The state of play with hydrogen

TL;DR

• Hydrogen is an abundant resource that can provide energy for a range of industrial and domestic use cases including steel manufacturing, vehicles, heating, and cooking.  

• While hydrogen does not emit carbon itself, the process required to separate hydrogen from oxygen can produce harmful greenhouse gases.  

• Blue and green hydrogen are environmentally sounder than grey hydrogen, but also more costly as they respectively require carbon capture capabilities and electrolysis powered by sustainable fuel sources such solar and wind power.  

• Green hydrogen has the potential to decarbonise some of the world’s highest polluting industries such as steel. Companies like H2 Green Steel and Electric Hydrogen are pioneering examples in this space.  

• With investment, supportive government policies and development of infrastructure, hydrogen could move from a potential solution to a game changing contributor in the race to net-zero. 

The detail

With the effects of climate change already impacting communities worldwide, and the goal of achieving net-zero by 2050 moving ever-closer, it is crucial to reduce our reliance on fossil fuels at speed. Decarbonisation needs to accelerate across every sector of society, from the established industries like iron and steel to domestic spaces such as heating in the home. Not only do these alternative sustainable fuel sources need to be more environmentally conscious, but they also need to be affordable and, where possible, utilise existing infrastructure.  

Hydrogen represents a fossil fuel alternative that has the potential to transform the way hard to abate industries such as steel operate. Hydrogen is the most abundant chemical element in the universe, responsible for 75% of its overall mass and, when burned, does not release carbon. That said, when produced in bulk and converted into fuel using steam methane reformation, carbon is produced as a by-product.   

The use of hydrogen fuel can be traced back to 1839 when Welsh inventor, Sir William Robert Grove, developed the Grove Cell. However, it wasn’t until the 1920s that a usable level of power could be generated. NASA became involved in the 1960s, funding more than 200 research contracts to create smaller and more efficient hydrogen fuel cells over time. Today, hydrogen is predominantly being used in vehicles – China has the highest number of hydrogen fuel stations worldwide, followed by South Korea, Germany, and the US.  

The fuel of the future? 

Hydrogen can be harnessed as an energy source via electrolysis. This process uses electricity to split water into hydrogen and oxygen within a unit known as an electrolyser, of which there are two main types currently in use: alkaline and solid oxide.  

Alkaline electrolysis uses a liquid alkaline solution of sodium or potassium hydroxide, whereas solid oxide electrolysis cells (SOECs) use a solid ceramic material to selectively conduct negatively charged ions at elevated temperatures. Alkaline electrolysis is the more established process, but there are concerns about the quality of its output and many are switching to SOECs instead.  

Despite these two techniques dominating the market, pioneering companies like Electric Hydrogen are taking a fresh approach to the design and scale of electrolysers. Founded in 2020 and based in the US, the company has built a stack of electrolysis cells that allow hydrogen to be produced at a lower cost. A complete plant product of 100MW can be built and commissioned in three months, providing a more economical way forward for manufacturers of fertiliser, ammonia, steel, chemicals and fuels to decarbonise.  

The full colour spectrum  

There are three main types of hydrogen, defined by production process and their respective emissions: grey, blue, and green. Grey is the most common, created from natural gas or methane using steam methane reformation. Unfortunately, it is also the least environmentally friendly option as it does not capture any of the greenhouse gas emissions generated during the reformation process.  

Blue hydrogen is also predominantly produced from natural gas via steam reforming. Unlike grey hydrogen where the emissions generated are simply left to pollute the atmosphere, blue hydrogen employs carbon capture and storage (CCS) techniques to trap and store it. It’s considered a low-carbon source as, while it doesn’t eliminate the production of carbon dioxide, it does contain 85 to 90% of it.  

Green hydrogen is what most excites climate change activists and investors. This involves the production of hydrogen using sustainable electricity to power the electrolysis process. This creates pure hydrogen with no harmful by-products and could provide a solution to the industry’s biggest emissions challenges. However, it is also the most expensive type of hydrogen, costing upwards of $4 per kilogram compared to the $2 per kilogram price of blue hydrogen.  

If the cost of green hydrogen could be reduced, it represents an opportunity to decarbonise everything from vehicles and home appliances such as boilers, cookers and gas fires to steel, iron and chemical production. It can also be supported by the developing world – Africa has some of the world’s greatest solar, wind and hydropower potential, which could be channelled into sustainable electrolysis sites. The European Investment Bank estimates that Africa could have a green hydrogen production capacity exceeding 50 million tonnes per annum by 2035.  

Untapped potential 

And hydrogen fuel use is growing. In 2022 global use reached 95 Mt, a 3% increase year-on-year, while annual production of low-emission hydrogen is predicted to reach 38 Mt by 2030. Experts also predict it could be used to power a wide variety of things, from replacing coking coal in steel production to electricity generation. Airbus even believes that hydrogen is a more promising solution than most for air travel decarbonisation due to the amount of energy it can store by weight.  

Global governments are also invested. The European Union introduced a strongly pro-green hydrogen plan in July 2020, while the US and UK believe a switch to hydrogen heating could start to happen within the next 10 years. The US Department of Energy established the Hydrogen Earthshot initiative, which seeks to reduce the cost of hydrogen to $1 for one kilogram in the next decade, while the UK is investigating the benefits of blending hydrogen into natural gas. Currently, the UK only permits a 0.1% hydrogen blend to power homes, businesses, and industries but FutureGrid has been created to test the feasibility of concentrations up to 100% using existing gas transmission assets.  

Early results look promising. The HyGrid Project, launched in Long Island in 2021, is working to decarbonise the existing gas network and is expected to heat approximately 800 homes. In addition, increasing the concentration of hydrogen in the natural gas blend in the UK could have the same impact as taking two million cars off the road.  

Despite these positive domestic use cases, industry needs to embrace green hydrogen on a wider scale to have a long-lasting impact on international net-zero goals. Novel applications in heavy industry and long-distance transport currently account for less than 0.1% of hydrogen demand, but must account for a third of global hydrogen demand by 2030 if the 2050 scenario is to become reality.  

Hydrogen can be used in a huge variety of industrial applications, from iron purification to replacing chemical feedstocks in plastics and fertilisers – yet its use in these industries is virtually non-existent. Legislation can help. For instance, the Inflation Reduction Act’s 45V clean hydrogen production tax credit intends to offer a subsidy of up to $3 per kilogram of hydrogen, depending on its emissions production. However, governments can go further and help reassure investors by making commitments such as pledges to buy from clean steel manufacturers and by ensuring domestic use doesn’t drive up wholesale prices.  

H2 Green Steel is one example of embracing hydrogen to clean up the steel industry, which is one of the world’s most polluting sectors and responsible for 7% of global CO2 emissions. The company reduces CO2 emissions by 95% in comparison to traditional steel manufacturers and aims to produce five million tonnes of steel by 2030. Its process uses end-to-end digitalisation, procures its electricity from fossil free sources and uses green hydrogen instead of coal. It is achieving this at scale by building one of the world’s largest electrolysis plants within its steel production facility in Boden, Sweden. H2 Green Steel is a pioneer to watch, and while it is leading the way, the company needs many more competitors to follow in its footsteps to enact long-lasting change.  

A crucial moment in time 

Hydrogen is at an intriguing stage of its development. Its potential uses are understood, yet the widespread government support, infrastructure and investment have not been put in place at a high enough volume that makes it competitive. The Green Premium conundrum applies; investors must weigh up the cost of producing, storing and delivering clean hydrogen compared to the price end users are prepared to pay.  

It’s estimated that bringing down the cost of both blue and green hydrogen to a competitive level will require both government support and an investment of $150 billion over the next decade. Due to the size of hydrogen molecules, infrastructure improvements to existing methane pipe networks may also be needed before hydrogen can be rolled out at scale. Home appliances must also be updated to be hydrogen ready.  

Even so, it remains true that clean hydrogen produced at scale could help to solve the world’s most acute emissions challenges. Its global scope is also exciting. With investor and government support to ensure this type of alternative fuel is prioritised ahead of the traditional polluters, we could soon become used to powering our power plants, kitchens, cars and more with green hydrogen.   

— Lew 👋

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The Transition’s work is provided for informational purposes only and should not be construed as advice in any capacity. Always do your own research.