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Hydrogen’s future: Decide end uses and supply will follow

HOUSTON — On the opening day of what is probably the world’s leading energy conference, hydrogen took center stage, with one presenter citing transportation as a potential market to lead its growth. 

The CERAWeek conference, now owned by S&P Global and operated by its Commodity Insights division, had multiple sessions Monday during which hydrogen’s future as part of what is known as the “energy transition” was widely touted. The section of the conference known as Agora had a hydrogen “hub” set up front and center, and formal as well as informal hydrogen-focused sessions took place there all day long to heavy crowds. 

A message that came through repeatedly in several sessions was that focusing on creating hydrogen supply had it backward. Instead, it was argued that the path to making hydrogen a significant fuel as part of the energy transition to a world of cleaner fuels is to establish more uses for it first and the supply will follow.

“I think hydrogen is better suited for heavy industry and heavy transportation, and the mass deployment will come later probably,” Marco Alvera, the CEO of Snam, said. Alvera was on a  panel with a title that largely summed up a lot of the conversations heard over the course of the day: “Will Hydrogen Deliver — and When?”

Snam’s primary activity is the construction of energy infrastructure.

Hydrogen does not exist on its own. Its molecules need to be separated from whatever other molecule it is attached to, like its attachment to oxygen in water. 

It’s the choice of the energy needed to separate out that hydrogen molecule that holds the prospect of it being an alternative clean fuel that can be used in numerous applications, such as in a fuel cell to power a vehicle. Hydrogen created through electricity from a coal-fired power plant would have a significant carbon footprint, even if the hydrogen-powered vehicle had no specific carbon emissions. 

Alvera laid out some numbers on the current economic competitiveness of hydrogen. He put it in terms of a fuel’s ability to provide a megawatt-hour of electricity. 

Hydrogen in Europe is now about $100 per MWh. Oil is about $80 to $90 per MWh, while U.S. natural gas, which has not run up anywhere near the surge in other fuels, is at about $20 per kilowatt-hour. But European natural gas, which already was in short supply before the Russian invasion of Ukraine, is up to about $300 per kWh.

Green hydrogen, produced entirely from renewable fuels, would now be priced around $100 per MWh, Alvera said. That compared to German power prices, which he said are close to $480 per MWh.

The member of the panel who has the most hydrogen experience was Samir Serhan, the COO of Air Products, which has long been a producer of industrial hydrogen. Government policy toward the various technologies that can be used to produce hydrogen should be “agnostic,” Serhan said, and that policy “should be more focusing on promoting end-market use.”

But even though the message was that hydrogen’s growth should come through developing end-use markets for it, the technology needed to produce it was a focus of much of the discussion.

Bill Newsom, the president and CEO of Mitsubishi Power Americas, said a key goal should be to reduce the cost of the electrolyzers that separate water and produce the stand-alone hydrogen. One way is to begin standardizing the electrolyzers, which Newsom said are now mostly “bespoke,” without much standardization.

Alvera described the current array of electrolyzer technology as “the difference between handmade boots and factory-made boots. … The cost curve can come down just using existing technology.” 

One specific government-sponsored demand booster that came in for praise by Serhan was the California Low Carbon Fuel Standard, which incentivizes the use of low-carbon fuels, such as hydrogen or renewable diesel, by allowing the use of those fuels to generate credits that can be sold to companies failing to meet their low-carbon targets. Serhan said that by promoting use of hydrogen, demand is generated and as supply rises to meet that demand, “the production costs naturally will go down.”

A company’s desire to be seen as environmentally conscious also is a boost. Alvera said some companies will give Snam a somewhat vague command to “just take away from my CO2 costs.” But others are more specific, he added, citing an ice cream manufacturing company that wanted its CO2 emissions reduced enough that it could boast of its environmental achievements in its marketing. To do that, however, green hydrogen would be required in the manufacturing process, as opposed to blue hydrogen (produced with natural gas and carbon capture and sequestration) or grey hydrogen (produced with natural gas and no CCS). 

But Serhan said something else was going to be needed: government standards for when a company can claim to have a carbon footprint low enough to justify some sort of low-emissions labeling on their products. 

But even if the focus of the panelists was on creating demand, the question of supplying the infrastructure for the hydrogen economy kept popping up. Alvera raised the specter of Western nations repeating the mistakes of the past, when they funded what he said was “trillions in subsidies” toward creating demand for the solar industry, “and all the production goes to Asia. We should create the demand and create the manufacturing at the same time.”

That led to further discussion about the supply chain needed to create the hydrogen economy, with Newsom commenting that the high costs of transportation could act as a spur to drive the manufacturing of hydrogen infrastructure toward the Western nations that are expected to be the biggest consumers.

Throughout the day, the benefits of hydrogen were repeated often: It can be transported relatively easily, with Serhan noting that his company operates hydrogen pipelines that run hundreds of miles. Areas that are rich in renewable capability — like a sunny area — can in essence store their excess renewable capacity by turning it into hydrogen, which then can be transported elsewhere. 

“Hydrogen is a great enabler and connector,” Alvera said. “It allows renewables to be built where they would otherwise be hostage to the bottlenecks of the existing grid. It allows development on a bigger scale.”

And long before the economy develops what a panelist in another discussion derisively referred to as an overly optimistic “shining hydrogen city on the hill,” with hydrogen powering a vast number of activities, Alvera said hydrogen can make inroads into decarbonization through blending. Blending 10% hydrogen into a natural gas stream, for example, “would overnight create demand” that would help give a boost to hydrogen infrastructure that might yield significant benefits 10 to 15 years in the future.

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