Filenews 7 August 2022
By Yiannis Telonis
The above caustic – and aphoristic – comment by the American writer Harlan Elisson (one of the creators of Terminator) is often used as a pun by supporters of hydrogen as the new fuel that will bring us into the green century. As they argue, if we are smart then we will have unlimited energy from hydrogen at our disposal.
Hydrogen has entered the equation for the green century dynamically in the last few years. This is because a conjuncture of factors with the greatest awakening of the world's governments to the effects of global warming on the climate focused on its great advantages – its unlimited quantity and its clean burning. In the simple narrative, hydrogen is our saviour since the only product of its combustion is water vapor.
But just as everything beautiful in life is not necessarily and just so it applies to hydrogen. In principle, hydrogen may not be as clean as simple logic wants it to be. Secondly, the production and distribution of it is currently being fierce competition over who will be the major players of tomorrow in this market and how the various interests are trying to shape the market.
And most importantly for us – all the initiatives taken converge on accelerating the use of hydrogen while removing fossil energy sources – coal, oil and natural gas.
In this article I will try to outline the hydrogen market its problems and prospects and what all this may mean for us here in small Cyprus.
Hydrogen and its production
Let's start from the basics with the production of hydrogen. According to a Bloomberg NEF study conducted in 2020, global hydrogen production amounted to 110 million metric tons. Most of the production was used in the production of ammonia (NH3) for use in the manufacture of fertilizers and in the conversion of gross crude oil into gasoline and diesel. For about 75% of this world's hydrogen production, the method of natural gas conversion – whose key component is METHANE CH4 – was used. This method creates - in addition to hydrogen - an undesirable derivative, carbon dioxide CO2.
If during production carbon dioxide is pumped into the atmosphere then the hydrogen produced is called grey hydrogen. But if during production carbon dioxide is concentrated and buried underground, then we are talking about the production of blue hydrogen.
There is a second method of production for the remaining 25% of the production used by water (our well-known electrolysis) with the electricity used for production coming from renewable energy sources. This hydrogen is called green hydrogen.
And while all three types of hydrogen have equally clean combustion as a derivative of water vapor, their production costs vary significantly. Green hydrogen has a much higher production cost – around $7.5 a tonne compared to about $2.4 a tonne for blue hydrogen. It is therefore easy to see why green gas has hitherto accounted for only a small percentage of world production.
Before we go to the structure of the market let's also see why hydrogen has attracted interest. Its first and main advantage is clean combustion. A second big advantage is its high burning temperature which makes it suitable for heavy industry – eg. production of cement and steel; A third advantage is its relatively easy storage. For example, while for aviation the use of electric batteries in airplanes is not feasible with the existing technology (bulky and heavy), the opposite is true for hydrogen. A fourth advantage of it is that its production does not presuppose a natural raw material that some states in the world have, such as mineral wealth. And one last one – perhaps its greatest advantage – is practically inexhaustible.
The evolution of the hydrogen market as an energy source
As mentioned above, 75% of the current hydrogen production is used outside the energy market. And while hydrogen as a technology and energy source has been known for decades the energy market has not had the boost it expected. The reasons mainly concerned the cost of creating the infrastructure necessary for its storage and distribution.
For example, our well-known company Shell had shown interest in the development of the movement of cars with hydrogen as the energy source. In fact, 20 years ago – at a time when the cost of lithium electric batteries for use in cars was still prohibitive – Shell had already developed hydrogen storage technology for use in a car. Why didn't it go ahead? Because at the same time the use of lithium batteries began in mobile phones and other small appliances. Huge investments were made for the development of batteries since the market that was suddenly created was huge. And while hydrogen had clean combustion on its side it could not compete with the batteries in the car since the only necessary infrastructure for the batteries was an outlet in the garage!
But two important developments brought the "time" of hydrogen before us. The first development concerns the 2008 financial crisis and the huge sums that governments injected into technology as measures to get the global economy out of recession. These investments have helped RES to become more economically competitive with the predominant technology being that of photovoltaic systems. And these RES can now be used in a cost-effective way in the production of green hydrogen.
The second development that came in 2021 again concerned the huge sums that governments pledged to allocate to the market to get out of the crisis brought by the pandemic. And at a truly happy juncture, America, Europe and China have allocated a large part of these funds to the transition to the green era. Bloomberg NEF has estimated that by 2050 green hydrogen will cost just 1/3 of its current price with its annual purchase being the size of $ 700 billion. To understand this magnitude, it is enough to bear in mind that the total oil and gas market today is of the size of $ 1.5 trillion.
The future market structure
Above I had mentioned the three types of hydrogen: grey, blue and green. And while the market has now discounted the withdrawal of grey hydrogen since its production is just as harmful to the environment as the burning of fossil sources and while one would expect the prevalence of green hydrogen as the source of energy for the future, things are not so clear in the medium term. And the reason is the huge economic interests that are at stake and that are fighting for their very existence.
I am referring, of course, to the countries that produce fossil energy and to the companies that own the gas distribution networks. Both influential and capitalist groups support blue hydrogen, each group for its own reasons. As we saw above, blue hydrogen uses as raw material natural gas with negative production of carbon dioxide. For gas producers in America the solution lies in the technology that allows the burial of CO2, a know-how that has been developed over decades in Europe.
For the countries of the Middle East, the solution lies in the use of RES from Voltaikos, utilizing the abundant solar energy of their region. For the owners of the distribution networks, the bet is to develop technology that will allow them in the future to channel hydrogen through the existing pipes with minimized leaks. This is absolutely necessary as studies have shown that the leakage of hydrogen into the atmosphere without combustion has a medium-term increased negative effect on the atmosphere and from CO2 itself.
So a tough battle is expected. In the medium term at least, it seems the most likely development to be the use of both forms of hydrogen.
What we do
Developments in the energy sector will be rapid. As we saw above, natural gas is a short-term solution for the long journey to green energy. And the time of its use is increasingly reduced . We should be concerned about this in two axes. Firstly, we have already lost valuable time in its utilization – further delay simply reduces its economic value. The second pillar concerns our plans for the use of hydrogen or to be more clear the absence of any design. At a time when advanced countries are already planning their future on the basis of hydrogen-based energy, we are still thinking on the basis of natural gas. Time to wake up.
