An introduction to (green) Hydrogen

A post on the most important elements regarding green hydrogen

Hydrogen is generally considered an essential tool for our path to decarbonization. Some people do not hesitate to call this molecule the “silver bullet” or the “gas of the future”. Intriguingly, this is not the first instance of hydrogen being championed as a transformative solution. Nearly two decades ago, the influential Jeremy Rifkin authored The Hydrogen Economy. shedding light on its potential.

After numerous posts on electricity, we believe that it was relevant to start talking about hydrogen, specifically green hydrogen. This article aims to introduce the key facets that merit consideration in hydrogen-related conversations. While not exhaustive, it will provide an overview of the central topics, especially the widely debated subject of green hydrogen.

To be clear, we believe that hydrogen will likely play a significant role in the future energy landscape, but it falls short of being a universal panacea. The hydrogen ecosystem is poised for growth, but its widespread adoption will be gradual, finding its niche primarily in challenging, hard-to-decarbonize applications.

If you are interested in learning more about hydrogen, we recommend the following posts of Michael Liebreich for a deeper dive into the hydrogen world: Separating Hype from Hydrogen and The Unbearable Lightness of Hydrogen.

What is hydrogen?

Wikipedia provides valuable insights into hydrogen's nature: Hydrogen is a fundamental chemical element characterized by the symbol H and atomic number 1. It holds the distinction of being the lightest element. Under standard conditions, hydrogen manifests as a diatomic gas represented by the formula H2. This gas is colorless, odorless, tasteless, non-toxic, and notably, it possesses high combustibility. Moreover, hydrogen ranks as the most abundant chemical substance in the known universe, comprising approximately 75% of all ordinary matter.

Much like electricity, hydrogen is not an inherent source of energy. It is not naturally occurring in significant deposits, or at least these natural deposits have not yet been discovered or exploited¹. Instead, H2 serves as an energy carrier, necessitating an initial energy source for its production.

Why is hydrogen considered as a solution?

Hydrogen is often touted as a climate fix because it is theoretically possible to produce it without emitting greenhouse gases while using it in a large variety of processes: from chemical industries to clean fuels or even to produce heat, or to be used back in electricity systems. Therefore, hydrogen could be qualified as a Swiss Army Knife².

Hydrogen is currently an issue - the production side

Hydrogen production encompasses a wide array of methods, each often distinguished by a specific color coding that characterizes the production process. Here is a brief overview of the diverse techniques used in hydrogen production.

One color corresponds to one way of producing hydrogen.

Far from being a solution, hydrogen is currently more of an issue with regard to emissions. Indeed, hydrogen production is responsible for around 2% of global emissions from the energy sector. This is due to the fact that hydrogen is mainly produced with natural gas without carbon capture (grey hydrogen), or even with coal (black hydrogen).

Actually, low-emissions hydrogen, namely green hydrogen (electrolysis powered by renewables) and blue hydrogen (grey hydrogen with carbon capture), represent less than 1% of the total production of hydrogen, as the IEA presented in its 2023 report on hydrogen.

Two principal approaches stand out for producing low-emission hydrogen: electrolysis, driven by low-emission electricity sources (like renewables and nuclear power), and the utilization of fossil fuels while simultaneously capturing the ensuing carbon emissions. Given the current emphasis on the growth of renewable energy sources, our primary focus centers on green hydrogen, generated through electrolysis powered by renewable energy. However, it's worth noting that hydrogen produced via nuclear energy and blue hydrogen may also have a role to play in the evolving energy landscape of the future.

The economics of green hydrogen

While determining the actual cost of green hydrogen is a multifaceted process influenced by various factors, we can pinpoint three crucial components:

1. The investment cost (CAPEX) of the electrolyzer.

2. The cost of electricity (measured in €/MWh).

3. The utilization rate of the electrolyzer (expressed as a percentage of its full load capacity).

Notably, the substantial capital investment in the electrolyzer underscores that higher utilization rates can lead to a reduction in the ultimate production cost.

IEA presented the cost of green hydrogen depending on these three variables. It is clear that for a low utilization rate, the production cost becomes prohibitive.

The graph above presents optimistic figures with green hydrogen reaching values below 3 USD/kg, comparable to the main current way of producing hydrogen, namely grey hydrogen, whose cost estimates are around $0.98-$2.93 per kilogram.

A recent white paper from the Boston Consulting Group depicts a very different picture when considering real projects. Indeed, they estimate the 2030 green hydrogen cost in central Europe to be between 5 to 8 € per kg, instead of a previous consensus view of lower than 3 €/kg. The reasons for such differences are described below.

What to do with the limited quantity of green hydrogen?

Given the inherent economic challenges associated with green hydrogen production, it's evident that its availability will be quite limited. Consequently, its utilization should be approached with great care and consideration.

Hydrogen finds a broad range of applications across various sectors, and to determine which uses are most viable, Michael Liebreich's "hydrogen ladder" proves to be an invaluable tool. This ladder ranks potential applications on a spectrum from "Unavoidable³” to "Uncompetitive." Each application is further associated with a specific color to highlight potential alternatives.

• Yellow for electricity associated with batteries.

• Green for biomass and biogas.

• Grey for something else.

• Red for no real alternative than hydrogen⁴.

A striking observation from the hydrogen ladder is that applications amenable to electrification typically fall into the lower-priority categories. This is particularly evident in the extensive domain of the transportation sector, encompassing personal vehicles, subways, trains, and buses. Additionally, low-temperature heating applications, including domestic heating, are better served by electrification, rendering the use of hydrogen unnecessary in these contexts.

Will we import hydrogen from far away?

If countries cannot make green hydrogen locally, there is still the option to import it. Nevertheless, such an option might be more complicated than it seems. We will not dive into the intricacies of hydrogen transport but it seems increasingly more likely that the most economical way to transport hydrogen is by pipeline as a gas. According to a recent study from Agora Energiewende: pipelines are the cheapest way to import renewable hydrogen to Germany. An exception is for derived products from hydrogen: Derivatives such as green ammonia or briquetted sponge iron (HBI) represent a particularly favorable solution at less than €1.5 per kilogram of hydrogen. But only if these materials can be processed directly without expensive conversion, for example for fertilizer or steel production.”

This observation is aligned with the vision of Michael Liebreich where hydrogen would only be imported by pipelines or with derived products to be used directly, most notably ammonia for fertilizers. Therefore, large-scale intercontinental hydrogen trade is unlikely to happen.

Does it make sense to produce green hydrogen anywhere?

Furthermore, there is a valid inquiry into the rationale for generating hydrogen in nations heavily reliant on fossil fuels for their electricity generation. Numerous countries⁵ beyond the European Union have expressed their intentions to produce green hydrogen, even while their electricity grids are predominantly powered by fossil fuels. One might reasonably argue that it would be more prudent to prioritize reducing fossil fuel dependency in their power generation before venturing into green hydrogen production. Generally, the promotion of green hydrogen is most effective when the energy mix is already significantly decarbonized and an excess of clean electricity is readily available.

Let’s sum up

In summary, the pivotal points to consider are as follows:

1. Hydrogen will play a vital role in our journey toward decarbonization.

2. Presently, hydrogen production is a climate concern due to substantial greenhouse gas emissions.

3. The two primary methods for low-emission hydrogen production involve using clean electricity (renewables and nuclear) and the use of fossil fuels coupled with carbon capture. Due to the rapid deployment of wind and solar, the focus lies generally on green hydrogen, produced through electrolysis with renewable energy sources.

4. While advocates of green hydrogen anticipate production costs below 3 €/kg, actual projects may range between 5 to 8 €/kg, at least in central Europe. This price range could result in limited hydrogen availability, which challenges the envisioned "Hydrogen Economy" concept.

5. Consequently, only select applications are viable for hydrogen use, with the hydrogen ladder offering valuable insights. Notably, hydrogen cars and domestic hydrogen boilers do not make much sense.

6. Importing (green) hydrogen is likely to be restricted to neighboring countries through pipelines, although derivatives like ammonia may expand possibilities. Converting derivatives back into hydrogen is improbable.

7. Producing green hydrogen in nations heavily reliant on fossil fuels for power generation may not be the most sensible approach. It's preferable to reduce fossil fuel usage in the energy mix before venturing into green hydrogen production.

We hope that you enjoy this introduction to the world of green hydrogen. Please leave us a comment if you think that we missed some important points as we are always looking to improve our understanding of the energy world.

“A wise man proportions his belief to the evidence”, David Hume.

1. White Hydrogen or natural hydrogen might become a reality. See this article.

2. See the interesting article and the comparison with a Swiss army knife.

3. Unavoidable for reaching lower greenhouse gas emissions.

4. All cases in red use hydrogen already.

5. Such countries include for example Algeria, Egypt, South Africa, Saudi Arabia, etc.