Can hydrogen help make the world more sustainable?
7 minute read
At this point, there is little debate about whether we are in the midst of climate crisis, and topics such as the Paris Agreement of 2015 have gone mainstream.
When people imagine or visualise their low carbon future, they imagine things like battery-powered cars, heat pumps for domestic heating, induction hobs for cooking and wind turbines and solar panels everywhere. This is because Tesla cars and wind farms and the like have become symbols of the climate movement. There is no doubt that renewable generation and electrification are important drivers in resolving the climate crisis.
However, it does not take all that much scrutiny to realise that ‘electrifying everything’ is not feasible as a universal solution to the problem of climate change.
Other sources of energy are necessary for a large and meaningful subset of activities. These include generating industrial heat, storing excess renewable generation and some transport applications.
Hydrogen, many argue, is the complementary piece of the jigsaw that fills these needs. This article will act as a short, and hopefully helpful, primer on the lightest element in the universe.
Hydrogen is the first element on the periodic table; it is small and highly reactive. It is most commonly found on Earth as water, that is two hydrogen atoms bonded to one oxygen.
Hydrogen is already produced and used at volume today, some 70m tonnes per year as an industrial feedstock for various chemical processes. Besides applications in the chemical industry, the most evocative application for hydrogen is perhaps generating electricity in fuel cells, which in turn can drive motors in cars, which are already being commercialised at relatively small volume (Toyota Mirai is a fine example).
Hydrogen is undoubtedly a growth sector. The IEA project that by 2050, 20% of the world’s energy mix will come from hydrogen and that up to a third of greenhouse gas emissions can be mitigated by the emergence of a hydrogen sector. BofA Securities project that the hydrogen sector can generate $2.5tr of direct revenue by 2050.
Given such bullish projections, legislators are keen to enable this sector by incentivising projects that bring the cost curve down. Hydrogen is a central pillar of the EU’s €1tr+ green recovery plan. The French and German governments have additionally committed €7 billion and €9 billion towards the development of hydrogen infrastructure over the next decade. The UK will publish a hydrogen strategy in H1 2021, which is expected to be very aggressive.
Hydrogen will find use at volume and at scale as a tool for industrial decarbonisation and can be used to generate industrial heat in steel and cement making; two sectors which historically have proved very hard to decarbonise as well as onsite generation of green hydrogen to decarbonise mining operations.
Hydrogen is an exciting transport fuel. Relative to battery-powered cars, fuel cell-powered cars are lighter, typically have greater range (>400km) and can be refilled quickly. The biggest impediment to widespread adoption of hydrogen vehicles is lack of refuelling infrastructure. The case for hydrogen becomes even stronger for vehicles that travel long distances and heavy loads; this is because batteries become prohibitively large and heavy as vehicles become bigger. Hydrogen, on the other hand, is incredibly light. Nikola has created significant buzz in capital markets with its promise of hydrogen freight trucks. Toyota and several other manufacturers are actively bringing hydrogen trucks to market.
Hydrogen has been identified as the maritime fuel of the future, due to its lack of emissions and lightness. Maritime accounts for up to 30% of the world’s NOx emissions, over 10% of the world’s SOx emissions and has a carbon footprint drastically exceeding 1bn tonnes per year. Due to the size and weight of container ships, batteries are inadequate for propulsion; hydrogen is largely heralded as a long term solution here.
The aerospace sector also gravitates towards hydrogen over batteries as a propulsion fuel, again due to its lightness and energy density, though real-world implementations seem more distant than for automotive or maritime applications.
One of the most exciting applications for hydrogen is as a means of energy storage. Hydrogen can be electrolysed using excess renewable generation and converted back to electricity for load balancing or to otherwise mitigate intermittent generation. There is a particularly exciting project led by Mitsubishi Power in Utah that leverages geological features (salt caps) to store hydrogen. Stored hydrogen can also be leveraged for other applications, such as chemical feedstocks.
There are challenges in the way of widespread adoption of hydrogen. Midstream (distribution and storage) for hydrogen is very much an emerging sector. Reengineering pipelines, ships, tanks and cylinders require significant capital to deploy at scale.
The provenance of hydrogen is important, and not all hydrogen is created equal.
The ‘market-leading’ production technology as of January 2021 is steam reformation of natural gas, a process with emits a sizeable quantity of carbon dioxide – this is referred to as ‘grey hydrogen’. If steam methane reformation is combined with carbon capture technologies, then is called ‘blue hydrogen’ and is not deleterious to the environment. ‘Green hydrogen’, on the other hand, is hydrogen that has been electrolysed from water using electricity generated from only renewable sources. Most new development over the next decade will focus on the deployment of green and blue hydrogen projects. An emphasis on certification of hydrogen will arise as hydrogen becomes commoditised.
Many expect hydrogen to follow the path trodden by LNG (liquefied natural gas) in transitioning from a highly vertically integrated industry to an exchange-traded commodity. Presently, hydrogen is produced at chemical plants and used as a feedstock in those same plants. In future, both hydrogen production and demand will become decentralised. On the supply side, that means a greater volume of production technologies (green, blue etc.) will be deployed at many locations at many different scales. On the demand side, that means many more industries will require hydrogen. As a result, markets for hydrogen will emerge and traders will look to find arbitrage. Leading commodity traders are looking to trade their first hydrogen volumes this year.
Hydrogen is no panacea. Many other complementary technologies are needed in the fight climate change – better batteries being an example, and transitioning to a more circular economy is vital too. What is clear though is that given the scope of investment in hydrogen technologies, and its potential to decarbonise huge sectors that are largely out of scope for batteries and other means of electrification, hydrogen will play a major role in making the world more sustainable – certainly if the IEA’s bullish projections prove to be true.
Who are Altroleum?
I take a particular interest in hydrogen because it is the core competency of Altroleum, a London based software company that I founded.
Every deployment of technology to resolve climate change must be underpinned by some level of investment, and good data underpins good investments.
Altroleum is a building something akin to a ‘Bloomberg terminal for the energy transition’ – a software first experience for users to visualise and interact with data related to the energy transition.
We are building a class-leading set of data products to support the hydrogen sector, starting with daily hydrogen production cost assessments for geographies in Europe and North America for all well-established production technologies.
We target hydrogen developers, ancillary industries affected by the emergence of the hydrogen sector (mining, chemicals) and the financial sector (particularly those working on energy desks with some exposure to hydrogen, individuals interested in the ESG implications of the emerging hydrogen sector and commodity traders).
Would love to follow up and discuss any of this!