The number and scale of projects that use and manufacture green hydrogen, a gas that releases energy when burned without emitting carbon dioxide, is growing rapidly. If built according to plan, a €2.5bn (£2.18bn) subsea pipeline will transport “green hydrogen” from Spain to France from 2030.
In the US, some power plants are being upgraded to allow hydrogen to be blended with fossil gas, and Norwegian oil company Equinor is partnering with Thermal SSE to build an 1,800-megawatt “blue hydrogen” (MW) plant in the US. Great Britain.
Meanwhile, China unveiled a plan in March that calls for deploying 50,000 hydrogen-powered vehicles by 2025, and in early December, the first hydrogen-powered tractors and forklifts rolled off the assembly line at a new factory in Guangdong province. .
How hydrogen is produced
Hydrogen is produced in several ways. A color spectrum is used to simplify it. The “grey” and “brown/black” hydrogen comes from fossil gas (methane) and coal (coal, brown or black), respectively, a process that, for every ton of hydrogen, emits between ten and 12 tons of CO₂ into the atmosphere. gray hydrogen and 18 to 20 for brown.
“Blue” hydrogen has the same process, except that the carbon dioxide must be captured and stored underground. And “green” hydrogen is conventionally defined as generated by splitting water into hydrogen and oxygen using renewable electricity.
But only 0.04% of hydrogen is green, and blue hydrogen is less than 1%. The remainder is gray or brown in color, most of which is used in oil refineries and in the manufacture of ammonia and methanol. It’s a huge industry that emits more CO₂ than all of Great Britain and France combined.
High gas prices, opportunity for green hydrogen
A silver lining to today’s high gas prices is expected to see green hydrogen become a cost-effective alternative to dirty fuels in boilers, tankers and furnaces in steel plants. Unfortunately, without electricity market reform, this opportunity is likely to be wasted.
And as the buzz about the hydrogen economy intensifies, a closer look suggests that the fuel is less a spearhead for an ecological transition and more the object of an elaborate bait-and-switch operation by oil companies.
The True Colors of Hydrogen
green hydrogen
Green hydrogen is essential for decarbonisation: to replace fossil fuels in steelmaking, in the production of ammonia for fertilizers and possibly in maritime and road transport – processes that are difficult to electrify.
Some hydrogen green is shaded with dirtier tones. So, it’s not just that a lot of energy is wasted in its production in the double transformation of electricity into gas and then into fuel. But burning hydrogen also emits nitrogen oxides, air pollutants linked to respiratory disease and acid rain.
If green hydrogen production is scaled up to play an important economic role by 2050, its demand for fresh water will exceed a quarter of current global annual consumption, risking water shortages in some regions. Above all, hydrogen is only significantly green if the renewable energy that generates it cannot be fed into the grid to replace energy from coal or gas plants.
blue hydrogen
Blue hydrogen relies on a similar, but much more damaging trick of light. For hydrogen to be true, emissions must be captured and safely stored.
In theory, carbon capture and storage works, but nearly all plants use captured carbon to pump more oil, and many have shut down due to failures. Only a few store carbon indefinitely, and even these consume a lot of energy and capture only part of the CO₂ that can leak out.
The main source of blue hydrogen is methane, a powerful greenhouse gas that leaks from wells and pipelines. The investigation suggests that these problems make blue hydrogen worse for the climate than fossil gas.
The price of electricity, key to getting green hydrogen
In the EU, as in many economies, the price of electricity is based on the marginal cost principle, which means that the most expensive source (usually fossil gas) sets the wholesale energy price. During sunny or windy periods, an excess of renewable energy generation can drive down electricity prices, freeing them from the grip of natural gas prices for a few hours at a time.
This is often not enough to justify investments in electrolysers that produce green hydrogen. Green hydrogen will not gain the necessary price advantage over blue hydrogen and fossil gas until electricity markets are restructured.
Meanwhile, the high price of oil and gas accelerated the expansion of the industry. The US government is urging oil and fracking companies to “drill babies”. Britain’s government will grant more than 100 permits to drill for oil and gas, and colossal new investments in fossil fuels have been announced in the Middle East and Africa.
Fossil fuel companies and their transition
In a few years, when these new sources come online, and particularly if economic growth continues to slow and depress energy demand, oil and gas will be cheaper again, until the next price increase triggers new rounds of reversals and the hellish cycle continue. Owners of newly constructed wells, pipelines and terminals will struggle to defend these assets and prevent decarbonisation.
Now, fossil fuel companies are redefining themselves as “carbon stewards”. The aim is to prevent its assets from being stranded by repurposing them, presenting a largely fictional substance, blue hydrogen, as a low-carbon “bridge” to an unspecified green future.
Other sectors joined the oil-led coalition. As engineer Tom Baxter notes, gas network operators and boilermakers see their survival in this maneuver. Utilities are equally interested, as hydrogen’s inefficiencies allow them to sell more power.
Public policy is the key to enabling green hydrogen
Addressing this stagnant operation requires public policies. Governments will need to regulate or tax carbon out of the market while increasing renewable energy.
The approach to electricity pricing must also change, to decouple prices for electricity generated from renewable sources and fossil gas. The marginal pricing system greatly benefits renewable project owners as they benefit from high electricity prices and actually have zero input costs.
An alternative market structure would set rewards for generators according to their average costs plus a small surplus that could be reinvested in deploying more renewables and other green technologies, providing consumers with cheap electricity. This can only be achieved through a tightly regulated market or by nationalizing energy companies and fixing prices and production.
These interventions would give green hydrogen a competitive advantage over blue or gray variants, an advantage that could be promoted with other subsidies, such as tax credits in the Inflation Reduction Law In the US, in particular, demand for energy needs to be reduced to alleviate upward pressure on prices.
In any future power system, hydrogen will play a role. But its expansion must be carefully designed to keep the promise of green hydrogen from masking the risks of its blue and gray cousins.
By Gareth Dale, Reader in Political Economy at Brunel University London, and John Szabo, Fellow at the Center for Economic and Regional Studies and Assistant Professor at Eötvös Loránd University in Budapest.
