Green and clean
Hydrogen is the fuel that could power the future – and save the planet Ambrose Evans-Pritchard
The stars are aligned for the economic take-off of clean hydrogen. After three false starts in fifty years, the technology is ripe. The politics of climate change are about to unleash a shock wave of global investment.
Vast increases in scale will slash the cost of production over the next decade, mimicking the gains already seen in wind, solar, and electric vehicles.
The Australians came out with their national hydrogen strategy last November, sketching a new order where cheap hydrogen from solar in Western Australia replaces the lost output of dying coal. Brussels unveiled its gigantic plan last week, calling for outlays of €240bn-€380bn (£217bn) by 2030. It includes a 40 gigawatt (GW) blitz of electrolysers for pure green hydrogen by the end of this decade.
As it happens, the world’s biggest producer of polymer membrane (PEM) electrolysers able to split water molecules into oxygen and hydrogen fast enough to buttress wind and solar happens to be a British firm: ITM Power in Sheffield. Its share price has risen by 1,500pc in 15 months, while oil majors continue their death spiral.
The British public may not be aware, but this country is a world leader in what is about to become the dominant energy force of the 21st Century, so long as the Government does not throw away the bonanza.
You know something is up when Big Finance is mobilising in earnest. Goldman Sachs is all over it. True to form, the US bank has just published its number-crunching guide: The Rise of Clean Hydrogen. It argues that “blue” and “green” variants will be so competitive that they could abate 45pc of all greenhouse emissions and become the backbone of net-zero decarbonisation.
This is heady stuff even for ecoenthusiasts. Bloomberg New Energy Finance (BNEF) thinks it will be 24pc of global energy by 2050, calculating that the cost of green hydrogen could fall two thirds to $1.4/kg by 2030 and to $0.8/kg by 2050 (equal to $6 natural gas). At that point it competes toe-totoe with imported gas in Asia or Europe. BNEF says the right policies could trigger investment of $11 trillion (£8.7 trillion).
The broad story is by now well known. Hydrogen will start to displace diesel in lorries, buses, and trains in the mid 2020s, using fuel cell technology. It will be blended with natural gas for the heating of buildings up to 20pc using existing infrastructure. This is low-hanging fruit on the path to net-zero.
Clean hydrogen will challenge gas burned in “peaker” plants as a back-up for intermittent wind and solar. Experts vary on the sequencing, but the overall picture is that hydrogen rises through the gears rapidly as we near 2030 and then enters overdrive.
It will be turned into synthetic fuels for ships and aircraft (yes, we can all keep flying). Hydrogen boilers will be installed for heating, with precautions, since it is famously combustible. It will displace coal and gas in steel, glass, cement, chemicals, and the production of fertilisers.
Lo and behold, we approach global net-zero without having to wear hair shirts, or shut our economies, or live on soybeans. We do not have to bow to the green Taliban, our latter day Puritans – a breed immortally described by H.L Mencken as people with a “haunting fear that someone, somewhere, may be happy”.
Blue hydrogen is made from natural gas, mitigated by carbon capture, use and storage. It is not zero-carbon, but it cuts most emissions and is much cheaper today than green hydrogen made from wind and solar. The advantage will switch as renewable power falls to $20 MW/h and mass production slashes the cost of electrolysers. BNEF thinks green will win in the end.
However, right now blue is ready to go. “We could build this very rapidly in the UK as soon as 2023 or 2024,” said Professor Stuart Hazeldine from Edinburgh University. Britain has the advantage of depleted oil and gas wells in the North Sea that can be used for carbon sequestration, along with the connecting network of pipelines. They are linked to the industrial clusters of Grangemouth, Teesside and the Humber, where hydrogen is needed.
Blue hydrogen is not an end in itself. It is the accelerator, a temporary fuel to get the game going. Its green cousin will progressively take over. A pioneer variant is already being built on the Humber using Orsted wind power from turbines offshore to make hydrogen in an ITM electrolyser. This is then used in a Phillips 66 refinery, an elegant triple win.
The hydrogen revolution dovetails with Britain’s great gamble on offshore wind, heading for 75 GW by midcentury. The logical endgame is the construction of giant wind farms in the shallow waters of the North Sea to generate power for exclusive use in hydrogen production.
The potential is almost unlimited. Britain could achieve hydrogen independence and become a net exporter. At some point hydrogen will trade as a commodity like Brent crude. We will stop tracking oil futures. We will track hydrogen futures.
The UK has another advantage. Hydrogen is expensive to store. The cheapest option is to use salt caverns and this island is peppered with geological salt deposits down the East coast of England.
The Government is spending £70m on a clutch of hydrogen schemes, including Europe’s first big hydrogen plants to heat homes. But it is small beer compared to the EU announcements last week.
There was nothing in the Chancellor’s Summer Statement, heavy on distractions such as a stamp duty holiday, and too light on the fundamental task of economic generation. “It was a wasted opportunity. We need to start making things again,” said Prof Hazeldine.
For the world as a whole, a global carbon price would pull forward the switch to clean hydrogen. In my view, it is coming in the US, probably along the lines of HR 763, a bill in Congress with Left-Right support that combines a carbon tax and with a dividend. The money is rotated back into people’s pockets. The higher the price, the bigger the cheque. That secures political consent.
We are moving into a post-Trump world where the US and Europe will both be pursuing “green deals” with a carbon border tax to fight free riders. Once that happens, China will be forced to follow suit.
There are too many moving parts to know when clean hydrogen will catch fire – so to speak – but it is coming sooner than almost anybody could have imagined just two years ago.
We have within our grasp the final clinching tool for decarbonisation. We can contemplate a net-zero world without having to give up our luxurious lifestyles. Celebrate.
Hydrogen is about to become the dominant energy force of the 21st century