The Inflation Reduction Act (IRA), along with Canadian, EU, and other jurisdictional policies, are incenting a transition to green hydrogen, albeit in different ways and with often foolish use cases. If governmental money is a thumb on the scale, they should be insuring that the hydrogen actually is green. From that perspective, three terms become important: additionality, temporality, and locality. They aren’t in the debate for heat pumps or EVs, but are in the debate for hydrogen.
First, a reminder. Above is my updated projection for hydrogen demand through 2100. I’ve been iterating this perspective for a couple of years, adding a time perspective to Michael Liebreich’s hydrogen ladder, along with some judgments about what is more likely to be the outcome. A few things are obvious and contrarian. The first is that total hydrogen demand is going to decline through this century, in my opinion. That’s because hydrogen as manufactured and used today is a global warming problem on the scale of all of aviation globally, so it must be addressed.
Current consumption is about 120 million tons a year, including about 30 million tons of syngas used as a feedstock for various industrial processes, including direct reduction of iron (DRI) steel-making processes. The biggest consumer by far of hydrogen today is the oil industry, which uses about 38 million tons per year in refineries to desulphurize crude oil. As peak oil demand arrives this decade most likely, the highest sulphur crudes will be off the market first, including Alberta’s and Venezuela’s products, as they are more expensive to process and refine compared to the lighter, sweeter crude that’s close to water that the world still has a lot of. With much less high-sulphur crude being refined, hydrogen demand plummets.
The next biggest point of consumption is for manufacturing ammonia, almost entirely for fertilizer. That’s about 30 million tons a year, and it’s a major source of greenhouse gas emissions when manufactured and when applied to fields, where it turns into N20, a greenhouse gas with a global warming potential 265 times that of CO2 and one that persists in the atmosphere for a very long time. As we move forward, solutions in hand — continued movement of subsistence and small hold farmers to better livings in cities, precision agriculture including with drones, agrigenetics to maximize nature-based nitrogen fixing in the soil, and low-tillage agriculture to maximize soil carbon capture — will significantly reduce the need for ammonia-based fertilizers.
The only significant growth area I project for hydrogen is in steel manufacturing, where my projection through 2100 only sees a 30 million tons per year requirement for DRI processes, including HYBRIT’s pure hydrogen method.
While the oil and gas industries and gas utilities are attempting to make hydrogen for heating, hydrogen for transportation, and hydrogen derived e-fuels a thing to replace the current natural gas and petroleum derivatives used for energy in those cases, my projection does not include those. Heating will be electrified, with heat pumps doing the heavy lifting. All ground transportation will electrify, short haul aviation will electrify rapidly with increasing range every decade, and all inland and two-thirds of near shore shipping will electrify, with only the longest marine and air journeys requiring burnable fuels. And those fuels will be biofuels, not e-fuels.
The job is to fix the black and gray hydrogen demand we have today, not invent new uses for hydrogen where it’s a bad fit, but without a massive demand increase in demand for hydrogen, there will be no need for blue hydrogen from fossil fuel reserves, so they’ll become valueless, hence the intense efforts to push the square peg of hydrogen into so many round holes.
But as we shift to manufacturing the already massive amounts of low-carbon hydrogen we’ll require, we have to make sure it actually is lower carbon, and here’s where a head-scratcher enters the equation. Why do we have to think of it differently than we think of EVs and heat pumps, which are two primary wedges for decarbonization?
The first point to think about is where the hydrogen will be manufactured. Right now, about 85% of all hydrogen is manufactured at the point of consumption. Ammonia plants have steam reformation units fed by a natural gas pipeline on the facility, so that the hydrogen can be moved directly into the Haber-Bosch process without having to store, compress, or distribute the hydrogen. Oil refineries do steam reformation of natural gas in the refinery grounds for the most part to avoid having to store, compress, or distribute it. These processes turn natural gas (or coal) into hydrogen in the amounts required for their industrial uses at the times when the hydrogen is required. That’s because hydrogen is very expensive to store, compress, and distribute. The market has clearly spoken on this subject, and hydrogen becoming green doesn’t change those dynamics.
As a result, in the future we’ll see a high-power electricity distribution line and water pipe running to ammonia-manufacturing plants, where electrolyzers will turn the water and electricity into hydrogen in the volume required when it is required for manufacturing ammonia. Hydrogen won’t be manufactured 1,000 km away and trucked or piped to the facility.
And that means that in most cases, hydrogen will be manufactured with electricity from our shared grid, not in some off-grid location in the wilds somewhere. That makes it just like EVs and heat pumps, but we mostly don’t argue about additionality, temporality, or locality when we talk about those electrification use cases, and it’s worth teasing out why not.
Paul Martin, of the Hydrogen Science Coalition, and I discussed these concepts this week in the context of my new podcast channel, Redefining Energy – Tech, a sub-channel of the great Redefining Energy podcast run by two European cleantech investment bankers. If you’ve enjoyed my occasional hosting on CleanTechnica’s CleanTech Talks podcast, please follow my new podcast.
What is additionality, and why is it important? Additionality is a concept that touches on multiple parts of decarbonization, including offsets and electrification. I was introduced to the topic by Mark Trexler, a global offsets expert. The premise is simple: if you aren’t adding new clean solutions or energy, but instead are just claiming that something that already exists should give you credits for greenness, you aren’t doing much. In offsets, it’s like claiming that an existing forest that you aren’t cutting down is a new positive thing, as opposed to something existing that you are rebranding. And in green hydrogen, it’s ensuring that the green electricity required comes from a new wind or solar farm instead of just diverting green electricity from one end point to another end point.
Temporality is different. As I’ve pointed out, hydrogen can be green, but it can’t be cheap without big subsidies from governments. That’s because you can’t just build a wind or solar farm and run electrolyzers part of the time. Electrolyzers remain very expensive, are only one of about 28 components in a major electrolysis facility, and storage and compression and distribution costs add up quickly. If a facility is buying wind energy and running the electrolyzer only when the wind is blowing at that wind farm, then it’s adhering to temporality requirements, but the cost of hydrogen skyrockets as the capital cost of the electrolysis plant is not being spread across sufficient kilograms of hydrogen, so each becomes more expensive. Given the capital cost, owners of the plant will want to run it as close to 24/7/365 as possible, which means that they require firmed electricity, which typically will mean buying wind and solar electricity, and having behind-the-meter storage. And that means grid costs for electricity, not wind or solar PPA costs. As I noted when analyzing the recently abandoned Norwegian liquid hydrogen for shipping fuel facility, even at the average $58 per MWh industrial cost of electricity, the hydrogen would likely have cost $9.30 per kg undelivered.
Locality is the last concept. What it means is that buying electricity from a remote wind or solar farm while running electrolyzers on a grid where all additional power will come from coal or natural gas is a shell game. If you have an electrolysis facility in coal-heavy Indiana with its 748 kg CO2 per MWh, then it doesn’t much matter if you are buying wind from a wind farm in Montana. All the electricity the facility consumes will be additional to Indiana’s demand load, and will most likely be met by burning more coal, for a net negative outcome.
So why is green hydrogen different than heat pumps or EVs? The first reason is that EVs and heat pumps provide massive emissions reductions over the solutions that they displace, except on the filthiest of grids. EVs are up to 80% efficient from electrical generation to wheel, and heat pumps are 2-5 times as efficient at delivering heat as gas furnaces, so it’s hard to find a grid in the developed world where either is worse than burning gasoline, diesel, or natural gas. And all grids are becoming lower carbon over time, so grids that were out of the running on heat pumps, such as Alberta’s when it was at 790 kg CO2 per MWh, are now lower carbon for heat pumps, as shutting down coal has put them under 600 kg CO2 per MWh.
The second is that EVs and heat pumps are used a lot less often than the very expensive electrolysis facility would be. Personal vehicles often sit parked for 95% of the year, and many fleet vehicles don’t have much more usage. Heat pumps in hotter climates are barely used in the winter, and in colder climates are rarely used in the summer, with both typically experiencing spring and fall low usage. By comparison, the capital cost of electrolysis facilities require them to be run as close to 24/7/365 as possible.
Personally, I’m a bit torn on this. I’ve been advocating that building electricity demand in this century with EVs and heat pumps inevitably leads to more wind, solar, transmission, and storage being added to the grid, which benefits everyone. And the additions are low and diffuse, so demanding putting green electricity before electrification doesn’t make sense. Why is electrolysis different?
Well, if it’s displacing a natural gas feed for steam reformation of hydrogen in front of the Haber-Bosch process for ammonia on a clean grid where wind, solar, and hydro are currently being curtailed due to lack of demand, it probably doesn’t. There just aren’t that many places where that’s true. And if it’s on a grid like Washington state or the province of Quebec, where the electricity is plentiful and very low carbon, it probably doesn’t matter.
And if a company is paying for the electrolysis out of their own pocket because it makes business sense, and the grid will decarbonize around it, that’s also fine, although the firm should be careful about overstating their green credentials.
Where it becomes problematic is if green hydrogen is being subsidized or incentivized by governmental money. In that case, the government shouldn’t be rewarding firms for emitting more CO2 when they are coloring outside of the lines of additionality, temporality, and locality. And governments really shouldn’t be subsidizing foolish uses of hydrogen, which is to say all the ones that expect it to replace fossil fuels as an energy source. That latter ship has sailed in the US, it seems, but the latest news out of Europe makes it clear that they are starting to pay attention to the fantasy of hydrogen for energy in a useful as opposed to starstruck way.
The most recent example of that was the news this week that Germany has called the bluff of the natural gas utilities which were pretending that they are going to have fully hydrogen pipelines and no natural gas pipelines for heating in time for the country to meet its emissions targets. How did Germany call their bluff? They introduced a bill that would allow gas utilities to promote and install hydrogen-ready boilers and appliances if the utilities would commit to providing a firm plan in 2024 that would arrive at 100% hydrogen in all buildings and homes by 2035. The gas utilities, of course, said that this was completely impossible, exposing their busted flush for all to see.
Where, when, and how electricity is generated for hydrogen matters if we actually want to address climate change. Inventing new uses for hydrogen before replacing existing ones is mostly a bad idea. Governments shouldn’t be rewarding firms that are actually emitting more CO2e just because they are making hydrogen.
UPDATE: We reached out to the Hydrogen Science Coalition (HSC) with the following questions, to which Paul Martin, a
co-founder of the organization, replied:
Q: Do the EU’s green hydrogen policies and plans align with the Hydrogen Science Coalition’s empirically driven requirements for low-carbon hydrogen?
A: At best, partially. HSC has clear principles that we agree on, listed on our website. While we are encouraged that EU policy seems to be moving away from the use of hydrogen as a replacement for natural gas, and is at least somewhat skeptical of the (absurd) use of hydrogen as a fuel for light vehicles (cars, light trucks, etc.), there are many aspects of EU policy in relation to hydrogen that are not consistent with our principles. We’re particularly concerned that the “hydrogen backbone” is a road to nowhere, that the “hydrogen hubs” do not focus on the obvious need to replace fossil-derived, high CO2e emission hydrogen in uses durable post-decarbonization, etc.
Q: Do the USA’s green hydrogen policies and plans align with the HSC’s empirically driven requirements for low-carbon hydrogen?
A: The US IRA subsidizes hydrogen production basically irrespective of the sense of the intended use case, or lack thereof. This will hopefully generate some low CO2e clean hydrogen for appropriate use cases, but it will also waste billions pushing hydrogen into inappropriate use cases. See our principles for more details of what we think are appropriate and necessary and defensible use cases for hydrogen, and which cases we think are inconsistent with good public policy in relation to decarbonization.
Q: Is there a jurisdiction in the world that aligns with the HSC’s empirically driven requirements for low-carbon hydrogen?
A: There might be, but we’re unaware of one.
We see most hydrogen use being proposed in response to the wrong question. The question being asked is: “We can’t burn fossils any more — what else can we burn?” whereas the question should be: “We can’t burn fossils any more: how do we move people around, heat and cool our homes, provide food in quantity and variety etc., without using fossils as fuels?” When the right question is asked, the answer is very rarely “Make hydrogen and burn it as a fuel.”
One of the reasons HSC was founded was the founders’ concern that interested parties were lobbying governments worldwide in ways contrary to what we saw as the interest of rapid, economically sensible decarbonization. Many parties who are either in a direct financial conflict of interest, and many others who are in a position of moral hazard in that they profit from the attempt to build a “hydrogen economy” whether the attempt succeeds or fails, overwhelm the public discourse and flood the media with their project announcements, reports, press releases etc. Politicians worldwide then naturally feel a “fear of missing out” on what seems like “the next big thing”. We felt it was necessary to form a group of people with knowledge about hydrogen and its use cases at a high level, but who were free of such conflicts of interest, who could offer opinion on the basis of what we know about these issues from the basis of science, engineering, and economics. Our view is that hydrogen is itself a massive decarbonization problem, with GHG emissions greater than those of the aviation industry. We should therefore focus on “greening” hydrogen itself, in all uses for hydrogen that are durable post-decarbonization, rather than fantasizing about a future where there is excess low GHG hydrogen to waste on inefficient use cases which could be decarbonized by other means.
There is also much talk about hydrogen being the tool for “hard to decarbonize sectors,” but it seems to us that “hard to decarbonize” is taken as meaning, “whatever use case we think we can make money selling hydrogen into.” Science is clear in our view: the truly hard to decarbonize sectors are few, and many of them are also not served well BY hydrogen.
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