The A to Z of the Energy Transition: H is for Hydrogen

No surprises of the topic for H*. But it is with some trepidation that I write on this subject, as few energy-related topics have been as polarised, with often an over-simplified view that one is either 'pro' or 'anti' hydrogen. This intuitively has never seemed sensible. We are talking about the lightest element, not a football team. I will confess that I am neither pro or anti hydrogen, just pro seeking the most effective ways to accelerate the energy transition - in which hydrogen has a role to play for sure.

Just a few years ago it felt like hydrogen was the biggest theme of the energy transition. The term 'hydrogen economy' was top of every energy conversation, with forecasts of 500 - 800 MTpa (millions tonnes per annum) of hydrogen demand by 20250 predicted by Energy Transition Commission (ETC-Global-Hydrogen-Report) and of similar orders of magnitude by many others. Hydrogen was seen as playing a role across many end uses - industrial use, heavy-duty transport, to aviation, shipping, heating and more. Some quoted that around 20% of end-use demand would be met by hydrogen by 2050.

Over the last year or so there has been a long list of shelved hydrogen projects and sharp declines in growth forecasts. I'll discuss what happened in a moment, but first some broader context...

Hydrogen, its many colours and how it's used today

To anchor the discussion it's worth starting with hydrogen's role today.

Globally we use around 100 Mtpa (million tonnes per annum) of hydrogen. The largest single use is in refining, where it is used for hydrotreating (to remove sulphur) and hydrocracking (to break heavy crude oil into lighter fractions), followed by ammonia production, which has many chemical uses but is predominantly used in fertiliser. Current hydrogen production is predominantly derived from coal and gas (black, brown and grey), accounting for around 2% of global emissions of CO2. In fact less than 1% of hydrogen today is 'clean'. According to the Energy Institute Statistical Review of World Energy, installed capacity for green hydrogen production at the end of 2023 stood at 148 kilo tonnes per annum and contributed just 0.1% of global demand. So whilst hydrogen is synonymous with clean energy, the vast majority today is anything but clean.

What is most important to recognise is that the emissions associated with different colours of hydrogen vary enormously. Green hydrogen, assuming the electricity is 100% renewable, is effectively zero emission (at the point of production), blue hydrogen is highly dependent on the proportion of CO2 captured and stored (through CCUS), but done well can achieve reductions of around 95%, but clearly black and grey hydrogen release significant levels of CO2 - greater than just using the coal or gas as a fuel in the first place. And yellow hydrogen depends on the intensity of the electricity grid from which it's produced.

Much energy-transition focus has been on green and blue hydrogen but more recently there's been increased interest in naturally occurring white and gold hydrogen. There are differing views on the potential of the resource base and still a lot of uncertainty on their commercial viability and how such deposits would be produced and brought to market. Definitely one to watch.

Hydrogen and its many colours. Source: author, based on multiple other sources

So what happened to all those forecasts and projects ?

I've followed the hydrogen sector pretty closely for nearly a decade, observing the build up of a 'hydrogen bubble', with many planned projects and increasing capital flows. Over the last year or two this bubble has deflated, at first slowly and more recently much more rapidly. The forecasts cited just a few years ago of 500-800 Mtpa have reduced dramatically, for example with the Energy Transition Commission Chair, Lord Adair Turner, stating that 'closer to 350 MTpa' by 2050 being a more realistic outcome.

Multiple projects have been cancelled, including Ørsted's green hydrogen to e-methanol project in Sweden (Ørsted scraps flagship European green fuels project - FT) and Equinor's blue hydrogen project, which had planned to export to Germany (Norway's Equinor scraps plans to export blue hydrogen to Germany - Reuters.

There have also been multiple municipal hydrogen bus fleets, which have either been cancelled or 'paused', including in Montpellier, Oslo, and Hamburg - in most instances electric buses have prevailed as the solution. And various trials of home heating have been shelved, although one is still planned in Fife, Scotland.

Why has this happened? In my view there are at least four key reasons:

1. Hydrogen's double-edged sword is that it is so versatile. It can be used as feedstock, a fuel, stored as a liquid or gas, converted to electrons and back into hydrogen, if required. This meant that it was seen as a solution to all manner of applications - some suitable, some less suitable and some (frankly) really unsuitable. Just because something can be used for a job doesn't mean it should be used.
2. Costs: forecasts just a few years ago predicted rapid falls in clean hydrogen costs, particularly for green hydrogen. The holy grail was seen as $1/kg. These projections were based on optimistic learning curves on electrolysers (which to some degree is happening) but also access to low-cost (or even free if curtailed) electricity. On both these points progress has been slower than many hoped. Today (and it's quite hard to get green and blue hydrogen price data because so little is produced), we're at more like $6/kg for green and $3/kg for blue (both of these have wide error bars). National Energy System Operator have built some great models for calculating hydrogen prices under different scenarios: Levelised cost of green hydrogen - National Energy System Operator
3. Practical, operational and safety considerations: as the lightest and 'leakiest' element, hydrogen is not a simple product to transport and store. For many projects this has added complexity and cost. And whilst hydrogen can be handled safely on a refinery or process plant, there are both real and perceived risks around its use closer to the general public. And one lesser-know fact about hydrogen, is that it is itself an indirect contributor to global warming if released into the atmosphere (with a 100 year Green House Warming potential of 11.6 according to this paper from Nature Magazine A multi-model assessment of the Global Warming Potential of hydrogen - Communications Earth & Environment)
4. The whole energy transition landscape has faced headwinds in recent months, from softening of political will to tackle climate change, to the ending of support from incentives such as the Inflation Reduction Act, in the US. Large energy companies have also faced pressure from investor to refocus capital on their core businesses. And in this respect, hydrogen has faced similar challenges to other renewable projects.

How do we figure out what hydrogen should and shouldn't be used for?

There's been a LOT of debate on what roles hydrogen should and should not play. I don't intend to go through sector by sector but rather set out some guiding principles to consider:

1. Replacing the existing ~100 MTpa of black, brown and grey hydrogen should be prioritised over and above new applications. This tends to be the relatively low-hanging fruit, plus it can be carried out where there is already infrastructure and expertise in handling hydrogen, such as on refineries.
2. "If it can be electrified, it should be electrified", paraphrasing Emma Pinchbeck FEI, the CEO of the UK's Climate Change Committee. In most applications where direct electrification is possible it is by far the most efficient way of decarbonising - even if the electricity supply is not 100% renewable.
3. Merit orders provide an important lens by which to consider which applications are best suited. I can think of at least three dimensions to consider: i) What is the most techno-economic efficient solution for any given use application ? ii) What is the most valuable use-case for hydrogen? iii) What is the opportunity cost of using green electrons (in the case of green H2) versus direct use of those electrons. The answer to these questions will vary by geography and through time as costs change. But in the UK the Climate Change Committee stated in their most recent 7th Carbon Budget that, '...we see no role for hydrogen in buildings heating and only a very niche, if any, role in surface transport'. This is not based on ideology, it is based on the engineering and economics. Many of you will be familiar with a oft-referenced Hydrogen Ladder from Michael Liebreich.
4. Efficiency matters but don't forget about efficacy. An electric container ship may be more efficient than its hydrogen equivalent, but if it only has a range of 500 miles it won't be practical. So in more expensive-to-abate sectors, such as shipping and aviation, there are multiple trade-offs to balance to optimise solutions. It is likely we will see a range of electrical, bio-based and hydrogen-derived solutions (such as methanol or ammonia). Similarly, it is hydrogen's ability to be stored in large volume, which may see it play a significant role in low-term storage for the electricity systems. And of course there may be more niche uses, such as creating e-fuels for vintage cars which owners want to keep on the road and won't mind paying more to fuel, given their infrequent use.

There is so much more that I could write on the use-cases for hydrogen but also plenty of other resources you can access including this Nature Magazine paper, published just two days ago: Realistic roles for hydrogen in the future energy transition - Nature Reviews Clean Technology

Making hydrogen a practical reality

For the roles that hydrogen will play it's critical that industry creates the technical good practices and know-how to ensure it is operated safely and efficiently. The Energy Institute is actively working with a diverse range of energy companies, regulators and academics, creating guidance on a broad range of guidelines, including hydrogen plant design and asset integrity. You can find out more here: Hydrogen - Energy Institute

And the Energy Institute also recently published its Energy Essential Guide to Hydrogen, which sets out other practical considerations.

Hydrogen - Energy Essentials: A Guide to Hydrogen

So what next?

All of the above said, there should be NO doubt that hydrogen DOES have an important role to play in the energy transition. It is encouraging to see a refocusing of attention and investment in predominantly industrial areas, which are challenging to otherwise decarbonised. Earlier this month 27 hydrogen projections were shortlisted from UK HAR2 (Hydrogen Allocation Round), many of which are focused on decarbonising existing industrial processes such as Hynamic's project to provide green hydrogen to ExxonMobil's Fawley refinery in Hampshire.

And what about those forecasts? Maybe we should worry less about whether it's 200, 350 or 800 Mtpa by 2050 and focus first on replacing the existing 100 Mtpa of black, brown and grey hydrogen, by which time we'll have a far clearer idea on where hydrogen is most suited for other applications. That doesn't mean we shouldn't experiment and learn but let's focus on tackling the right problems with the right solutions, rather than solutions seeking problems to solve.

*Well done if you read this far. For anyone who is disappointed that I didn't cover hydropower or HVDC don't worry, these will be covered further down the alphabet.

Further reading:

There's no shortage of further reading on hydrogen and here are a few recent articles from the Energy Institute New Energy World magazine, with thanks to Will Dalrymple our Senior Editor.

The white gold rush: 40 companies now in pursuit of natural hydrogen

Hydrogen capacity rises – but questions remain about slow pace

Green hydrogen projects take two steps forwards, one back

North Africa set to lead in global green hydrogen development

UK government pledges nearly £22bn for carbon capture and hydrogen

Balancing supply and demand is key to kickstarting the green hydrogen sector

Europe’s green hydrogen industry has arrived