The Economist - USA (2021-10-09)

20 Briefing The hydrogen economy TheEconomistOctober9th 2021

tor. Today the world has about three giga­

watts (gw) of electrolyser capacity—a giga­

watt  being  the  power  output  of  a  nuclear

plant or a very large solar farm. McKinsey, a

consultancy,  expects  that  to  grow  to  over

100 gwof capacity by 2030. Bernd Heid, one

of the company’s experts in the field, reck­

ons  this  scaling  up  could  in  itself  cut  the

cost per gigawatt of capacity by 65­75%. In

short, a grown­up and dynamic industry is

emerging out of a business which until re­

cently bordered on the artisanal.

itmPower,  a  British  maker  of  electro­

lyser equipment, has seen its tender pipe­

line more than double in the past year. The

firm raised £172m ($226m at the time) last

year to expand capacity to 2.5gwper year.

Graham Cooley, its boss, says his firm “now

has  a  blueprint  for  a  gigawatt  factory,  we

can  cut  and  paste”.  His  firm  is  involved

with Siemens Gamesa, a turbine­maker, in

a  big  “hydrogen  hub”  to  be  built  on  the

shores of Britain’s Humber estuary.

A sign on the wall

As a result of these forces, the price of hy­

drogen  made  from  renewable  sources  is

plunging,  and  seems  likely  to  keep  doing

so.  Bloombergnef predicts  the  price  of

green  hydrogen  using  pem electrolysis

could fall to just $2 per kg by 2030, making

it  competitive  with  blue  hydrogen  (see

chart 2). Morgan Stanley goes significantly

further, arguing that at the very best loca­

tions for renewables in America, green hy­

drogen  will  be  able  to  match  grey  hydro­

gen’s $1/kg “in 2­3 years”. 

The markets that will matter for green,

blue  and  pink  hydrogen  will  be  those

where  they  offer  a  clear  advantage  over

other  non­fossil­fuel­based  approaches,

most notably renewable electricity. One of

those is in the electricity sector itself. This

month  the  New  York  Power  Authority,  a

utility,  is  starting  a  pilot  project  in  which

green  hydrogen  made  from  hydroelectric

power is blended into natural gas, in con­

centrations up to roughly 30%, to generate

electricity from a normal gas turbine. 

This  looks  like  thermodynamic  non­

sense,  as  the  amount  of  electricity  pro­

duced  by  burning  hydrogen  in  a  turbine

can  never  be  as  much  as  the  amount  that

was  used  to  make  it;  feeding  the  energy

used to power the electrolyser directly into

the  grid  would  provide  more  kilowatt­

hours. But not all kilowatt­hours are equal.

Sometimes renewables produce electricity

in excess, driving its price down to zero or

even, on occasion, below—there are some

situations  when  people  get  paid  to  take

electricity off the grid, or charged for pro­

ducing it. In a system with a carbon price it

could  make  sense  to  use  green  hydrogen

produced when electricity is cheap to low­

er the cost of meeting supply with gas tur­

bines when electricity is dear. 

The same also holds if the hydrogen is

greybutthehydrogenproducerdoesnot

havetopaythepriceofitsemissions.That

provides no environmental benefit—the

netemissionsarehigher,eventhoughthe

emissionsfromthepowerplantarelower.

Nevertheless some argue, possibly sin­

cerely,thatit isa wayofincreasingdemand

forhydrogenandthusprimingthemarket

fora greenerfuture.

Hydrogenisnottheonlywaytobalance

thetimesandplaceswhereelectricityisin

surpluswiththosewhereitisinhighde­

mand; largeinterconnected gridshelpa

lot,asdoesbatterystorageandsmart­grid

technologythatreducesloadswhenneces­

sary. Butforlong­term storage thatcan

dealwithdifferencesfromseasontosea­

sonandevenyeartoyear,hydrogenlooks

betterthananyofitscompetitors.

AnintriguingprojectunderwayinUtah

involvingtheAmericanarmofMitsubishi,

a Japaneseconglomerate,willmakehydro­

genfromlocalrenewables,storeit innear­

bysaltcavernsanduseit asa fueltopower

a giantturbineproducingcleanelectricity

that will ultimately reach Los Angeles.

Longer term, pure hydrogen could be

sourcedfromfaraway.MarcoAlverà,boss

ofItaly’sSnam,oneoftheworld’slargest

pipelineoperators,andauthorofa recent

bookonhydrogen,believesgreenhydro­

gencanbeshippedfromTunisiatoBavaria

economicallyusinga mixofexistingand

newpipelines.AustraliaandChilearehop­

ingtoexporthydrogenmadefromabun­

dantlocalsolarenergybyship.

Anothermarketwherehydrogenhasan

apparentedgeoverrenewableelectricityis

steel. Cokingcoal is integral to today’s

steelmaking,whichaccountsforabout8%

ofgreenhouse­gasemissions;itprovides

notjusttheheatneededfortheprocessbut

alsothechemicallynecessarycarbon.An

alternative process, called direct­reduc­

tion,uses hydrogen to do much ofthe

chemicalworkthatcarbondoesincurrent

smelters.ArcelorMittal,aEuropeansteel

giant,recentlycommitted$10bntoslash­

inggreenhouse­gasemissionsandislook­

ingtohydrogenasa waytodoit.USSteel

hasformedapartnershipwithNorway’s

Equinor,anoilandgascompanywhichisa

ccspioneerandnowmovingintobluehy­

drogen.Hybrit,aSwedish industrialco­

alition,deliveredtheworld’sfirstbatchof

greensteeltoa customerinAugust.

Industrialprocesseslikechemicalreac­

tors,cementkilnsandglassmakingalso

requirehightemperatures,a requirement

notalwayseasilyprovidedbyelectricity.In

a recentreportonthehydrogeneconomy

theInternationalEnergyAgency(iea),a

think­tankoperatedbyrich­worldgovern­

ments,notesthathydrogencandirectlyre­

placenaturalgasinsomeprocessesalrea­

dy. Ammonia can also sometimes be

“droppedin”asaneasysubstitute.

Cryingforleaving

Whenitcomestoaviationandshipping

theroleofhydrogenisa matterofintense

debate.Forshorttripsbatteriesmightsuf­

fice.Butplanesusingfuelcellscouldgive

battery­electricalternativesa runfortheir

money.ZeroAvia,a startupbackedbyBrit­

ishAirwaysandJeffBezos,Amazon’sbil­

lionairefounder,completedthefirstfuel­

cell­poweredflightina commercial­sized

aircraftinBritaina yearago.Ferryopera­

torsinNorwayandonAmerica’swestcoast

are now experimenting withshort­haul

ferriespoweredbyhydrogenfuelcells.

A long way down

Cost of hydrogen*, $ per kg , 2020 prices

*Includescostofplantandcapitaloverplantlifetime

†Carboncaptureandstorage Source:BloombergNEF

2

2021 2030 forecast 2050 forecast

10

8

6

4

2

0

“Blue” H from

coal with CCS†

“Blue” H from

gas with CCS†

“Green” H

Low

High

Steppin’ up

Viability of hydrogen use in a net-zero world, August 2021 Competing technology

*Viaammoniaore-fuelratherthanH2gasorliquid Source:Liebreich Associates

3

↑Unavoidable

↓Uncompetitive

Fertiliser

No real alternative

Electricity/batteries

Biomass/biogas

Other

Hydrogenation Methanol Hydrocracking Desulphurisation

Shipping* Off-roadvehicles Steel Chemicalfeedstock Long-term storage

Long-haulaviation* Coastal& rivervessels Remotetrains Vintage vehicles*

Medium-haulaviation* Long-distancetrucks& coaches High-temperature industrial heat

Short-haulaviation Localferries Commercialheating Islandgrids Clean power imports

Lightaviation Ruraltrains Regionaltrucks Mid/low-temperatureindustrialheat Domestic heating

Metrotrains& buses Fuel-cellcars Urbandelivery 2/-wheelers Bulke-fuels Power system balancing