Green hydrogen's time has come, say advocates
eying post-pandemic world
Nina
Chestney, Kate Abnett
LONDON
(Reuters) - Hydrogen has long been touted as a clean alternative to fossil
fuels. Now, as major economies prepare green investments to kickstart growth,
advocates spy a golden chance to drag the niche energy into the mainstream of a
post-pandemic world.
FILE PHOTO:
The new Febus hydrogen bus is seen before a presentation in Pau, France,
January 14, 2020. REUTERS/Regis Duvignau/File Photo
Green
hydrogen was pushed to the fore last week when Fatih Birol, head of the
International Energy Agency, said the technology was “ready for the big time”
and urged governments to channel investments into the fuel.
Some
countries, including the Netherlands, Australia and Portugal, have already
begun investing in the technology. Now investors, politicians and businesses
are pushing the European Union and others to use its post-crisis recovery plan
to support hydrogen in areas like trucking and heavy industry.
The promise
of hydrogen as a fuel to help power vehicles and energy plants has been a
talking point since the 1970s, but it is currently too expensive for widespread
use. Proponents say infrastructure investment and more demand from transport,
gas grids and industry will bring the cost down.
Most
hydrogen used today is extracted from natural gas in a process that produces
carbon emissions, which defeats the object for many policymakers. But there is
potential to extract “green” hydrogen from water with electrolysis, an
energy-intensive but carbon-free process if powered by renewable electricity.
EU
officials, one of whom described green hydrogen as the “holy grail”, said it
could replace fossil fuels in sectors that lack alternatives to align
operations with the EU’s Green Deal plan to reduce net emissions to zero by
2050.
“Hydrogen
could solve a lot of problems. We need everything else as well but the
political interest is because to achieve deep energy efficiency and
decarbonisation, hydrogen seems relatively easy,” said Jesse Scott, senior
advisor at think-tank Agora Energiewende.
“It is less
alarming (for policymakers) than some other elements for meeting net zero,” she
added, such as carbon removal technology for example.
HYDROGEN
GAINING MOMENTUM
Momentum
appears to be building; EU industry chief Thierry Breton met hydrogen companies
online this week to discuss the bloc’s recovery from the pandemic.
“We could
use these circumstances, where loads of public money are going to be needed
into the energy system, to jump forward towards a hydrogen economy,” said
Diederik Samsom, who heads the European Commission’s climate cabinet.
This could
result in hydrogen use scaling up faster than was expected before the pandemic,
he added.
The
European Commission has earmarked clean hydrogen - a loose term which can
include gas-based hydrogen, if fitted with technology to capture the resulting
emissions - as a “priority area” for industry in its Green Deal.
Over the
past year, several governments, including Germany, Britain, Australia and
Japan, have announced or have been working on hydrogen strategies and the pace
has picked up over the past month during the pandemic.
This week,
Australia set aside A$300 million ($191 million) to jumpstart hydrogen
projects. Portugal plans to build a new solar-powered hydrogen plant which will
produce hydrogen by electrolysis by 2023.
The
Netherlands unveiled a hydrogen strategy in late March, outlining plans for 500
megawatts (MW) of green electrolyser capacity by 2025. A German hydrogen
strategy is expected later this month.
The Dutch
government is pushing for the EU to follow suit and present an “action plan”
for clean hydrogen, a spokesperson told Reuters.
CAN IT
BECOME AFFORDABLE?
When it
comes to transport, hydrogen fuel cells trail electric batteries in the push
for greener cars, given their higher price and the lack of refuelling stations.
But proponents see potential for heavier vehicles.
Daimler and
Volvo Trucks unveiled plans last month to bring hydrogen fuelled heavy-duty
vehicles to market within the decade.
Hydrogen
gas is already used in industry to produce ammonia, which goes into
fertilisers, and methanol, used to make plastic.
A major drawback
of the green hydrogen that governments are most interested in, is that it
requires a large amount of renewable electricity to produce. The good news is,
renewables prices have fallen sharply in recent years.
According
to Bernstein analysts, hydrogen made from fossil fuels currently costs between
$1-$1.8/kg. Green hydrogen can cost around $6/kg today, making it significantly
more expensive than the fossil fuel alternatives.
However,
increased demand could reduce the cost of electrolysis. Coupled with falling
renewable energy costs, green hydrogen could fall to $1.7/kg by 2050 and
possibly sub-$1/kg, making it competitive with natural gas. Higher carbon
prices would also encourage the shift.
“Clean
hydrogen produced from electricity is around three times more expensive than
that from natural gas, but solar and wind costs have decreased in recent years
and if they continue to fall, clean hydrogen produced with lower electricity
costs would become more affordable,” said Philippe Vie, global energy and utilities
lead at consultancy Capgemini.
“On
hydrogen we are right now where we were with renewables in 2000-2005. Ten to 15
years is probably a good time lapse to become competitive,” he added.
MAJOR MONEY
NEEDED
Any serious
attempt at large-scale use - either in industry or transportation - would also
require major infrastructure investments. For example, power from an offshore
wind farm would need to be connected to an electrolyser that produces the green
hydrogen, which would then need to be transported to end users.
Europe has
around 135 MW of electrolyser capacity, but planned green hydrogen projects
could bring that to 5.2 gigawatts, according to consultancy Wood Mackenzie. But
many projects hinge on further investment partners or subsidies, which
advocates fear will be scarcer in the COVID-19-induced economic slump.
“Investments
that would have been foreseen to be done now are not made because production is
delayed,” Jorgo Chatzimarkakis, secretary general of lobby group Hydrogen
Europe, told Reuters.
To help
lower costs, several projects are being worked on across the gas
infrastructure, industry, mining and energy sectors.
Royal Dutch
Shell and Dutch gas firm Gasunie unveiled plans in February to build a mammoth
wind-powered hydrogen plant in the northern Netherlands, capable of producing
800,000 tonnes of hydrogen by 2040.
In Germany,
oil refinery Raffinerie Heide is embarking on a project using excess wind
energy and abundant water supply in the region to produce hydrogen to make
kerosene.
“The price
of hydrogen we pay for now is four times natural gas from an external source
fed through the pipeline and produced 30 km away,” said CEO Juergen
Wollschlaeger.
A big fear
for companies in the hydrogen industry is that they will be unable to take
advantage of the unique opportunity presented by vast economic stimulus
packages, and that governments will favour supporting traditional high-carbon
fuel sectors that have been hit hard by a collapse in energy demand.
“For us,
that will be the question to be answered in the next weeks. Will the carbon
fuel industry succeed in convincing the officials to support them?” Bernd
Hübner, chief financial officer at German green hydrogen start-up Hy2gen said.
Reporting
by Nina Chestney and Kate Abnett; Additional reporting by Sonali Paul in
Melbourne and Aaron Sheldrick in Tokyo; Editing by Pravin Char
Our
Standards:The Thomson Reuters Trust Principles.
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