The challenges in pursuit of a green hydrogen economy
By David Stent — Climate Council Digital Producer & Content Manager
Green Hydrogen is the trendiest clean energy source around, touted for its ‘simple’ ability to turn water into a highly combustible energy source capable of replacing our demand for oil and gas. However, the costs of green hydrogen are significant and unviable from a commercial perspective, at this point in time.
There are a few barriers to be knocked down before the commercial aspect of green hydrogen is advanced; the costs of renewable energies need to be viable themselves, the storage of electricity generated is still too inefficient, the storage of hydrogen too volatile, the costs of desalination remain significant and important, there is a lack of industrial demand for hydrogen (especially green hydrogen).
The intersection of these barriers has led to the conversations on the utility of green hydrogen being several steps ahead of where it needs to be. Foremost, the quantity of supply developed will be predicated on where demand may be secured. This entails that off-takers agree to purchase energy at higher costs than alternatives, including repurposing processes to use hydrogen. The resulting lack of interest in such expensive alternates is unsurprising as shareholders seek the balance between returns and responsibilities, and in an energy landscape lacking emissions regulation, only a few are bold enough to push green hydrogen forward.
The Energy Council looks at the latest IEA report, ‘Global Hydrogen Review 2021’ to assess how the development of green hydrogen is advancing, and what is needed to make it commercially viable in the quickest timeline.
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The push and pull of supply and demand
Green hydrogen remains far-off from being a significant contributor to global energy supply, with just 21% of the 90 Mt produced each year coming from renewable-sourced energy. As such, the notion that the global energy sector is about to usher in the era of green hydrogen is distorting the significant challenges and barriers that must be overcome still.
Global annual hydrogen supply in 2020 accounted for 90 Mt, with the bulk (59%) coming from fossil fuel-based steam methane reformation from natural gas, with 19% coming from coal-to-hydrogen gasification – while less than 1% currently is sourced from electrolysis. The elephant in the room here is that less than 1% of global hydrogen is supplied by renewable generation, while the relatively small sector of fossil-fuel hydrogen production makes up 2.5% of total global emissions.
Herein lies the core problem with green hydrogen, the assumed uptake in supply is obviously predicated on a growth in demand – but the sources of demand are quite narrow; industrial demand for steel, cement, and fertilizer make up the vast majority of hydrogen’s industrial uses. Moreover, if we are to expand areas of demand, we must do so through the growth of blue or grey hydrogen, to justify the development of costly green hydrogen projects.
While there is the option to utilize CCUS technologies to capture emissions at source, would appear to solve many of the concerns of using natural gas to create hydrogen – a recent, well-publicized study conducted by Stanford and Cornell scientists suggests that the inefficiencies and gas leakage could actually mean blue hydrogen creates more emissions than directly burning gas or coal.
Electricity generation remains but a fraction of the demand due to the high-energy consumption required to create green hydrogen – with some suggesting it is far more efficient to use renewable generated electricity directly rather than to power electrolysis.
So where does this leave green hydrogen as the great hope for ending fossil fuels when it requires the input and commitment of the sectors it seeks to replace? At what point will demand be successfully shifted from cheaper sources to the more expensive but cleaner source?
The report highlights the dearth of necessary projects to achieve a net-zero scenario; looking to 2030, “350 projects could push electrolytic hydrogen production to 5 Mt” with an additional 40 early early-stage projects taking that up to 8 Mt – still 4 Mt short of the Announced Pledged Supply by nations in the Paris Climate Agreement. The scenario worsens when considered against the IEA’s 2030 Net-Zero Scenario that outlines a supply of electrolysis hydrogen to be upwards of 80 Mt.
With the industrial scope of demand remaining limited, and the supply of green hydrogen far below the levels required to induce the net-zero scenario – can the watershed moment even be achieved, and if so, what barriers must be broken down to achieve it.
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Stepping back and taking a breath
Given the concerns raised in the study about emissions from blue hydrogen production being elevated beyond natural gas and possibly even coal, the pursuit of green hydrogen is in a quandary.
The IEA suggests that, as the uptake of electrolysis and CCUS increases, the supply of green hydrogen increases exponentially. This is predicated on the adherence to the Net-Zero Scenario where there is close to 1000 GW of global electrolyzer capacity by 2030, from there it would rapidly increase each five years to 3500 GW by 2050.
The Announced Pledges Scenario, where electrolyzer development is much slower, would only lead to 1,500 GW by 2050. Given that our current actions, at most, leave us between 33% – 58% short of the APS roadmap – this expected exponential growth as part of the Net-Zero Scenario is a fanciful folly.
Infrastructure remains a financially burdensome barrier, however in the grander scheme of the energy transition; these become suitable sunk costs that will pay for themselves over their operational lifetime. While hydrogen-only pipelines can be far more costly (10-50% more so than for natural gas) than those transmitting natural gas, there is the capacity to use these gas pipelines by blending hydrogen into the mix and lowering the emissions profile. This provides the space to build out the higher cost capacity as the costs of green hydrogen fall.
Innovating toward the watershed
As humanity’s growth accelerates us toward climate disaster, so too is human ingenuity dissecting these issues and seeking workable solutions to innovate ourselves out of this catastrophe. The most obvious solutions for green hydrogen can be found in; driving down the costs of electrolyzers, developing significantly greater renewable generation capacity and
IEA lists four solutions that may accelerate the rate of adoption and drive down costs of production; Solid oxide electrolyzer cells – using cheaper materials that split steam instead of water. Methane pyrolysis – the process of splitting methane into hydrogen and carbon black (using far less electricity than electrolysis but more gas than steam methane reforming). Anion Exchange Membranes – a process that creates a higher concentration of fixed charges, making electrolysis more efficient. And lastly, Electrified steam methane reforming (ESMR) – an adaptation of SMR that replaces the heat source and in turn, requires significantly less energy to produce.
Policy innovation is the final tool required to truly kick-start the evolution to a new energy landscape. Herein, the governments of the world need to take ambitious leaps in financing new projects, investing in promising technologies and assuming greater costs. These can manifest in the form of; clear government issued roadmaps for hydrogen production that can direct committed industrial actors, strong financial incentives for shifting to from fossil fuels to low-carbon alternatives, support for technological innovation and to “establish appropriate certification, standardization and regulation regimes”.
The hype and fanfare around green hydrogen should undoubtedly be welcomed and encouraged, but while the sector remains at a nascent stage – there needs to be some more pragmatism in the belief to what green hydrogen will achieve and to what level green hydrogen will displace fossil fuels.
Many will continue to see green hydrogen as the ‘golden key’ to unlocking a net-zero future, yet it should not be seen as the ‘be-all and end-all’ solution to solving our fossil fuel addiction. Realistically, there are huge capital constraints, a narrow range of demand sources and requiring a high rate of energy to produce.
Expanding renewable generation capacity to first and foremost deliver electricity to grids should be the priority for where wind or solar power are directed. Not only are we likely to be contributing to the emissions problem by inducing a hydrogen economy through the expansion of blue hydrogen, we are also spending billions on a sector that serves few industrial uses (albeit hard-to-abate sectors). The result is that expensive, multi-billion dollar pilot projects are launched to solve this issue, and in the meantime, many millions of people living in poverty continue to be denied access to electricity (despite living in highly beneficial regions for renewable energy generation).