Companies competing to claim hydrogen market while doubts over the future remain
Post AuthorPatrick Lavery
Combustion Industry News Editor
The Financial Times has published an article looking at the ‘race’ to scale-up hydrogen, giving an interesting overview of efforts to develop the industry and also the commercial considerations at play. Most current use of hydrogen is in ammonia production, oil refining, and methanol production, but Morgan Stanley forecasts the market to quadruple by 2050 to US$600 billion annually, with use being shared between power and industry, transport, chemical manufacturing and construction.
Governments across the world are committing support to develop the use of the gas, with an estimated US$150 billion (€125 billion) having been pledged, a turning point being the UK government’s 2019 decision to set in legislation a 2050 net-zero greenhouse gas emissions target (the first major economy to do so). ITM Power, the UK-based maker of electrolysers, has seen its share price rise by an incredible 2000 percent over a few years, a (perhaps exaggerated) reflection of growing belief in the future of the energy vector.
The great hope is that green hydrogen, produced from renewable energy, will eventually become cost competitive with other energy vectors as deployment expands, research and development intensifies, and scale is achieved. Currently, ‘green’ hydrogen accounts for only 1% of all hydrogen produced, but, in the words of Ben Gallagher at energy consultancy Wood Mackenzie, “you cannot get to the 2C target without low carbon hydrogen” (speaking in reference to the baseline target of the Paris Agreement), though this of course also includes ‘blue’ hydrogen produced from fossil fuels and carbon capture and storage. Oil and natural gas majors are some of the biggest supporters of hydrogen, seeing in it a means of business growth with the future of oil somewhat uncertain, with possible stagnation or decline in demand. Estimates of how much hydrogen might make up of the future energy mix are rough, but range between 10-20%, a highly significant amount.
Steel making is another sector which is beginning to embrace hydrogen, but direct reduced iron production, which hydrogen might be used for, requires high quality ore grades (67% iron or greater) which are rare, and therefore the applicability may be limited, unless technology evolves to be able to cope with lower quality grades. Carbon capture and storage may be the alternative otherwise.
Some commentators, such as the Brussels-based Corporate Europe Observatory, believe that the surge of interest in hydrogen is hype manufactured by oil and gas companies to prolong the lifespan of existing gas assets. As much as €60 million (US$72 million) – though this is contested – is being spent annually to affect opinions of European lawmakers, according to the Observatory. It may be true that oil and gas companies will benefit, but it is something of a misleading argument, because even if the world was able to become net zero without hydrogen, other (or the same) companies would benefit from whatever technical solution was deployed, and the same argument could be used.
Technical and economic challenges are certainly present, with a base energy loss of 30% to split water molecules in any electrolysis process, and then various other losses, such that at least half green electricity is lost in the process of creating hydrogen, which will then have its own losses when combusted (or otherwise used) to produce power. This is obviously important. Those losses would have to be weighed against the alternatives to storing excess electricity produced from renewables, and the practicalities of using that electricity. Batteries and pumped hydro storage are two alternatives, but pumped hydro storage sites are in short supply, and batteries expensive at a scale that would cover long periods of low power production from renewables. The coming years will be highly interesting ones in the energy sector.