To meet its net-zero target by 2050 the UK will have to replace all fossil fuel sources. This is a sizable challenge when you consider that according to GridWatch, gas still accounts for almost 40% of UK power. Numerous alternatives will need to be utilised, and among them hydrogen is key.
Hydrogen can be burned to generate heat or turned into electricity with a fuel cell, while emitting no carbon at the point of use. It also has high energy density with long-term energy storage capabilities.
Not all forms of hydrogen production are equally net zero friendly, though. Currently around 95% of hydrogen is produced using fossil fuels. Grey hydrogen, the most common form, is created from natural gas using steam reformation, but without capturing the greenhouse (GHG) emissions made in the process.
Blue hydrogen is produced using methane but uses a different process, producing hydrogen with CO2 as a by-product. While Blue is a lower-carbon hydrogen than Grey, it still creates GHG.
Green hydrogen, by contrast, is produced without generating any GHG emissions. Electrolysers use an electrochemical reaction to split water into its components of hydrogen and oxygen. The process emits zero-carbon dioxide in the process as input power is renewable – for instance, solar. The question is, in which industries or sectors could Green hydrogen feasibly replace fossil fuels?
Switching to hydrogen
The most obvious beneficiaries are transportation, power and heating, and heavy industry. Lorries, buses, ships and planes will all have difficulty electrifying and hydrogen fuel cells offer a credible alternative.
For the power industry, the electrification of heating systems will require huge investment in equipment, grid infrastructure and storage to deal with demand variability. Hydrogen can reduce emissions by blending with existing natural gas pipelines; converting existing gas networks into hydrogen networks; or using fuel cells for combined heat and power.
Blending 20% of renewable hydrogen by volume will lower the carbon emissions associated with gas combustion by 7%. Given the lower energy density of hydrogen, the emissions reduction is not linear so the most efficient method is to replace the network and supply 100% hydrogen.
Numerous processes in heavy industry – such as steel and cement production – require high degrees of heating and combustion. Using electricity is either impractical or expensive. Burning coke to melt iron, for example, creates a chemical reaction that cannot be replicated with an electric furnace, but it could be enhanced with other combustible fuels including hydrogen.
However, as hydrogen is highly flammable, colourless and odourless, leaks are harder to detect than with other types of fuel. This means new users will need some reassurance about safe handling.
In the transportation sector, wider adoption of hydrogen will depend on pricing. Hydrogen is already used for material handling equipment such as forklifts.
Research from Bernstein estimates that hydrogen fuel-cell-powered trucks and buses will cost the same as diesel-powered equivalents from the mid-2020s. Trains and ships are likely to become competitive from the 2030s. Undoubtedly subsidies could help speed up adoption. In China, 10–20% of the initial vehicle cost of a hydrogen-powered vehicle is currently subsidised.
Across all industries, the costly production process relating to hydrogen power will hinder the speed and breadth of adoption. Reducing this cost will require significant and ongoing investment and innovation.
Lower renewable energy costs will be crucial to support a steep decline in the Green hydrogen cost curve. And Green hydrogen, rather than Blue or Grey, is the only way for making the decarbonisation credentials stack up.
While hydrogen is efficient when used for power, the process to produce it wastes a substantial proportion of electricity (30–50%) and some production methods are highly water intensive – not ideal in regions that are short of water.
To ensure Green hydrogen reaches critical mass in terms of usage and to be attractive on cost grounds, investment is required. Yet, the incentives to invest are not always powerful; many of the investible pure-play opportunities are currently unprofitable. But forward-looking investors will weigh up the risk against the potential future reward.
Fuel cell technology appears to be the most obvious opportunity, although it does require faith in future success. But is that any different to where wind or solar power were in the past? They are increasingly becoming cost-competitive with fossil fuels and have the benefit of receiving subsidies – the UK government recently announced a £265 million subsidy pot for renewable energy schemes.
From a geopolitical perspective, there is good reason, given recent oil and gas prices and supply issues, for many governments to prioritise energy independence. Hydrogen, along with wind, solar and tidal, is an attractive option.
According to industry lobby group the Hydrogen Council, in 2020 the EU and at least 15 other countries published hydrogen plans, often backed by subsidies, to help lower production costs. At least $300 billion is expected to be invested globally over the next decade by the public and private sectors. If this investment level happens, hydrogen, it is estimated, could provide almost one-fifth of global energy demand. So far only $80 billion has been committed.
No doubt the path towards the target of net zero by 2050 will be bumpy, with government advocacy and financial support not always as envisaged. Yet there is positive momentum. As the Hydrogen Council points out, not long ago the US government was on a different page on climate targets but the Biden-Harris administration has put the climate challenge back on the US agenda and clean energy deployment is making headway.
Perhaps the next few years will see a major scale-up in hydrogen usage to achieve the decarbonisation the world desperately needs.