It is easy to get sidetracked writing about climate change and infrastructure given the broad technology and policy issues embraced by the topic. So, we periodically need to remind ourselves that the focus of these Musings is on the need for infrastructure adaptation in response to the impacts of climate change that we are already experiencing, and which will inevitably accelerate regardless of the (badly needed) global efforts to stem greenhouse gas emissions and global warming. [1] As a recent essay by Marcus Dubois King in the Pacific Council magazine declared: “many of the worst impacts of climate change are already baked in for the foreseeable future. Unfortunately, even if industrial emissions were reduced to Stone Age levels tomorrow, it would take considerable time for the impacts of climate change to begin to wane.”
With that reality in mind, and with a US election looming and new infrastructure and energy plans being discussed in the daily news cycle, we wanted to spend some time in the next few blogs trying to connect-the-dots on questions that several of our readers have raised about how to “build back better” the infrastructure we will need in a climate-challenged world, and realistic options for leveraging promising new energy sources and technologies.
The question that keeps coming up is “what’s real versus just aspirational”? That is a big and very important question and we may soon be making national-level decisions about infrastructure bills and maybe even “green new deals” that will have long-term implications even as cities, states, utilities and individual companies place their own bets on energy and infrastructure systems that will take us into the post-pandemic world. So, let’s talk about what are realistic options, and let’s start that conversation by plunging into one of the hottest technology topics of late: hydrogen – in particular “green” hydrogen.
Hydrogen has been touted for decades as the break-through clean energy solution, but since it was primarily manufactured via steam methane reforming (SMR), the hydrogen produced every year and used in oil refining, chemical, steel and iron production was still associated with “more than 800 MT of CO2 emissions every year”, according to a recent International Energy Agency (IEA) report (Section 7: Cross-Cutting Hydrogen). Given that emissions profile, this traditional route to hydrogen is neither, as the report points out, a “low carbon pathway” nor a zero-carbon solution. The recent buzz about hydrogen’s potential, however, has focused on the breakthrough made possible by the rapidly expanding supplies of low-cost renewable energy (primarily solar and wind), and the coming-of-age of cost-efficient technology to electrolyze water for hydrogen production.
This new clean hydrogen, defined as “green hydrogen” or “e-hydrogen” is produced using renewable energy to electrolyze water in a process that separates hydrogen and oxygen using low-cost, clean electricity. This is the game-changer, and is what has been getting bold headlines of late, with Bank of America claiming hydrogen is at its “tipping point” and poised to claim an $11-trillion market; Goldman Sachs calling it a “once in a lifetime opportunity” with a worldwide $12-trillion market; and even The Economist writing that “after many false starts, hydrogen power might now bear fruit”. The narrative emerging has this new clean, green hydrogen used in various forms for everything from energy storage to aviation and marine fuels, with technology giants Wartsila and Siemens recently producing white papers outlining the process technology and policy paths to delivering “green” hydrogen products to a variety of commercial and industrial sectors.
BloombergNEF has produced a report on the hydrogen economy outlook that concludes that the precipitous drop in renewable energy costs plus the ongoing improvements in water electrolysis technology are a game changer that, in the decades ahead, could “cut up to 34% of global greenhouse gas emissions from fossil fuels and industry – at a manageable cost.” This will require that policies are in place to scale up technology and drive down costs, but if achieved, the Bloomberg report concludes that the delivered cost of renewable hydrogen in much of the world (e.g., China, India and Western Europe) “could fall to around $2/kg ($15/MMBtu) in 2030 and $1/kg ($7.4/MMBtu) in 2050”. If true, this cost structure would likely make hydrogen competitive against LNG (though not most pipeline natural gas) and most fossil fuels outside of the U.S. and Middle East, and many battery storage systems.
But what does this likely mean in terms of what really gets done? Major policy initiatives have been announced around hydrogen, especially in Europe and Japan, and the EU’s “Green Deal” -- as well as other policy roadmaps -- lay out major plans for the production and distribution of green hydrogen that includes investment in electrolyzers, new renewable energy production and related systems that, in the EU alone, could total as much as $550-billion over the next decade. In a series of recent articles in Bloomberg New Energy Finance (BNEF), Michael Liebreich calls these estimates “courageous” (meaning he thinks them unrealistically large), but also outlines where he thinks hydrogen can play in the road to decarbonization, what the economics are on the hydrogen supply side, and the opportunities for hydrogen on the demand side. His key point is similar to the message coming from other quarters, that hydrogen has the potential to play a huge role in a decarbonized future – but it won’t be the universal solution sometime touted, and the investment needed in infrastructure and new technology will be heroic.
In particular, direct use of electricity produced from increasingly cheap renewable power will always beat green hydrogen’s economics – since by definition green hydrogen uses that electricity as an input. But we can’t electrify everything and, importantly, today, electricity meets only 20% of the world’s final energy demand. That’s it. 20%. And, according to Liebreich, “if you add in the proportion of oil going into passenger cars and light trucks, you are still only addressing about a third of final energy consumption”.
Setting aside the electrical power generation and surface transport applications, the remaining sectors that will need decarbonization solutions are still very large and include industrial applications (steel, iron, cement), chemicals, aviation, shipping and heating. As Liebreich says, “hydrogen’s role in the final energy mix of a future net zero emissions world will be to do things that cannot be done more simply, cheaply and efficiently by the direct use of clean electricity and batteries”. Moreover, he points out that as we become increasingly dependent on an electricity system built on a foundation of wind and solar power, we’ll need “two things that hydrogen is uniquely positioned to supply: unlimited flexible capacity for reliable backup, and strategic energy storage for resilience to shocks”. This role can be played, by the way, by green hydrogen, “blue” or “turquoise” hydrogen which all represent variants on hydrogen production. So even if hydrogen production itself can’t compete with cheap renewable electricity, it likely has a broad range of other unique applications.[2]
Now – let’s take a deep breath – and look at the demand side of the hydrogen equation, which is about tackling hard-to-electrify-and-decarbonize sectors. For those of you who want to stop now, here’s the “cheat sheet” table summarizing our take-aways on the question of where clean hydrogen seems to genuinely have a role, and isn’t just “aspirational”. Hopefully many of you will read-on, however:
Table 1- Green Hydrogen Applications
The low-hanging fruit here is simple substitution. Industrial uses which have relied on carbon-intensive “grey hydrogen” produced from natural gas and coal, for oil refining, ammonia production and the like, account for 24% of CO2 emissions globally. The EU’s hydrogen strategy puts particular emphasis on simply transitioning this sector from grey to green hydrogen, and this should be fairly straightforward as green hydrogen becomes cost competitive and is expected to reach price parity with grey hydrogen by 2030. Similarly, the EU plan is to substitute green hydrogen for oil, gas and coal used as petrochemical feedstock, which again is expected to be a fairly straightforward transition. So that’s a clear opportunity for hydrogen.
Another huge application for green hydrogen is in steel and cement manufacturing, which represent an estimated 8% of global CO2 emissions. As detailed in a recent McKinsey report, and elsewhere, there has been a lot of focus on decarbonizing these manufacturing processes by shifting from the use of coal to green hydrogen. This is challenged by the economics of green hydrogen as well as the capex requirements needed to achieve this transition, but, as the McKinsey report points out, “[a]ll major European steel players are currently building or already testing hydrogen-based steel production processes, either using hydrogen as a PCI [pulverized coal injection] replacement or using hydrogen-based direct reduction.” One example is a pilot program underway for the fossil fuel free production of steel at SSAB’s Hybrit pilot plant in Lulea, Sweden, which is set to commence operations in 2026, with the aim of making SSAB’s entire operation fossil free by 2045. The jury is out as to the economic feasibility of this effort, and competing low carbon technologies are being proposed, including biomass-based options. There will be situations where local logistical considerations and the ‘last mile’ challenges of hydrogen delivery will pose difficulties, but it appears that there is a strong push for hydrogen’s application in this sector.
Now let’s get to surface transportation which is the area where the hydrogen narrative has been focused for almost two decades. As far back as 2003, the European Hydrogen and Fuel Cell Technology Platform forecast up to 5-million hydrogen cars on the roads by 2020, displacing up to 5% of transport fuels. Japan forecast similar targets and US President George W Bush had equally glowing forecasts for hydrogen replacing 11-million barrels per day of US oil demand by 2040. Today, however, as Bloomberg reports, there are “fewer than 20,000 heavily subsidized hydrogen fuel cell (H2FC) vehicles on the roads globally served by around 400 almost exclusively publicly funded hydrogen filling stations.”[3] It’s worth noting that for all its vaunted commitment to hydrogen, California lists just 42 open hydrogen filling stations across the entire state, with another 8 under construction. Today there are three H2FC models being sold (one each) by Toyota, Hyundai and Honda, while most manufacturers are producing plug-in battery electric vehicles (BEV) and hybrid electric models. Light delivery trucks, buses and vans could convert to hydrogen fueling systems, but the challenges of installing the refueling systems as well as the improvements in battery technology make that an increasingly challenging proposition for hydrogen. As Liebreich says, “pretty much anything that does not regularly drive over 300 miles without stopping is better off as a BEV than a H2FC. Forklifts, working 24/7 in an enclosed space, seem to be the exception, and there are an estimated 35,000 of those in the U.S. alone, and they seem to be the likely hydrogen target in this space.
As for the long-distance truck market, the jury is still out. Hyundai has delivered its first 10 trucks for testing in Switzerland, Kenworth has been testing a fuel cell truck since 2017, Toyota, Hino, Daimler and Volvo are testing fuel cell trucks, and the Ports of Long Beach and Los Angeles, leveraging a $41-million award from the California Air Resources Board (CARB), have been testing the use of 10 hydrogen-fueled heavy duty trucks and other zero and low emission vehicles, aimed at reducing emission from the estimated 16,000 trucks operating out of the ports every day, as part of the port’s zero and near-zero emission freight facilities (ZANZEFF) project. And, of course, Nikola Motor has raised huge sums in the public market to support its BEV and hydrogen-focused long-haul trucking vision. So – while investments are being made in hydrogen-powered long-distance trucks, there’s also a contingent (which includes Tesla) arguing that there is no reason that battery electric trucks won’t be the winners here. So, for surface transport overall, hydrogen’s place seems far from secure.
Next, there is marine shipping. Here is a sector that electricity likely can’t address. Other than in short-haul ferries that can be electrified, decarbonizing long haul ocean transport (both for cargo vessels and cruise ships) requires a low or zero carbon fuel. Biofuels are a possibility but seriously supply constrained. Increasingly the consensus is that either hydrogen or a derivative molecule like methanol or ammonia, along with a host of efficiency improvements, will be the answer. Maersk Shipping is looking at a range of alcohols and ammonia, and the IEA sees ammonia as a leading contender to replace traditional marine petroleum fuels.[4] Indeed, the IEA’s new report, Energy Technology Perspectives 2020, suggests that “in shipping, biofuels, ammonia and hydrogen will meet more than 80% of fuel needs in 2070…using around 13% of the world’s hydrogen production”. Ballard and ABB are testing and promoting hydrogen fuel cells for use in a range of large and medium sized marine vessels and pushing international regulatory bodies to establish standards across the industry for better coordination and development of new fuel delivery infrastructure. NYK Line is testing ammonia powered tugs in Japan while the Port of Antwerp is testing both methanol and hydrogen fueled vessels in Europe’s busiest port. So, although the final technical solution is unclear, there seems to be a real opening for hydrogen or a derivative to play a role in decarbonizing this sector.
And then there is aviation. As Leibrich points out, “prior to Covid-19, it consumed around 8 million barrels of jet fuel per day. Biojet is certainly an option, but global biofuels production is stalled at around 2 million barrels per day. Assuming the demand for air travel bounces back after the pandemic, and keeps growing thereafter, a breakthrough is needed.” He goes on to say that electrification is promising for general aviation and short haul up to 500 or maybe 1,000 miles “with advances in solid state battery technology”, but anything longer will likely require a hybrid system and the “fuel of choice will either be hydrogen…or ammonia, or a synthetic liquid fuel”. Airbus recently revealed a range of hydrogen-powered concepts and the industry group ZeroAvia recently wrote that “the requirements for extreme energy density, high cycle frequency and lack of biofuel scalability will make hydrogen-based aircraft propulsion a virtual necessity in our carbon-neutral future.” So, again, a promising hydrogen opportunity that will require a lot of support – but which has momentum.
We have saved the topic of energy storage for last, as that is where hydrogen has the potential to support in an increasingly complex and interconnected energy web. Right now, approximately one out of every three Americans lives in a state or community that has committed to 100% clean energy goals, according to a late 2019 UCLA study. The European Union and a host of other countries around the globe have announced similar net-zero carbon goals. That means that a huge commitment has already been made to running a grid primarily on renewable energy sources. As was noted earlier, electricity currently amounts to 20% of global final energy demand, and with the additional areas of potential electrical penetration, that proportion could increase very significantly – possibly well beyond the 30% mentioned earlier to as much as 70-80% of final demand.
Whatever the number, with that level of electrification based on largely intermittent, renewable energy, the need for very significant energy back-up to literally be sure you can keep the lights on, regardless of the disruption scenario, will become enormous and critical. If we are increasingly dependent on solar and wind (and hydro) in a heavily electrified world, what happens when an arctic blast blankets the Northeast sharply raising heating demand beyond grid capacity; or scorching heat waves ripple across the West sparking a critical need for increased air conditioning; or hurricanes flood Houston drowning the substations and grid systems that power into the city; or Western droughts cause hydro power shortages; or a “wind drought” causes wind power shortages across Texas and the Midwest; or 40 days of rain causes solar capacity to drop precipitously in Hawaii? Back-up energy storage will be essential.
Options for providing that energy back-up will include, as Liebreich notes: 1) demand response; 2) batteries good for a few hours or maybe a few days; 3) pumped hydro storage and biomass – also good for days but likely not weeks or months depending on regional or other factors; 4) massive overbuilding of electrical generation capacity (with associated cost and operational implications); or 5) nuclear power (with the myriad cost and political unknowns). Or, there is zero carbon hydrogen (or ammonia) and/or natural gas with CCS, which can be stored in large quantities for long periods, transported via pipeline and truck/ship and is increasingly cost competitive.
While most recent storage options have focused on lithium-ion batteries, increasingly the focus is turning to longer duration options including more pumped hydro, flywheels, compressed air, zinc and other longer-duration battery options, and hydrogen. This “need for incredibly long-duration storage – like days – isn’t likely to kick in until the last leg or final 10% of the clean energy transition” according to Daniel Flynn-Foley, Wood Mackenzie’s heard of Energy Storage, “but with 100% targets, energy storage moves from a catalyst to a necessity.” So, while it might not be a pressing immediate emphasis, there is a real focus on hydrogen in this niche as well.
There are all sorts of considerations that come into play around hydrogen transport and clearly the most cost-effective approach is to use existing pipeline infrastructure which, while it will need meaningful engineering and materials changes, still has existing rights-of-way and the like that have value and can likely be repurposed. Moving hydrogen via truck or ship, or converting it to ammonia are all options, but add to the delivered cost. We’ll save that discussion for a later date but suffice to say that if the hydrogen can be utilized closer to its production source, the economics are improved.
Why did we drag you through this? Partly because some of you asked – but also because we are on the cusp of making decisions about “reinventing” our infrastructure both because it is crumbling and because, frankly, the damage from climate change is upon us. But these are complicated times when, as Richard Hass recently wrote “history has accelerated”. There are a lot of things we need to cope with at once and significant decisions need to be taken. We cannot afford to get it wrong or fail to see how the options before us are changing along with our environment. So hopefully this pulls together a few of the threads that have been dangling loose around “the promise of hydrogen” and how we think of it in our rapidly changing infrastructure future.
[1]Note that there is often a fine line between “adaptation” (ways to deal with the effects of climate change) and “mitigation” (approaches to decrease the causes of climate change).Hydrogen, we think, plays a role in both functions.It provides critical long-term energy storage, flexibility and other needs that will be essential as climate uncertainty and variability increases, while also decreasing greenhouse gas emissions and reliance on fossil fuels.
[2] Much has been made of producing green hydrogen from “excess” renewables, with a lot of focus on the development of solid oxide and proton exchange membrane (PEM) technologies that provide load-following (rapid ramping) capabilities to respond to the intermittency of renewables. However, these are currently more expensive than alkaline electrolyzers that can also load-follow, albeit less rapidly. A point made in the BNEF series is that the notion of using “excess” and therefore very cheap renewable energy might be a mirage in a highly connected and dispatch-efficient regional grid (although it might apply to island grids), and it might make more sense to focus on pursuing hydrogen electrolysis based on less expensive (alkaline) electrolyzer technology using excess renewables where possible while being prepared to purchase ‘wholesale’ electricity to maintain steady operations or – and this is sacrilege in some circles -- even co-locating hydrogen production facilities with some of the new IV-generation small scale nuclear power plants currently under development (maybe). There are lots of unknowns, but the advantage, Liebreich writes, is that nuclear power, like electrolysis itself, likes “running flat out, [is] not subject to intermittency, and…produces waste heat, which can be used to drive high temperature electrolysis”.
[3] Note that the IEA’s 2020 “Circular Carbon Economy: 07 Cross-cutting: Hydrogen” report cites a global H2FC fleet by end 2019 of over 25,000 vehicles vs Bloomberg’s 20,000. Both figures, however, are extremely low relative to earlier projections.
[4] The IEA report on Cross-Cutting Hydrogen says this about fuels in the marine sector: “…Hydrogen and ammonia are potential alternatives to fossil bunker fuels, offering 85-95% lifecycle CO2 reduction compared to heavy fuel oil/maritime gas oil if produced from dedicated renewable electricity. Ammonia has advantages over hydrogen in that it has a 50% higher energy density than liquid hydrogen, requiring lower fuel storage volumes. Ammonia has much higher liquefaction temperature than hydrogen, requiring less insulation for storage and thus making its transport easier...A further consideration is that ammonia today is the most widely traded chemical commodity and the logistical requirements of ammonia transport are known, although widespread use of ammonia as a marine fuel would require significant new infrastructure investment...(Section 07; p. 42)
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