Musings on COP, Part 1: Hydrogen Hype Friday

By Wendel Hortop, Senior Strategy Analyst at Open Energi

Whilst up in Glasgow I’ve been wanting to write a blog on the debate between hydrogen vs. long-duration energy storage for the provision of clean, long-duration flexibility, inspired by some recent conversations on the topic.

Therefore an invitation to a session on Friday titled “Is hydrogen the fuel of the future” seemed like a great opportunity to pick up some ideas around the hydrogen side of the argument. There was a good panel too, with Greg Jackson (CEO of Octopus) and Darren Jones MP amongst others, including a member of John Kerry’s staff.

‘Hydrogen Hype Friday’

Upon listening to most on the panel however, I get the impression that I was completely wrong in even considering it a debate worth having. In fact, it feels like the very solution to climate change itself is already in our grasp, with claims of $3/kg green hydrogen (i.e. produced by renewable-fed electrolysis) in the next few years, and targets of $1/kg clean hydrogen by 2030 bringing the promise of “Cheap, Clean, and Dispatchable”, the holy grail of clean energy. Upon leaving, I catch sight of a sponsored wrap-around on the FT declaring “Dear fossil fuel industry, green hydrogen is exactly the solution you were hoping we would never find”. Then, as a final hurrah, come across a huge advert in central Glasgow that evening proclaiming “Hydrogen: Fuel of the future”, by none other than INEOS (at this point the glean started to wear off). All in all, that’s a lot of hype.

The Reality Check

Whilst green hydrogen may well end up being the holy grail of clean energy, it seems a bit of a leap from where we are now. In fact today the hydrogen industry is actually instead a significant contributor to climate change, given the overwhelming majority used is produced via steam methane reforming (aka grey hydrogen), a process which releases CO2 into the atmosphere (and quite a lot of it – 900Mt of CO2 in 2020 according to the IEA). Just replacing current demand entirely by zero-carbon hydrogen in 2030 would be a massive win, let alone producing enough excess to power our transportation, heating, or electricity grids in any meaningful way before the end of the decade. To-date there is perhaps up to 100GW planned for development by 2030. If the entirety of today’s hydrogen demand, 90 Mt in 2020, was to be replaced by green hydrogen it could require over 1,000 GW of electrolyser capacity – and the renewable capacity to supply it.

The reality is we’ll need any and all zero-carbon resources to meet net-zero by 2050. Hydrogen very may well become the fuel of the future, however we have to pursue all realistic options at the same time. If we overhype technologies today over others which are still viable, we will just see slower progress and inefficient decisions. Taking another example from hydrogen, if fuel cell vehicles had been declared the winner of zero-emission transport in the 2000s, we would never have developed battery electric vehicles to the point that they are now dominating the passenger vehicle space and leading the decarbonisation of transport (with massive benefits for stationary storage too). Again, not that hydrogen won’t end up being the solution – it just has to prove itself first.

The Geopolitical Angle

The most interesting outcome from the session for me was the realisation (perhaps obvious) that in a hydrogen economy its very likely we will see the market dominated by just a few regions and players, those with the lowest cost of production, just as we see in the oil market today. Saudi Arabia itself is already developing a huge 2GW electrolysis plant, powered entirely by some of the plentiful renewable energy available in the country. Whilst oil production is constrained by where the resource is and can most cheaply be accessed, production of green hydrogen just needs renewable resource (most likely wind and/or solar) and space. Given economies of scale will likely dominate, the regions with the highest combination of these two factors will win out – so large fossil fuel players such as Saudi Arabia, Australia, and the US, but also potentially some new players, such as Chile. The promise of this in the future probably helps to explain why we see such a push for the hydrogen economy today.