How Will the Low Carbon Hydrogen Economy Actually Develop?

Low carbon hydrogen is emerging as a fast-growing market, but how will we develop the new production, distribution, and the new devices and processes that will use this hydrogen?

We are at the start of a low carbon hydrogen revolution, but this is a complex transition, and it would be wise to think clearly about how and when this will unfold.

My very first impression of hydrogen is “it is a clean energy dense fuel and we know it can work to power the same types of machines that fossil fuels power today. That would include engines, gas turbines, fuel cells to make electric power, boilers to make steam or devices to heat buildings.”  Additionally low carbon hydrogen could displace grey hydrogen with major reductions of greenhouse gases (GHG). What is not to like about hydrogen?

My second impression was “oh yeah, hydrogen is only an energy carrier so it needs to be made without GHG emissions of CO2 and methane”. Most of the hydrogen we make today is produced by the steam methane reforming process (SMR) with large methane and CO2 emissions. Our hydrogen options for reduced GHG emissions include so called blue hydrogen, which is steam reforming with carbon capture and storage and green hydrogen, which is made from electrolysis of water using clean power. Both options have challenges with cost and complexity. On further thought we have no hydrogen distribution system, and it is hard to transport hydrogen due to its exceptionally low density and special safety and handling needs.  Even if we had a distribution system, the cost of new engines, fuel cells, boilers, and industrial process changes to switch to hydrogen do not exist, and this means it will be expensive to make the transition. It would be no small task for refineries or ammonia plants (the main consumers of hydrogen today) to switch to blue or green hydrogen.  So, my second impression was Yikes! The challenges look daunting.

Blue hydrogen has very little emissions advantage compared to grey hydrogen if the upstream methane emissions are considered. This is about 550 g CO2 /kW*hr. for grey hydrogen versus 486 g CO2/ kW*hr. of energy for blue hydrogen. Bluer hydrogen emissions will vary depending on the source of the methane used by the blue SMR reformer.

My third impression is why are all these companies building out the parts of the hydrogen economy for a market that does not even exist yet? The oil industry is promoting blue hydrogen and dozens of demonstration projects have been built. Sure, there are many government grants, tax breaks, and even oil companies or steel mills building demonstration plants, but most of the industry is sitting on the sidelines as the hydrogen economy is not yet in place. Is all the hype and news reporting of new hydrogen projects justified? or just a short-term fad until the grants stops? The driving force for moving to hydrogen is the urgent need to stop the emissions of GHG as we have all but lost hope to keep global warming below 1.5 DegC by 2100 and even 2.0 DegC is slipping away. The International Energy Agency (IEA), reports that hydrogen produced from fossil fuels is responsible for approximately 830 million tonnes of CO2 emissions per year, which is about 2% of global energy-related CO2 emissions.

Methane is also a target for reduction, as around 9% of the natural gas used in SMR is typically released as methane emissions during the production process, and methane is 85 times more potent as a greenhouse gas. This transition will be driven by government policy and regulations using incentives and penalizing or directly regulating these emissions. To meet our climate goals of net zero by 2050 a hydrogen economy is essential, and companies have observed that government policy has been shifting fast to create a low carbon hydrogen market, and they will continue with more expansive policies. There is however considerable uncertainty about how this plays out in different regional locations and based on the priorities of a polarized political system in the US. In short, low carbon hydrogen is coming, it is inevitable, but the challenge is to understand just how and when production, distribution and end use evolve.

Hydrogen Production.

There is a scramble to develop new more efficient and lower cost technology and to get established as an electrolyzer supplier that can scale. While the cost of electrolyzers may drop a lot with scale, there are thermodynamic limits on how much energy is needed to pull hydrogen away from oxygen for any process. The world is moving fast towards green hydrogen and the market for hydrogen electrolyzers is red hot with CAGR over 100% this past year.

There is more blue hydrogen in production today than green hydrogen, but that is likely to change as green hydrogen is growing fast and has a significantly better environmental footprint. The chart below compares the environmental footprint of various energy sources, and we can see that blue hydrogen is nearly as high as grey hydrogen, i.e., 550 g CO2 /kW*hr for grey hydrogen versus 486 g CO2/ kW*hr of energy for blue hydrogen. An objective and transparent analysis of upstream oil and gas emissions including methane is available with the Oil Climate Index plus Gas (OCI+) Tool. https://ociplus.rmi.org/

Green hydrogen made from electrolysis of water is growing fast, but green hydrogen carbon footprint depends on a clean source of power. For more details on the suppliers and market trends for hydrogen electrolyzers, please see the recent ARC Press Release announcing its Hydrogen Electrolyzers Emerging Market Analysis report.

Hydrogen Distribution.

There are several challenges associated with transporting hydrogen, including:

• Low Energy Density: Hydrogen has a very low energy density compared to other fuels. Compression and liquification help but add significant cost and complexity.
• High Flammability: Hydrogen is highly flammable and requires special handling procedures during transportation to prevent accidental ignition.
• Embrittlement: Hydrogen has been blended into gas pipelines but it does cause embrittlement, and pure hydrogen needs dedicated stainless-steel pipelines that do not exist.

Hydrogen electrolyzers are typically located at the end use site. For example, providing water and power to an electrolyzer at a vehicle filling station or providing an electrolyzer at the steel mill, ammonia plant, or refinery is much lower cost than making hydrogen off site and transporting it.

End Use Consumers of Hydrogen

The machines that will use hydrogen are similar, but not identical, to the machines that use fossil fuels. Companies that provided bottle gas and tank trucks, like Linde and Air Products, have emerged as engineering and procurement firms that will build a hydrogen production system at site. For refineries and ammonia plants hydrogen is essential for operation, so high reliability is essential, and installations are likely to include redundancy and hydrogen storage to insure a continuous supply to the process. Blast furnaces at steel mills can be converted to hydrogen. Cement plants can also use hydrogen for heat, but the kiln chemistry (CaCO3 -> CaO + CO2 ) still releases CO2 so additional carbon capture would be needed to further reduce emissions. In combustion with air, hydrogen needs a different air to fuel ratio, and it burns at higher temperature, which increases NOx emissions, so equipment designed for methane cannot be used directly for pure hydrogen.

In summary, blue hydrogen does not appear to be an effective way to make low  carbon hydrogen due to upstream oil and gas emissions of methane and CO2. Green hydrogen made from low carbon power is the favored technology for the hydrogen economy. Green hydrogen uses a lot of electric power, and this power must be low cost and low carbon to be effective for a transition to green hydrogen. Taking power out of the power grid today to make hydrogen is likely to be immediately balanced with hydrocarbons from gas power plants. The power grid is evolving quickly with new wind and solar dominating new power additions to the grid, and grid battery deployments are growing very fast. New EPA power plant regulations are due to take hold for coal plants by 2030, and gas power plants by 2035 may make electric power a bit more expensive due to carbon capture and storage (CCUS) being required. Low-cost wind and solar with grid energy storage will eventually make power costs much lower, but with more dynamic daily and seasonal price variations. New nuclear power is well suited for making hydrogen and could make a renaissance after 2030. The grid is also looking to update transmission lines to move power from remote generation sites, like Quebec hydro and a growing offshore wind industry. In the past, electric grids adjusted generation to meet customer demand, but the future will be more demand response driven with customers consuming power when it is available as time-of-day pricing is expanding.