Bursting the hydrogen bubble

Hardly a week goes past without a company announcing ambitious plans to produce green hydrogen. But are these projects realistic?

Listen to a discussion on the folly of using hydrogen as a fuel in the transport, heating and power generation sectors and the sectors where H2 has an important role. Is hydrogen a panacea for the green transition, or a vehicle for greenwashing?

Guests: 

• Paul Martin, Spitfire Research Consulting
• Jan Cihlar, Managing Consultant, Guidehouse

Transcript

Richard Sverrisson, Editor-in-Chief, Montel: 0:05

Hello listeners and welcome to the Montel Weekly Podcast, bring You Energy Matters in an informal setting. Today's pod investigates a hot topic hydrogen, by which I mean primarily green hydrogen. Hardly a week goes by without announcements of several hundred megawatts of electrolyzer capacity or plans to produce a huge amount of greed, hydrogen by 2030 or 2050. But will these plans see the light of day? Is green hydrogen the key to unlocking the net zero puzzle, or is it the last hurrah of the fossil fuel industry? In particular, I'd like to discuss the use cases. In what sectors does green hydrogen make sense and where does it not? Joining me, Richard Sverrisson, to discuss this and much, much more are Paul Martin consultant with Spitfire Research. A warm welcome to you Paul.

Paul Martin, Spitfire Research Consulting: 0:52

Hello

Richard Sverrisson, Editor-in-Chief, Montel: 0:53

and Jan Cihlar of Guidehouse, a consultancy. Great to have you too.

Jan Cihlar, Managing Consultant, Guidehouse: 0:56

Glad to be here. Hello.

Richard Sverrisson, Editor-in-Chief, Montel: 0:58

Every week we see almost, see a new project, a green hydrogen project be announced in Europe and beyond. Now what's your view here, Jan? Will we see these projects that are in the pipeline? Will they actually be realized?

Jan Cihlar, Managing Consultant, Guidehouse: 1:10

I think many of them will. And what a lot of these projects we're waiting for, or the investors and the project developers were waiting for is the regulatory framework for them to actually come into place. I think many of your listeners will know that the European Commission released the draft proposal for the gas decarbonization package, and also a couple of other important regulatory proposals. So once the clarity is on the table and once for some of these projects, of course, a subsidies state aid type of things can be also linked to them. You will see the first fis the final investment decisions actually starting to be signed. Up until now, I think there was a lot of announcement, very little actual on the ground things happening, but I think that might start changing soon.

Richard Sverrisson, Editor-in-Chief, Montel: 1:50

The European Commission plans to have five gigawatts of electrolyzer capacity installed in Europe by 2024. And 40 gigawatts by 2030. Is that correct?

Jan Cihlar, Managing Consultant, Guidehouse: 1:59

Yep. That's in the 2030 Europe European hydrogen strategy. Indeed. And up to 10 million tons of renewable and low carbon hydrogen by that date as well.

Richard Sverrisson, Editor-in-Chief, Montel: 2:07

And you think this is feasible? This is, seems very ambitious.

Jan Cihlar, Managing Consultant, Guidehouse: 2:10

Yeah. It seems very ambitious. It depends a little bit from IVU. What do you assume are the lead times for these electrolyzer large scale electrolyzer plans to be installed? So depending on who you talk to, this might take up to seven years. We are in 2022 now. There is lots of plans but just to get all the permitting done and to actually make all the, necessary preparations, that will take quite some time. So I think we might hit it if things start rolling now. But yeah, that really depends on how fast some of these things can get undersigned.

Richard Sverrisson, Editor-in-Chief, Montel: 2:36

Paul I know you are based in Toronto, but we have a, maybe a little bit of a European bubble here, but what's your view of these very ambitious plans that are, announced by global firms often?

Paul Martin, Spitfire Research Consulting: 2:45

I'm seen as a hydrogen skeptic and. I'm not a hydrogen skeptic at all. I'm a hydrogen as a fuel skeptic, so my concern here is not with the making of green hydrogen, which I think is wonderful and I encourage it. My concern is the wasting of any green hydrogen that we may happen to wait make for purposes that don't make sense, like trying to replace natural gas as a fuel. The real uses for green hydrogen, the appropriate uses, the no regret uses for any green hydrogen we may happen to make, are not uses of hydrogen as a fuel. They're uses of hydrogen to replace black hydrogen. I don't go for these euphemisms, by the way. There's no such thing as gray or brown hydrogen, all hydrogen in the world right now. Substantially all of it. Is black. It's 30% at bare minimum blacker than the fossil fuels that it's made from without carbon capture. And that's the reality of hydrogen today. Hydrogen today is a massive decarbonization problem that we haven't even scratched the surface of solving, and yet we have people frothing at the mouth, hyperbolizing about future uses of hydrogen as a fuel. When they haven't even replaced the hydrogen that's necessary as a chemical in the marketplace yet. So I think we're getting ahead of ourselves. I think we have to be very careful about that. I also think we have to be very careful about confusing wishes or desires, or. Possible future outcomes with real earnest decarbonization effort.

Richard Sverrisson, Editor-in-Chief, Montel: 4:23

Two, three years ago, hydrogen, green hydrogen or hydrogen even was hardly talked about in the move to decarbonize Europe's energy systems. But now it seems to be a very hot topic, as I mentioned in the intro. What's your view here, Jan? Why the sudden attention on green hydrogen?

Jan Cihlar, Managing Consultant, Guidehouse: 4:39

I interpret this in the following way. I think that the narrative, how to decarbonize and the question was always 2050, right? So it was the end state where. In Europe, we started saying, Hey, we wanna be net zero. And that's a euphemism by the way as well, the net zero. But let's assume that we wanna be net zero from climate perspective by 2050. And I remember the discussion a couple of years ago when the essential main stream of thoughts was let's electrify absolutely everything. Let's electrify transport, let's electrify building heating, even the high industrial heat demand. And then let's just decarbonize power. Okay, problem solved. But then some smart people started looking into how that would actually, what that would mean for, say, the electricity network, right? So both on the transmission and distribution level. Is that even feasible to get there with the amounts of electricity that would've to be deployed? And many people concluded that seems to be quite unrealistic, including ourselves, by the way. So we started looking for, say, what else could we actually do there? How could we make this efforts to be more maybe feasible by 2050, but also generally how do we make it more efficient? One of the big things that pop up, we actually started originally with with biofuels. So we, in Europe our studies quantified the maximum sustainably sustainable feedstock production for biofuels. So biotin and bio liquids. And then on top of that, we tried to analyze how much other renewable gases could we potentially use in a cost efficient manner in the system. And I think that's what touches what to, to what Paul already said before. So there is some hierarchy to how you wanna use these gases, and that goes both for the biogas or bio liquids and for the hydrogen green hydrogen that you produce. So that's the way that we have been thinking about that. And I think, yeah, many people now also recognize that might be actually in the end the more feasible and more effective way to reach the net zero target by 2050.

Richard Sverrisson, Editor-in-Chief, Montel: 6:22

When you say there are limits to electrification, what do you mean there, Yan? What in particular? Why do you see that as a, as an issue here?

Jan Cihlar, Managing Consultant, Guidehouse: 6:29

So if you look at, for instance, the distribution networks in the countries that I know quite well that's Netherlands and Germany, the biggest problem right now is that they are completely ed. And a lot of that has to do with with residential solar. But overall we will have to essentially massively reinforce the lines on distribution level everywhere debt. Issue gets, of course reinforced. Once you start having a electric vehicle in almost every household, unless then you have something like vehicle is a grid operation that gets even more reinforced if you have heat pumps everywhere. The numbers are staggering, right? So we are using more than 2000 tet hours a year of natural gas right now to heat our homes. That's really a massive number, and we need to somehow deliver a part of that energy still to the homes. Of course you would want to insulate them much better than they are now. Heat pumps are more efficient, but still just the reinforcement that would need to be done on the distribution system are massive. And to some extent, the same thing has to happen on the transmission level. If you look at the current resistance towards that, and by that the not in my yard type of resistance. It's massive in many European countries already, and we are nowhere near of being where we need to be. So that, that's where I come from.

Richard Sverrisson, Editor-in-Chief, Montel: 7:37

Maybe we can turn to discuss the electrification later, Paul, but hydrogen, green, hydrogen as a fuel. You mentioned you are you're, you are, you're strongly skeptical to this. It's being touted as perhaps an answer in the transport sector, but that seems to be very, you've been very critical of that.

Paul Martin, Spitfire Research Consulting: 7:53

Absolutely. So the problem here, as I mentioned, is that hydrogen is a massive decarbonization problem as opposed to a decarbonization solution to much of anything. And the numbers that were being bandied about there certainly decarbonizing by making the grid the primary source of energy is a huge effort, but it's actually been done. If you look at the growth in electrical distribution and production between the 1950s and the 1970s, the effort is really on that order. We've just been used to low growth for a long time. The other thing that's going on here is that there's quite a sunk cost fallacy happening where people are saying there's a natural gas infrastructure that exists. Why not use it? Because that means we'll have to do less with the grid. And the problem is you can't use the transmission infrastructure for natural gas for pure hydrogen. You just cannot do it. You need to replace basically the entirety of the high and medium pressure transmission infrastructure, the pipelines that carry the gas long distances between countries, for instance, and all of the compressors in the network. The distribution piping that carries gas from the street to each individual home, that stuff would probably be fine with hydrogen. But again the challenges here with hydrogen as a fuel, especially for heating, but also for transport, are that hydrogen is neither efficient nor effective as a heating fuel. Let me explain to you what I mean by that. So we gladly and gratefully trade efficiency for effectiveness when that's an option for us. And the perfect example is the gasoline car. Gasoline engines are small. Gasoline engines are not very efficient at all. They're on the order of 25% thermally efficien. But gasoline as a fuel is so effective. You can pour it from a container and the energy density per unit mass and per unit volume is extremely high. It's a liquid at room temperature, et cetera, et cetera. It's just a wonderful, effective fuel, except of course, for the fact that. Fossil greenhouse gas emissions that are generated when it's combusted are just not feasible to com to collect from each individual vehicle as it drives down the road. So the problem with hydrogen is that it's neither efficient nor effective. The, there are too many steps in the process of making hydrogen transmitting and storing it and then converting it back into mechanical energy or electricity again, and the cycle efficiency as a result of each of those steps being multiplied. One by another. The resulting efficiency chain is very poor. An absolute best case to convert electricity to hydrogen and then store it even in the most perfunctory way, not even transmit it anywhere, and then convert it back to electricity. The very best case is 37%. So round numbers feed three kilowatt hours in, get one kilowatt hour out. That's a very bad battery, isn't it? Certainly seems like a very bad battery to me. And then on top of it, you have this ineffectiveness. So the energy density per unit volume is very low. Considerably lower than the fuels we're used to. And for transport, honestly, cars and light trucks that ship sailed. Battery electric vehicles are a much, much better option. They are adequately or more than adequately effective. And they're three times as efficient. So you know that ship sailed and I am confident that it will go the same way for heavy trucks. And then you're left with aircraft jet. Aircraft hydrogen's a terrible fuel choice for jet aircraft because jet aircraft have to push their fuel through the air. So how big the fuel is, its energy density per unit. Volume matters greatly to how much cargo and how many passengers an aircraft can carry. You're left with ships, and honestly, ships are the extremely troublesome, but they're going to decarbonize last, and this is the thing that really irritates me about the whole discussion is that there's all this focus and I think an inordinate focus on these hard to decarbonize sectors when there are easy to decarbonize sectors right in front of us, and electric vehicles are the perfect example of that. Total cost of ownership is actually lower for an electric battery, electric vehicle today than for a gasoline or a diesel vehicle. And any decarbonization benefit that is achieved comes to the owner of that vehicle at a negative cost. So it's so obvious we should be pursuing that aggressively instead of worrying about what are we going to do about home heating, for instance, which is a much longer term thing.

Richard Sverrisson, Editor-in-Chief, Montel: 12:34

Even despite the problems in the distribution grid?

Paul Martin, Spitfire Research Consulting: 12:37

Yeah, the problems of the distribution grid, as I mentioned, it's very similar to the problems of the distribution grid between the 1950s and the 1970s. If we were presented with the problem of going from 1950s grid infrastructure to 1970s grid infrastructure today, we'd throw up our hands and say, it's impossible, but it happened. We did it.'cause we were motivated to do it.

Richard Sverrisson, Editor-in-Chief, Montel: 12:59

Before I turn to Jan and your views on the use cases for green hydrogen, if I can stick with viewpoint, there's a big, not a million miles away from here in Sweden lot's been made of using green hydrogen in the manufacturer of steel. Now what do you make of that?

Paul Martin, Spitfire Research Consulting: 13:12

That's a great use case for any green hydrogen we might happen to make. And the reason for that is that hydrogen is not being used as a fuel, it's being used as a chemical reducing agent. In fact, it's being used to replace synthesis gas, which is a mixture of hydrogen and carbon monoxide that's made largely from natural gas. Where actually 10% of hydrogen production in the world right now is used for that purpose, for the direct reduction of iron ores to iron metal in the form of what they call hot perque iron. So it's an existing use for hydrogen that we would be replacing with pure hydrogen. It's a great use case.

Richard Sverrisson, Editor-in-Chief, Montel: 13:51

You mentioned decarbonizing black hydrogen or, the, fossil fuel. So are there any other such use cases?

Paul Martin, Spitfire Research Consulting: 13:58

Absolutely. Ammonia is the most important one by far. By far. We are so dependent on ammonia. Literally half the people on earth would not be here if it wasn't for Haber pos ammonia. If you were to look at the nitrogen atoms in your, the proteins in your own body, half of those came from Haber Bosch. Half of those came from the process by which we take hydrogen and react it with nitrogen from the atmosphere to make ammonia, and then we make chemicals like urea and nitrates and so on, which we use as nitrogen fertilizers for the growing of food. And while we must reduce how much of those nitrogen fertilizers we use by being better at agriculture, that's something we must do because there's also greenhouse gas emissions of nitrous oxide that are generated by that use. I like eating. I don't think we're, I don't think we should really be worrying about what kind of fuel we're using in Porsches so much as how we're going to continue to eat in a decarbonized future. And as a consequence, that's the focus of. That's gotta be the focus of any green hydrogen we make. But I think it's a it's really important to look at how huge a challenge just decarbonizing hydrogen is, because I don't think people really have a perspective on that. And it's actually a very simple little bit of math. So right now we make about 120 million tons of hydrogen per year between pure hydrogen and synthesis gas hydrogen. And of that, perhaps 90 million tons will be needed in a decarbonized future because 30 million tons will no longer be needed because they're being used to des sulfur fossil fuels before we burn them. So in the future we'll need 90 million tons of hydrogen between pure hydrogen and synthesis gas and to make that using electricity at 50 kilowatt hours per kilogram, which is a really exceptionally good electrolyzer would take 4,500 terawatt hours of electricity. And in all of the world in 2019, which are the most recent figures that I have, we only made 2100 terawatt hours of wind and solar in the entire world. So just the effort to make black hydrogen green would take a doubling of wind and solar relative to 2019 and then some, and that would actually amount to, if you use that, those electrolyzers. At 50% capacity factor because the wind doesn't blow and the sun doesn't shine continuously. You would need a thousand gigawatts of electrolyzers. And these factories that people are building now, they're touting potential capacity to make one gigawatt of electrolyzers per year. So you see it, I, it just boggles the mind that people are concluding that we're going to have excess green hydrogen lying around to waste as a transport or heating fuel. When just the task of greening that black hydrogen that we depend on for our very lives through ammonia and the like, would take such a tremendous investment. It's just premature by decades and decades.

Richard Sverrisson, Editor-in-Chief, Montel: 16:57

What's your view here, Jan where do you see the use cases?

Jan Cihlar, Managing Consultant, Guidehouse: 17:00

There is a lot to impact it here, I think. Sure. Yeah. Let's start from the beginning. I think. I think, I do not disagree of course with Paul that there are clear use cases in, in industry to decarbonize the current, say black hydrogen usage. Just that should be the first use case obviously. And I think very few people are very few reasonable people are debating that. One of the interesting future increases in demand could indeed come from the steel industry and that will be the primary production route for steel. Unless we really fully can move to re steel recycling, which is unlikely. We'll need some kind of reducing agent. And hydrogen looks like the most promising. There's multiple projects that have been announced already in Europe that are pursuing that path. Maybe you saw that a couple months ago in the HI project in Sweden, they actually made the first ingot produced Exactly. Just using hydrogen in the DRI setup, so that, that's quite clear. And that's indeed this already tremendous amount. But in Europe, and I can just talk from the European perspective here. We already plan have more than half of that black hydrogen replaced by green by 2030. So it's not decades away. It's now. And there are concrete plans from the European commission and from the nation governments to reach that target and maybe even go beyond that. Now beyond industry, you talk transport and I think there I personally agree that I don't really see hydrogen being used in fuel cells in, in passenger vehicles or in and when trucks. I think that, or buses maybe even that is probably a very fringe use case. But in terms of airplanes, not hydrogen directly, but synthetic fuels we will have to, if you wanna continue flying there are two decisions. And I think Paul, you often say that as well. There are two decisions, so either we are gonna all stop flying. Okay? Option one or option two, we have to find some very expensive sustainable fuel. And that could be either biofuels or it could be something like a synthetic kerosene that's made of hydrogen. Both of these production routes require green hydrogen input or hydrogen input. The synthetic kein route much more actually. Extreme amounts if you would like to just fully run the current airplanes. On, on, on yeah. A decarbonized Fuel and maritime is the other one that you mentioned. And there are already concrete plants from several of the shipping operators in Europe, and they have started investing into, again, synthetic fuels. So the biggest one that they're exploring is synthetic methanol. And I must disagree that this is some, I understand where you come from, that this should be something that be decarbonized lost because that makes logical sense. But these ships are built, are being built for decades. They're being built for 50 years. So if you don't start now, if you don't start switching now, we are gonna be too late. And there is a problem to that obviously, that in the short term we might just not have enough of those green fuels and all that. That's something that we have to take, I think into consideration and we have to have also the long-term view in mind. And that goes with all of these things. So if we for instance, say if there is any decision that we would like to have these systems ready for hydrogen by 2050 at a large scale we have to start now. Maybe we are already a bit late. I'll just finish off maybe with the two other big demand segments. The buildings, I think it's extremely complicated and nobody really knows the answer to that, how exactly to decarbonize, especially building building heating, demand heat pumps seems to be, of course, the more effective and efficient solution there. What we have been exploring quite a bit is also what we call a hybrid heat pump setup. Where in some of the hard to insulate buildings, you keep actually the existing natural gas boiler, but then you feed tane into the gas grid instead of natural gas, and that compliments the heat pump. And then the big question really for me is what do you do with the power system itself, especially in terms of long-term energy storage? In Europe, the experience in the last couple of months I think the largest VIN drop that has been here at least since I have been looking at the figures, meaning that in inventor where energy demand of course, is very high. We had almost zero vin for weeks and weeks on and we had of course no sun whatsoever. So I think that this really clearly shows us that we have to find a way how to bridge multiple weeks of very low end wind and sun production across Europe. It was really across Europe. So we will need to find something a an yeah, a medium that can help us store very large amounts of energy for multiple weeks. And yeah. So I'm curious how else then if something like that, we would do that.

Paul Martin, Spitfire Research Consulting: 21:05

Two quick points. First of all, I agree 100% that. Aircraft, the logical solution there. There are only two. It's either biofuels or it's eels. So fuels that are made from hydrogen, honestly, that's what e fuels really are. They're not made from electricity. They're made from hydrogen that's made from electricity. Biofuels make a lot more sense at much, much lower cost to jet aircraft passengers. So I think they're the logical choice there. And if we're going to use hydrogen, green hydrogen for aircraft, it's going to be to increase biofuels yields. As far as shipping is concerned, the problem is that shipping already using the cheapest garbage fuel, fossil fuel that they can buy, the cost per ton mile of shipping is basically 40 to 60% fuel cost. And as a consequence, they're extremely cost sensitive. Now, if regulatory controls or taxes can force the shipping industry to decarbonize, it's going to do so at greatly higher cost. And so that's the trouble that I see here. By all means, make ships dual fuel as Maersk for instance, has done with with eight ships to great fanfare. But let's be realistic, those ships are going to run on fossil fuel because it's greatly cheaper. For as long as the regulatory program will allow them to do and they're only going to transition to a much, much more expensive fuel per JUUL or BTU or whatever unit of energy you wish to use when they're forced to, because the economic imperative will drive them to use the cheapest fuel that they possibly can. Otherwise, they're going to be considerably economically disadvantaged relative to their competition who don't care about climate change.

Richard Sverrisson, Editor-in-Chief, Montel: 22:48

A fascinating discussion. Gentlemen, I'd just like to round off by asking you, Paul, a lot has been made in Europe, especially given the situation that Jan mentioned in terms of the very low wind output that we've seen this winter combined with the gas crisis. There's talk of hydrogen ready gas fired plants. And what do you make of this? You've said before that a lot of the industry here or the hydrogen industry is selling us a fossil fuel with a thick obscuring, coats of greenwash. Is this an example of that, would you say?

Paul Martin, Spitfire Research Consulting: 23:18

I think it, the answer to that is yes and no. So I think you, you really would have to be a naive person to imagine. The fossil fuel industry, and particularly the fossil fuel distribution industry. Those people that are making a living right now distributing natural gas to consumers, see hydrogen as anything other than an existential thing for their future. They require it, otherwise they'll have to pack up and find something else to do for a living. So they're gonna sell you hard on the notion that hydrogen is something that they can deliver and in fact, that they can even make from fossil resources without making too much greenhouse gas emission. They're gonna sell you hard on that that possibility and dual fueling or fuel blending, blending hydrogen into natural gas to marginally improve its greenhouse gas emissions. Those are strategies of the fossil fuel industry to prolong its existence, and in fact, to delay real decarbonization in my opinion. Recalling that we were talking a moment ago about the cold, dark, calm periods when there's no wind in the middle of the winter and the solar panels are covered in snow. Those conditions are very real and you need stored fuels for that purpose. It's absolutely necessary. There's no way batteries are anything else like that. We'll cover those two week periods. So if you're going to store fuels, it makes logical sense to store fuels that. You already have access to. As an example, if we burn even fossil natural gas for two weeks a year, we've already dealt with the global warming problem largely, and that seems to me to be the least expensive and most practical alternative for dealing with the cold, dark, calm period. The other alternative, the thing that people are talking about is the possibility of making hydrogen in the summer for use in the winter to store it all the way through season. The challenge is that even when you make hydrogen continuously at as high a capacity factor as you can using electricity as your starting material, it's expensive due to the fact that the electrolyzers cost a lot of money, and if you only use them infrequently, the contribution of the cost of that capital per kilogram of hydrogen is too high. And then if you only use them half the year because you want to store the hydrogen made in the summer for use in the winter. It just doubles that cost. So the cost to reduce a very small amount of emissions. Emissions that happen only two weeks a year. Could be very high. And so I, I don't really see that as a good way to to proceed. And I think much a due has been made about the cold, dark, calm periods more so than perhaps they deserve in terms of actually being a decarbonization problem.

Richard Sverrisson, Editor-in-Chief, Montel: 25:55

Keeping gas, fire plants on for in reserve for just those two weeks is also not cheap, I'd expect.

Paul Martin, Spitfire Research Consulting: 26:01

Absolutely you're dead right? Anything that we do for that two week period. Is not going to be cheap, but we have to do it. And as my good friend used to say about his the way he had to be very careful about how he ate because of his type two diabetes. Life is easy when you have no choice. So our choice is we have to store fuels. We have no choice. The question is not whether we have to do it. The question is, which feels

Richard Sverrisson, Editor-in-Chief, Montel: 26:27

absolutely, and thank you gentlemen for a fascinating discussion once again and being guests on the Montel Weekly podcast this week. Listeners, you can now follow the podcast on our own Twitter account, aply named The Montel Weekly Podcast. Please direct message. Any suggestions, questions, or, let us know if you think you have a good idea for a guest on the show, you can also send us an email to podcast@montelnews.com. Lastly, remember to keep up to date with all that's happening in energy markets on Montel News. You can subscribe on Apple Podcasts and Spotify or wherever you get your podcasts from. Thank you and goodbye.