What we knew before.
The following aspects of hydrogen have been explored before.
Rystad Energy predicted two years ago that liquid hydrogen will find a place at the 2050 table but only account for 7% of the total clean energy needed. This 7% is a clean-fuel niche for hard-to-abate aviation, ocean vessels, and cement and steel industries.
Liquid hydrogen has two big advantages: one, the energy is contained in a dense form. Two, it burns in air to water with no carbon emissions.
Hydrogen is well-suited for production by large oil and gas companies because they already know how to produce and distribute another gas — natural gas — and they have deep pockets.
What we know now.
DNV in their annual report1 at the end of 2022 estimated that liquid hydrogen will fill only 5% (not 7%) of clean energy needs by 2050.
As Bloomberg Green have written, there are reasons why hydrogen has not gone mainstream yet, like wind and solar have. One is cost: green production by electrolysis of water is expensive and electrolysis is an inefficient technology.
Two, blue hydrogen is not climate friendly. While it is cheaper than green hydrogen, blue hydrogen requires energy to produce and break down methane into hydrogen plus CO2, and the CO2 needs to be disposed of, usually by CCS (carbon capture and storage). Both ends of the hydrogen production chain handicap the “clean” in this hydrogen alternative.
Three, most machines and industries aren’t adapted to use hydrogen. It’s an extra cost to rig up a conventional car to burn hydrogen instead of gasoline, or to adapt machines in an industrial shop to burn hydrogen instead of natural gas.
Hydrogen is a natural fit for oil and gas companies because of their vast experience in natural gas but also because they made enormous profits in 2022, and can afford to take a risk on new ventures.
Gloomy cost predictions for hydrogen.
A recent article provides excerpts from DNV’s Energy Transition Outlook1 2023. The main points are:
· To reach 5% of global clean energy demand by 2050 will cost over $7 trillion for production including new ammonia terminals plus pipelines.
· Most of the hydrogen will be used in manufacturing.
· Hydrogen and ammonia together will make up about half of the global shipping fuels, one of the hard-to-abate categories.
· More than 50% of global hydrogen pipelines will be repurposed from natural gas pipelines.
· Latin America and the Middle East and North Africa will become exporters of hydrogen or ammonia as they have large territories available for renewable energies like wind and solar to make hydrogen by electrolysis.
· In Europe, big countries like Germany, France and Spain will have 2030 targets of 4-6.5 Gw of domestic hydrogen production.
· The UK with its large network of gas pipelines will be able to switch from natural gas to hydrogen.
· EU plans include 6 Gw of electrolyzer capacity by 2024 shooting up to 40 Gw by 2030.
Is hydrogen being oversold?
So is hydrogen being oversold? Even though hydrogen fuel creates more excitement than solar or wind, 7% of the clean energy total forecast for hydrogen in 2050 is a pretty small percentage of the total. Add to this the excessive costs predicted to bring hydrogen online makes it tempting to admit that hydrogen is being oversold as a silver bullet clean fuel for 2050.
Let’s take a look at hydrogen activities in a few countries, some of which the oil and gas industry are involved in.
Hydrogen plans in the European Union (EU) versus U.S.
Total global production of hydrogen is about 90 million tons per year now. The IEA (International Energy Agency) predicts this will need to increase to 180 million tons per year by 2030 to achieve net-zero carbon emissions by 2050.
Nearly all of about 10 million tons per year hydrogen produced now in the U.S. is used by industry for refining petroleum, treating metals, producing fertilizer, and processing foods.
But most of today’s production, 99%, is blue hydrogen that is not carbon-free, as described earlier. Green hydrogen is produced by electrolysis of water and is largely carbon-free, if powered by renewable electricity.
The EU has been quick to adapt to electrolysis for green hydrogen, largely carbon-free. But the EU has been slow to respond to the massive hydrogen investments provided by the U.S. Inflation Reduction Act (IRA) which directs a whopping $369 billion to green energy programs.
Globally, the article says, only 1% of planned hydrogen projects, amounting to 1 Tw (Terrawatt), have begun construction. About a quarter of this, 269 Gw (Gigawatts) will be online by 2030. The growth will feel like a revolution, since today’s hydrogen production is only 0.45 Gw.
It also forecasts that the cost of green hydrogen will fall from 6-8 euros/kg today to below 3 euros/kg by 2050.
Hydrogen hubs in the U.S.
As well as the usual advantages of infrastructure concentration, the concept of hydrogen hubs is to offset the danger and costs incurred in transporting hydrogen, which is highly combustible, over large distances.
The U.S. Congress appropriated $8 billion from the Infrastructure Act of 2021 for the DOE (Department of Energy) to support at least four demonstration projects involving hydrogen producers, end-users, and the infrastructure connecting them. DOE has already funded an eye-popping 400 projects in hydrogen by Universities, national labs, and industry and the new hubs will lean on this information.
Full-funding applications were due in April 2023. Four private alliances, as well as many state governments allied with industry, and some allied with other states, have applied. Initial DOE funding is not to exceed $1.25 billion per hub, which is a huge amount of money. They expect to select 6-10 regional hubs with combined funding of $6-7 billion.
One hub is called the HyVelocity Hub centered along the U.S. Gulf Coast, and organized by ChevronCVX -0.6% and several private company partners including ExxonMobilXOM -0.9% and Mitsubishi. They would be leveraging on a network of 48 hydrogen production centers (the largest in the world) plus 1,000 miles of dedicated hydrogen pipelines along the Louisiana and Texas coasts.
One goal is to solve DOE’s challenge, called the Hydrogen Shot, of making 1 kg of hydrogen while emitting less than 2 kg of carbon dioxide. Another goal is to reduce the cost of hydrogen by 80% — to $1/kg within 10 years.
Programs such as the above have captured the attention of industry across the U.S. Tax credits offered by the IRA could generate $100 billion in clean hydrogen production – on top of the $8 billion that Congress appropriated from the Infrastructure Act.
Other hydrogen hubs that need to be watched have been summarized very briefly by Reuters Events2. Their list includes:
The Trans Permian and Horizons Clean Hydrogen Hub: has strong link to West Texas oil and gas.
HyBuild Los Angeles
The HyGrid Project
The HALO Hydrogen Hub: The states of Arkansas, Louisiana and Oklahoma have a long history of producing and transporting oil and gas liquids.
The Advanced Clean Energy Storage hub
The Southwest Clean Hydrogen Innovation Network
The Southeast Hydrogen Hub
Most of these projects involve energy utilities or non-profit city or state sponsored projects and many have built in university support.
DOE’s call for projects received 79 applications2, but just 33 of these were invited to move on to formal applications by April 2023. The final selection of less than 10 hubs will be in the second half of 2023.
It’s clear that stakeholders across the nation have captured the hydrogen vision. The U.S. has committed to a hydrogen future and wants to lead the world in this transition.
In a future article, we will describe the activities of particular oil and gas companies in hydrogen production.
The hydrogen vision is an ambitious one — because it’s hard to produce, dangerous to store and transport, and expensive.
The low carbon version of hydrogen is called green hydrogen, which is expensive, because it’s an inefficient process based on electrolysis of water. Essentially all of the current hydrogen production is blue hydrogen but this has high-carbon disadvantages at the beginning and end of the generation process.
But hydrogen is not a silver bullet. A hydrogen industry may take a large bite out of the 5-7% hard-to-abate emissions of the world’s energy by 2050, but the biggest chunk of total emissions still remains: 93-95%.