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Shrinking Hydrogen Demand & Hydrogen Decarbonization Will Have Major Climate Benefits

The basics of physics and economics have a way of winning arguments against lobbyists eventually, so the hydrogen problem will be eliminated.

The hype related to a hydrogen economy continues, relatively unabated. The fossil fuel industry, the natural gas utilities, Hyundai, and Toyota continue to push the illusion that hydrogen will be a source of heating, transportation fuel, and energy in general, despite the basics of physics and economics. They are, of course, going to be proven wrong unless their heavy thumbs on the scales of policy force us down that expensive dead end.

Three months ago I published a heterodox scenario of hydrogen demand through 2100 (part 1, part 2, part 3). It showed hydrogen demand falling before rising somewhat again. The arguments I made were that hydrogen’s highest demand sectors were refinery use for manufacturing engine fuels, and in fertilizer, both of which had to diminish substantially through the middle of the century and beyond to meet climate goals. The argument for fossil fuels being eliminated is obvious, and in the case of fertilizer, the hydrogen component of it comes from fossil fuels, and when it is spread on fields much of it turns into nitrous oxides with global warming potentials 265 times that of CO2. Only steel manufacturing is a growth area for hydrogen in this projection, with most other uses staying flat or shrinking slightly.

Hydrogen demand by demand area through 2100

Hydrogen demand by demand area through 2100 projection by author

Since then, I’ve assessed a wide variety of critiques of my assessment, and the only substantive change was that hydrogen demand for refineries disappeared entirely by 2100. A correspondent, Ghassam Wakim, who worked with refineries in the Middle East and other regions before pivoting to renewables, provided insights into the non-fuel aspects of refinery production. Basically, non-fuel outputs from refineries produce some hydrogen as a byproduct, they don’t consume it. As a result, version 2.0 of my hydrogen demand projection, in addition to nicer formatting, has no hydrogen demand from refineries at all in 2100.

Hydrogen demand projection table through 2100

Hydrogen demand projection table through 2100 by author

However, as with my projection of aviation refueling through 2100, the important question is What are the impacts on CO2e emissions? For the purposes of this first blush assessment, I stayed solely with the scope 1 emissions associated with the manufacturing of hydrogen. Scope 2 and 3 emissions are critical, and in the case of both fossil fuels and fertilizers dwarf emissions from the hydrogen itself, but those are problems with different solutions.

At present, black and gray hydrogen from coal and natural gas account for over 99% of hydrogen manufacturing, with 20-35x and 8-10x as much CO2 as the mass of hydrogen resulting. It’s skewed to natural gas, so I chose an initial baseline of 15x, and trended that down to 4x through 2100, as whatever hydrogen comes from fossil fuels will be forced to deal with emissions for the most part. At the same time, fossil-fuel sourced hydrogen will drop in demand decade by decade until only hold-out, misanthropic regions still use it. Note that these numbers for scope 1 emissions from hydrogen manufacturing are by the author, and as such should be considered to include significant error bars, as with the projections of hydrogen demand through 2100.

Replacing it will be green hydrogen, currently under 1% of total supply, but growing to 99% of supply by 2100. Per work I did related to the Carbon Engineering DAC air-to-fuel boondoggle in 2018 and 2019, PEM electrolysis manufacturing of hydrogen would have a carbon debt of roughly 10x the mass of hydrogen created on grid electricity with 200 grams CO2e / kWh, a not unreasonable number for modern grids. That number will fall through 2100 as more and more renewables come on line, reaching 0.2x the mass of CO2e as hydrogen created. Hydrogen will become low-carbon, but it is only low-carbon from fully carbon-neutral electricity, and that’s not the global standard.

CO2e emissions from hydrogen through 2100

CO2e emissions from hydrogen through 2100 by author

The combination of shrinking demand through 2060 as we electrify transportation and shift away from fertilizer and decarbonization of hydrogen manufacturing as we shift to renewably powered electrolysis, and some faint hope ‘blue’ hydrogen production will cause the massive emissions from hydrogen we currently experience to plummet.

Millions of tons CO2e from hydrogen manufacturing through 2100 table by author

Millions of tons CO2e from hydrogen manufacturing through 2100 table by author

To put this in context, just manufacturing hydrogen today creates around as much CO2e as all global aviation in 2019. That sector will decline substantially in emissions through 2100 as well, but it won’t be doing it with hydrogen-powered airplanes.

Hydrogen is a very significant contributor to global warming when only scope 1 emissions are considered. When the emissions from fossil fuels stripped of sulfur are considered, emissions skyrocket. When emissions from nitrous oxides baked off of fertilizer spread on fields globally are considered, emissions skyrocket.

This is why hydrogen is a climate problem, not a climate solution.

We can only decarbonize hydrogen manufacturing slowly. Manufacturing green hydrogen somewhat economically — but still more expensively than when we are allowed to treat the atmosphere as an open sewer — requires running cheap electrolyzers at very high capacity factors with very cheap electricity.

Lazard LCOE for hydrogen current best case scenario

Lazard LCOE for hydrogen current best case scenario

Electricity available 90% of the time from renewables isn’t going to drop below $20 / MWh. Electrolyzers aren’t going to become so cheap that we give them away in cracker jack boxes, as Paul Martin likes to say. We aren’t going to be producing dirt cheap hydrogen from massive amounts of free renewable electricity 20% of the time. Among other things, the transmission costs still have to be paid for.

While McKinsey in one odd report projects that 2040 costs of hydrogen will be 15-20% of 2021 prices for fossil fuel-sourced black and gray hydrogen with no CCS, delivered and supercooled, that’s just a ludicrous assumption that ignores economics and physics. As a result, we’ll have an increasing ratio of green hydrogen displacing the problem area of black and gray hydrogen through 2100.

So there’s the bad news / good news story. Hydrogen is a problem today. It will be a problem for much of the century. However, by the end of the century, CO2e emissions related to hydrogen will be approaching zero. That projection rests on markets, industry, and policy makers eventually being rational about hydrogen of course, something which is in short supply today if you believe the press. But the basics of physics and economics have a way of winning arguments against lobbyists eventually, so the hydrogen problem will be eliminated.

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Written By

is Board Observer and Strategist for Agora Energy Technologies a CO2-based redox flow startup, a member of the Advisory Board of ELECTRON Aviation an electric aviation startup, Chief Strategist at TFIE Strategy and co-founder of distnc technologies. He spends his time projecting scenarios for decarbonization 40-80 years into the future, and assisting executives, Boards and investors to pick wisely today. Whether it's refueling aviation, grid storage, vehicle-to-grid, or hydrogen demand, his work is based on fundamentals of physics, economics and human nature, and informed by the decarbonization requirements and innovations of multiple domains. His leadership positions in North America, Asia and Latin America enhanced his global point of view. He publishes regularly in multiple outlets on innovation, business, technology and policy. He is available for Board, strategy advisor and speaking engagements.


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