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Why green hydrogen is central to achieving net zero

The US has launched a ‘hydrogen shot’ known as ‘111’ for one dollar for one kilo in one decade. The UK intends to be the 'Qatar of hydrogen'. Japan wants to be a 'hydrogen society'. China, with 53 projects underway, is a 'potential hydrogen giant'. Australia’s government is investing $1.2 billion to fulfil a national hydrogen strategy. Similar promises gush from other countries to total at least 50 worldwide.

Will green hydrogen save us?

More than 350 hydrogen projects are proceeding and US$500 billion is invested by 2030. Fortescue Future Industries says it will spend possibly more than $1 billion to build in Queensland the world’s largest electrolyser facility that through the process known as electrolysis would double global green hydrogen production capacity. “Green hydrogen can save us,” Fortescue proclaims.

Green hydrogen is central in the drive to net zero emissions because electrolysers that split water into its two elements of hydrogen and oxygen produce energy that is emissions-free. As well as being a clean fuel that burns to high temperatures, green hydrogen is an energy carrier and an input for synthetic fuels. The combustible element is light, energy dense by weight and can be stored and transported. Like fossil fuels, hydrogen can be combusted for industrial and household use, in stationary and mobile applications.

The potential 'missing link'

Hydrogen might be the most plentiful element in the solar system, but it is only found in nature as a compound in gas, liquid or solid form. The element must be extracted, that is, manufactured. ‘Green’, ‘renewable’ or ‘clean’ hydrogen means the element was extracted from compounds using renewable power. The ‘green’ distinguishes these clean molecules from cleanish ‘blue’ hydrogen and dirty ‘brown’ hydrogen.

Brown hydrogen is derived when CO2-polluting fossil fuels react with steam during a simpler and cheaper extraction process called steam methane reformation. Almost all the hydrogen produced today is dirty hydrogen, which has been used for decades in oil refining and to produce ammonia for explosives and fertiliser. Blue hydrogen is obtained using fossil fuels where the carbon produced is captured and stored.

According to the global industry body, the Hydrogen Council, announced clean hydrogen production capacity currently stands at 11 million tons of hydrogen by 2030. If achieved, that would be an increase of 450% on 2019 levels and compares with (almost all dirty) hydrogen production today of about 70 million tons. About 70% of the flagged production by 2030 would be green hydrogen, while the other 30% would be blue.

Announced clean hydrogen capacity through 2030

Source: Hydrogen Council Insights Report, July 2021

Hydrogen, first used to propel the earliest internal combustion engines 200 years ago, is poised to help the world fight climate change for two main reasons.

First is that clean hydrogen helps to overcome the unreliability of solar and wind power. Hydrogen can make renewable grids reliable because it is easily stored as an energy source and dispatched when needed.

The second advantage of hydrogen is that it can replace fossil fuels used in manufacturing where furnaces need to reach 1,500 degrees Celsius. That hydrogen can replace the fossil fuels blamed for 20% of global carbon dioxide emissions means the element is the ‘missing link’ in decarbonising the ‘hard-to-abate’ areas of manufacturing, where electricity is not suited to generating the heat required.

What’s not to like about hydrogen?

The element’s big drawback is that it is more costly than dirty alternatives because it is expensive to manufacture.

As a general rule, renewable hydrogen is about two to three times more costly to produce than fossil-fuel-based hydrogen. In the Australian context, the cost of green hydrogen needs to plunge from an estimated $8.75 a kilo now to below $2 a kilo to be as cheap as fossil fuels. For the US to achieve its ‘111 shot’, the cost of clean hydrogen must plunge by 80% from US$5 a kilo.

Hydrogen will become cost competitive if:

1. Electrolysers become cheaper due to technological advances and economies of scale

2. Renewable power becomes more affordable, and

3. Producers can achieve economies of scale.

Governments, for their part, need to offer subsidies that encourage demand and supply. Another option is they could make clean energies more price competitive by legislating a tax on carbon.

As governments are providing the catalyst to engender the required economies of scale, Bloomberg New Energy Forum forecasts green hydrogen’s cost could drop to US$2 a kilo by 2030 and US$1 a kilo by 2050 by when the element could supply up to 24% of the world’s energy needs. A world looms where clean hydrogen might play a defining role in helping the drive to net-zero emissions. The split between green and blue will depend on reducing the cost of green.

Major technical challenges, but we've only just started

To be sure, doubts surrounding carbon capture and storage undermine blue hydrogen’s environmental credentials. Hydrogen, the lightest gas in the universe, is not dense by volume. This means it must be pressurised to pipe or liquified to ship, which adds to costs. Hydrogen is volatile and can explode. Solutions other than hydrogen could overcome the intermittent handicap of renewable power. Beware too that two decades ago, hydrogen was touted as an energy solution. Yet today the green hydrogen industry still barely exists.

But that’s a reason for optimism.

The push to derive the economies of scale needed to lower the price of hydrogen have barely started. Yet electrolyser costs have dived by around 60% over the past 10 years, and the coming economies of scale are expected to lead to a further halving by 2030, according to the financial-sector-backed Sustainable Markets Initiative, which expects green hydrogen to be price competitive against fossil-fuel-based hydrogen by 2030.

If so, the countries hyping the element are likely to fulfil their hopes for an element that today shapes as a key technological pathway to net zero emissions.

 

Michael Collins is an Investment Specialist at Magellan Asset Management, a sponsor of Firstlinks. This article is for general information purposes only, not investment advice. For the full version of this article and to view sources, go to: https://www.magellangroup.com.au/insights/.

For more articles and papers from Magellan, please click here.

 

15 Comments
Allan Blood
December 13, 2021

There are some statements in the article, and in the resultant comments, that are either relying on future technological advancement, or warrant a little more explanation.

The article says, “Can be stored and transported”. Yes it can, but at a significant cost. Hydrogen permeates through normal steel and so storage and transportation units must be in specially lined, and purpose built specialty steel or carbon fibre containers which come at a substantially increased cost to current conventional fuels storage and transport. The cost economics of storage and transport must have a relativity to market demand. Demand does not presently exist, and the ideology of the desired outcomes has raced far ahead of technologies ability to deliver affordable solutions that will not impact on the cost to both ordinary citizens and industry.

However, in certain areas, hydrogen per se, because of its greater energy efficiency, can compete now, as a fuel for heavy vehicles for example, and the world’s truck manufacturers led by Daimler, who are the world’s largest, are making rapid advances in engine design.

The article talks of “cleanish blue”. Blue can also have a zero emissions footprint and the purity content of the hydrogen can be identical to green, i.e. 99.999%.

The statement that hydrogen helps to overcome the unreliability of solar and wind power is hard to follow when it is the same unreliable solar and wind power that is required to make green hydrogen in the first place.

The cost of electrolysers used to split the H2O molecules to make hydrogen is most definitely coming down. What is not coming down at the same rate though is the quantum of electricity required to make a unit of hydrogen via electrolysers. Then we get back to the authors own statement of “the unreliability of solar and wind” to power the electrolysers. Significant over capacity in solar and wind production, and then a storage mechanism to allow for a constant base load input at the consumer end is required. This costs a lot of additional capex, as in a multiple more.

Solutions exist, but they are expensive. There must be domestic demand and supportive infrastructure. The roll out must be incremental only, as to start large has to be funded by someone, and with an ever changing technological backdrop, a lot of money will be wasted on assets that will become redundant quickly.

One last note, carbon capture and storage is tried and proven in many locations around the world. Beneficially, certain gasification configurations do not have a major capture cost component, unlike coal fired power stations where the capture costs would be prohibitive.

Author: Allan Blood, Founder & Director of Victorian Hydrogen & Ammonia Industries Limited.
Project: To produce 97,500 tpa hydrogen, 502,000 tpa urea, plus high purity AdBlue.

Tony Dillon
December 05, 2021

For a start, a net-zero emissions policy on a global scale is a fraud when 3 billion of the almost 8 billion people on the planet have next to no energy for their daily needs, 3 billion have some energy but not yet enough to pull themselves out of poverty, and the remaining 2 billion don't comprehend the regression their lifestyles will encounter to achieve net-zero. Current technology suggests that nuclear power is the only carbon-free energy source that can reliably deliver power on a large scale, without CO2 emissions. Climate activists who reject nuclear energy are being disingenuous, and obviously have a political agenda.

Bill
December 06, 2021

The article states: "Governments, for their part, need to offer subsidies that encourage demand and supply. Another option is they could make clean energies more price competitive by legislating a tax on carbon." Why the need for subsides if the technology is so attractive? In fact, widespread use of hydrogen technology it unproven, as is "carbon capture and storage" which is often DISMISSED on the grounds that it is unproven technology.

Michael2
December 04, 2021

Very concerned to see carbon storage mentioned in the production of blue hydrogen.

Carbon storage is as yet unproven to be viable.

Carbon storage to my mind is another lie by the fossil fuels industries so they can keep doing what they do without changing.

Dan Martin
December 03, 2021

Water vapour in the lower atmosphere comes in very handy sometimes, especially when we need rain.

Phil Kneale
December 05, 2021

Also very handy is carbon dioxide which makes things grow, thereby "greening" the planet.

Greig
December 03, 2021

Not sure which is the "one developed country" you refer to. In countries where citizens have been consulted nuclear power has been rejected (Italy being the strongest example). Nuclear has minimal public support and so in most cases has been rammed down constituents throats by businesses and governments i.e. generally people towards the end of their lives with evidently little care factor for the still completely unresolved issues of highly toxic nuclear waste, the dangers of living in the vicinity of nuclear power stations, the radiation impact on everyone involved in the uranium production cycle and the astronomic costs of dismantling nuclear power stations at the end of the lives (to do it properly takes around 40 years and costs vastly more than the value of the power generated during the power station's life). Germany is abandoning nuclear power, Japan is using it again (as little as possible) because it has no choice not because of public support. Virtually no advanced countries are progressing any new nuclear power stations, mainly not because of the above dangers but because it is the least economic form of power production.

Dave Williams
December 03, 2021

The view that nuclear energy still has those emotive problems of waste storage and safety needs a review. There are many different options to the standard view that uranium is involved. Thorium based reactors have many advantages, not least of which is the ability to provide small amounts of power in country districts negating the need for power lines and other infrastructure. They are also intrinsically safe, have fewer waste problems related to half life and do not require a source of large amounts of water. But with apparently few politicians with some science nous the likelihood of being able to bring them upto speed is small.

jennifer
December 02, 2021

The problem of waste from nuclear energy has not been solved. Leaving the legacy of this nuclear waste to our future generations for millennia, is not the right thing to do.

Trevor
December 02, 2021

Phil Kneale...............TOO TRUE ! But at least.........and at last..........."we" are going to have NUCLEAR POWERED SUBMARINES ! . Then......once they have PROVED THE SAFETY AND EFFICACY of Nuclear Power.......perhaps the opponents will "see the light" and the many benefits and relent ! Let's hope so !!

George Hamor
December 02, 2021

Too many ifs, buts, maybes...
A lot of wishful thinking...
If Twiggy thinks he can make another fortune out of green hydrogen why is he wanting the taxpayer to subsidise him?

Ray
December 02, 2021

Aha, are Twiggy's profits to be had due to FOMO of the clamouring investment managers or the long term use of your actual H2 as an economically viable fuel source?
I took a punt on FMG a fortnight ago at $15.22 and now $17.30, so we're both laughing...
Now can he pull off his magnetite plant? Just don't mention BHP and briquettes.
A bet each way then

Phil Kneale
December 02, 2021

I find the optimism about hydrogen puzzling. Apart from the practicalities of getting it to work, everyone seems to be ignoring the fact that hydrogen production produces water vapour which is a major greenhouse gas (more significant than carbon dioxide, I believe). If we're abandoning coal because of its contribution to global warming via one particular greenhouse gas, why would we replace it with something that does the same thing via a different greenhouse gas?

Peter
December 02, 2021

Whilst water vapour is a greenhouse gas, research I have read (I am not a scientist though) indicates water vapour emitted close to the earth’s surface has a very minimal effect.

Phil Kneale
December 02, 2021

I'm no scientist either. What I have read (from NASA scientists and others) is that water vapour is a more significant contributor to heating than CO2 but mainly as an amplifier of the effects of all the other greenhouse gases, including CO2. There are so many unknowns and complexities, though, that it's hard to see the sense in going down the hydrogen path when the emissions-free nature of, say nuclear energy, is not contested and as an industry it already exists and is known to work. It's a little embarrassing that there's virtually only one developed country that fails to see this.

 

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