The realist’s road to zero: #3 The hydrogen economy

Hydrogen could help many of the world’s most carbon-intensive processes to reach net-zero — just as long as we can decarbonize the production of hydrogen itself

January 2022

Words by Tony Whitehead

From ‘The realist’s road to zero’, The Possible 08

This article is part of a series focusing on the toughest targets for decarbonizing the built environment, and the tough choices facing global policymakers on the most sustainable way to deploy finite resources

Hydrogen finds itself at the centre of an increasingly passionate debate. Its supporters claim it is the fuel of the future, and the answer to just about all the world’s decarbonization issues. Hydrogen can heat your home and fuel your car or truck. It can be turned into aviation fuel, power container ships, and replace fossil fuels in carbon-intensive industrial processes.

Well, kind of, say the doubters. Hydrogen is energy-intensive to produce, that container ship will need a huge fuel tank, and hydrogen’s role in the production of steel and concrete, two of the biggest industrial carbon emitters, is still experimental. True, hydrogen produces no carbon emissions when it is used, but making hydrogen at scale in a genuinely carbon-neutral way presents serious challenges.

Today, according to the International Energy Agency, 99% of all hydrogen is derived from fossil fuels — mainly gas, but also coal and oil. None of this hydrogen helps to decarbonize the world. In fact, says the IEA, hydrogen production, most of which is used for the production of ammonia for fertilizer, produces as much CO2 as the entire emissions of the UK and Indonesia combined. 

So hydrogen is currently a problem, and for it to become a viable solution its production must be made all but carbon-neutral. This can be done either by capturing and permanently storing the CO2 emissions from natural gas-derived hydrogen — so-called “blue” hydrogen which currently accounts for some 0.8% of world production. Alternatively, “green” hydrogen can be made from water by electrolysis using electricity from renewable sources. 

But can it ever make sense to use renewable electricity to produce green hydrogen? Electrolysis inevitably involves a conversion cost; you get less power from the hydrogen than it took to produce it in the first place. In a majority of cases it makes more sense to simply use the renewable electricity directly to, for example, heat a home. It is one reason why green hydrogen represents only 0.2% of today’s production.

New Zealand hopes to develop the world’s largest green hydrogen plant, powered by the massive hydro station on Lake Manapōuri. Photo: R Scapinello / Alamy Stock Photo

“As increased renewable electricity is also needed to decarbonize the world’s grids, there’s an argument that you shouldn’t make green hydrogen much at all until that has been achieved,” says Les Pepper, energy project manager at WSP in New Zealand. “But this slightly misses the point. In New Zealand, for example, on average 85% of our power is from renewables, and we don’t fully utilize this potential. During periods of low power demand, wind turbines are still able to generate and hydroelectric plants sometimes have to spill water because storage lake capacity is limited. It’s a common issue in places like Canada and Scandinavia, which also have high levels of renewable energy. The trouble with electrons is that they have to be used there and then, but molecules are different: they can be stored, transported and used as a fuel in the future. So, if you make hydrogen with spare power, you have a supply of green energy that you can use in another time or place.”

"If you make hydrogen with spare power, you have a supply of green energy that you can use in another time or place"

Les Pepper, WSP

There is a compelling business case for this approach, says Pepper: “Up to 75% of the production cost of green hydrogen is the renewable electricity required to power the electrolyser plant. But the price of renewable power can fall very low within some electricity markets, when load demand is low.”

New Zealand plans to use this spare energy to produce carbon-neutral ammonia or other carrier products for export, and green hydrogen gas to fuel large trucks locally. “But you could of course use it for almost anything, including as a moderator for renewable energy supply. We have global clients who store low-cost renewable power to offset their operational carbon emissions. Or on a bigger scale, at times of peak demand, a utility could switch on a green hydrogen-fuelled power station plant.”

Sweden’s HYBRIT pilot plant aims to produce fossil-free steel by using hydrogen to reduce iron ore, in place of coking coal. Photo: Jonathan Nackstrand / AFP via Getty Images

The hydrogen bubble

Pepper says he is staggered by current levels of interest and investment in green hydrogen. “We used to do little 1MW hydrogen demonstrator projects. Now we have big companies with big balance sheets looking at achieving real economies of scale in this area — so 100MW+, even 1,000MW+ green hydrogen production facilities, are becoming common development focuses. That’s a small city’s worth of power. Enquiries are coming in almost daily from all over the world.”

His experience suggests an exciting future for green hydrogen, though the immediate impact on world CO2 emissions should be kept in perspective. As the IEA points out, producing all of even today’s dedicated hydrogen output from electricity would result in a demand of 3,600TWh, more than the total annual electricity generation of the European Union. Furthermore, New Zealand is still unusual in having so much renewable energy capacity that it can even think about using spare power to make hydrogen. Other countries might have to develop their hydrogen economy differently — via blue hydrogen.

This is more controversial because it is less straightforward to assess the real benefits of a system that relies on carbon capture and storage for its green credentials. A 2021 study by Cornell and Stanford University in the US pointed out that for every unit of heat in the natural gas at the start of the process, only 70-75% of that potential heat remains in the hydrogen product. Meanwhile, says the report, inefficiencies in the carbon capture, along with leakage of methane (a far more potent greenhouse gas than CO2) mean that even after carbon capture, blue hydrogen could end up 20% worse for the climate than simply using fossil gas.

“I think that’s pessimistic,” says UK-based WSP hydrogen consultant James Watt. “The methodology is good, but the research was based on a particular scenario involving shale gas and quite dated, inefficient equipment. Technology is better now and will continue to improve. If you cut methane leakage, for example, the figures would quickly start to look very different.”

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In a world of limitless green energy, there would be no need to make blue hydrogen. But that’s not the world we’re living in. “There is no purely green route available to net-zero carbon,” says Watt. “We have to be realistic, and in many countries, the UK included, the only way we are going to get hold of significant amounts of hydrogen over the next decade is via reforming natural gas and carbon capture. But it’s worth it to raise the levels of hydrogen uptake in industry, so that we get there a lot quicker than if we wait for the pure green version.”

And cleaner hydrogen is urgently needed, if only to decarbonize that which is already produced. But as more hydrogen is made, which of its many applications should be prioritized?

Investor Michael Liebreich developed the Clean Hydrogen Ladder to rank different use cases on the basis of their likely adoption, from unavoidable to uncompetitive, based on a range of factors including thermodynamics, economics, human behaviour and geopolitics. Hydrogen will have to win its way into the economy, he points out, in competition with every other clean technology that could solve the same problem, and other solutions will often be cheaper, simpler, safer or more convenient. At the top are industrial processes that already rely on grey hydrogen, followed by new uses where there is no other way to decarbonize.

This is where hydrogen should be deployed first to make the greatest difference, agrees Watt. “For making steel and concrete, or in chemical plants, it is one of the major alternatives to fossil fuels,” he says. “It could also be useful in oil refineries and petrochemical plants which use large amounts of gas for processes requiring high temperatures.”

Blue logic

If blue hydrogen is used for this, then it might seem odd to go to the trouble of capturing carbon while creating blue hydrogen from gas, in order to use it where gas is currently used. Why not simply use gas, avoid the conversion cost, and capture the carbon at, say, the oil refinery? Watt’s answer to this is key to the future of blue hydrogen. “A refinery will need to capture carbon at perhaps different 20 points, from heaters, boilers or the power plant, which is very expensive and inefficient. If it uses blue hydrogen instead of natural gas, all the carbon has already been captured at the point at which the hydrogen was produced. It’s much cheaper and more efficient to capture the carbon in this way. And of course, these facilities will be able to use others sources of hydrogen when it becomes available.”

This is the essence of blue hydrogen logic and it applies across many sectors. For example, after industry, hydrogen would probably be best deployed in countries like the UK as a replacement for gas in domestic heating boilers where it’s difficult to replace them with technologies such as air-source heat pumps: “You can’t install carbon capture in every home, but you can supply them with hydrogen, blue or green, along pipes that already exist,” Watt points out.

"You can’t install carbon capture in every home, but you can supply them with hydrogen, blue or green, along pipes that already exist"

James Watt, WSP

Again, there will be challenges, and there are technical and safety issues. The potential for hydrogen to leak from pipes intended for larger methane molecules is a known issue and can be addressed, says Watt, as is the tendency for lower-carbon blends of hydrogen and natural gas to produce more nitrous oxide pollution than natural gas alone. Equipment compatibility and workforce training are also key areas, he adds. “Hydrogen is a very different material than natural gas, and its challenges have to be identified and addressed to enable large-scale deployment. For example, its potential for heating buildings is already being tested, with demonstration programmes in both blended hydrogen with natural gas, and pure hydrogen.” WSP is working with clients in the UK to evaluate how gas networks might be switched to hydrogen, and to help prepare for large-scale building trials.

So blue hydrogen is far from being a quick or easy solution, but it can, says Watt, play an important part in an increasingly complex and multifaceted response to the challenge of global warming. And for the next decade or so, for those countries which do not yet have spare green electricity, it is probably the only way to bring about a hydrogen economy.


This article is the third in a series focusing on the toughest targets for decarbonizing the built environment — steel and concrete — and the tough choices facing global policymakers on the most sustainable way to deploy finite resources. No issue cuts to the heart of this like trees: we need them to sequester carbon as they grow, but we also need to cut them down for timber, wood products and biofuel. And planting trees is far from the only use for fertile land in a world with a hungry, growing urban population. In the next part of the series, we’ll consider how close planting trees can get us to our net-zero goal.

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