same was true for solar panels and wind turbines in the 2000s — they were simply too expensive to move beyond a limited niche — until governments brought in feed-in tariffs (and later auctions) that enabled wind and solar projects to make money. These schemes kick-started demand, which led to rapid growth in both sectors and economies of scale that eventually brought down prices to the point where they are now the cheapest forms of new energy in much of the world.
Without similar government interventions, electrolysers would struggle to reach commercialisation or see significant economies of scale.
McKinsey wrote in a recent report for the Hydrogen Council: “Within five to ten years — driven by strong reductions in electrolyser capex of about 70-80% and falling renewables’ levelised costs of energy — renewable hydrogen costs could drop to about $1-1.50 per kg in optimal locations, and roughly $2-3 per kg under average conditions.”
Achieving this price drop would require the deployment of 70GW of electrolyser capacity worldwide, requiring a cumulative $20bn of investment, the consultant said.
“Industry is prepared to invest,” the study added, “but clarity of policy direction to support hydrogen’s adoption will accelerate progress”.
Investments in large-scale CCUS for blue hydrogen would also cost billions of dollars.
So it is clear that governments need to act — and decisions need to be made — as soon as possible.
Should they go all-in on renewables and green hydrogen, or do they plump for fossil fuels with CCUS?
Such decisions will have a huge impact on the development of clean hydrogen — but far larger implications for the planet’s future energy system.
With 1kg of hydrogen containing 120-142 megajoules of energy, Irena’s prediction that 19 exajoules of green hydrogen will be needed in 2050 translates to 133.8 million to 158.3 million tonnes of hydrogen every year.
Using Platts’ formula that 1TWh of electricity provides 20,000 tonnes of green hydrogen (using PEM electrolysis), 6,690-7,915TWh would be needed every year to produce that amount of green hydrogen. Presuming a capacity factor (CF) of 100% (ie, operating 24 hours a day, 365 days a year), that translates into 763GW.
Of course, in the real world, CFs of even baseload fossil-fuel plants do not add up to 100%. Using average global CF figures for 2018, provided by the International Renewable Energy Agency and the World Nuclear Association, Recharge calculates that 6,690TWh is the equivalent of 957GW of nuclear (79.8% CF), 1,775GW of offshore wind (43% CF), 2,243GW of onshore wind (34% CF) or 4,240GW of solar PV (18% CF).
