Why we can't ignore green hydrogen in the clean energy mix

Historically a dark horse, green hydrogen energy has received renewed attention among global policy-makers and energy experts as a potential driver of net zero emissions. This is in large part because of significant advances in enabling technologies along with government subsidies and industrial policies supporting its research and development (e.g. more than €5 billion approved by the European Commission and $9.5 billion in the US Inflation Reduction Act).

Emissions-free green hydrogen uses clean electricity from renewable energy sources, including solar, wind, geothermal and hydropower, to separate hydrogen from water in a process known as electrolysis. According to The Economist, the element is not a primary source of energy like fossil fuels, but an energy carrier like electricity. The article also notes that: “There is no natural source of hydrogen, and most of it is bound up in molecules like fossil fuels, biomass, and water.”

Thermodynamics dictates that making hydrogen from one of these molecular structures requires more energy input than the final output of hydrogen power. Hence, the processes used are currently limited to chemically altering hydrogen by drawing in other elements on the periodic table to produce steel and cement, fuel for rocket engines, explosives, and to refine ammonia for fertilizers. It is cost-effective for these specific manufacturing and industrial processes requiring higher temperatures than conventional electrical power sources. In short, clean hydrogen will require extraordinary breakthroughs in innovative technologies if it is to achieve its stated goal of generating emissions-free electricity to the masses.

This is not to dismiss the progress made since the world last took a stab at hydrogen in the 2000s. The source of energy determines where it lies on the hydrogen colour palette. Green hydrogen is created, as we have seen, using emissions-free energy. The lower costs of generating solar and wind power today may enable the commercial scaling-up of green hydrogen production and its corresponding supply chain. Conversely, grey hydrogen, representing 95% of what the world uses today, produces energy using fossil fuels that release carbon dioxide into the atmosphere. Its close cousin, blue hydrogen, comes from natural gas; its carbon emissions are sequestered underground using carbon-capturing methods, rather than being released into the air.

Taken together, they provide options that can complement the strengths and weaknesses of other energy sources such as the inherently intermittent nature of solar and wind power. Hydrogen is just one of many arrows in a diversified energy quiver battling global warming and increasing carbon capture.

Tax credits and industrial policies are there to prime the pump for research spending and development of cleaner fuels, but the last mile to the finish line is the most difficult one. Such public policies are designed as a temporary aid to test-proof a concept prior to it being driven forward by private equity markets and tapered off taxpayer subsidies.

However, there are risks involved with this method. A cautionary tale of investing in green energy for investment’s sake is exemplified by the failed US solar panel firm Solyndra. The company garnered $535 million in federal loan guarantees between its inception in 2005 to its bankruptcy in 2011. In 2010, Solyndra brought online “Fab 2,” a $733 million advanced production facility in Fremont, California funded by these federal loan guarantees in addition to private investment. According to a press release, the company touted plans to employ 1,000 and produce solar panels with an annual manufacturing capacity of 500 megawatts per year. Bankruptcy exposed the frailty of these promises and the new facility closed. A 2015 report by the Department of Energy cited that incorrect information provided by Solyndra “undermined the department’s efforts to manage the loan guarantee process”.

To avoid this situation with funding spent on green hydrogen development, it will be critical for regulators and funding recipients to have transparent measures of success and accountability throughout the process of developing this new technology.

As mentioned earlier, green hydrogen currently faces immutable laws of chemistry and physics that require major technological breakthroughs. Similar to other sources of clean energy, it lacks a transportation infrastructure (pipelines included) and a mature supply chain network to manufacture grid-connected and less expensive electrolyzers. Currently, storage and long-distance shipping are cost-prohibitive. Rapidly scaling up its production presents another challenge. Rules, regulations and standards governing its production, transport and uses need to be legislated to pave the way. Green energy’s “clean” credentials have to be clearly defined and classified to ensure tax credits are not self-defeating and indeed carbon-less. Regulators have to closely police greenwashing and compel companies to disclose their life-cycle emissions.

Diversifying our energy portfolio toward clean hydrogen may also crowd out investment for more efficient renewable applications. This can result in the proverbial prisoner’s dilemma where the self-interests of, say, a wind and solar company vying for the same pool of limited government funds as a hydrogen company can lead to sub-optimal outcomes for all three. Also there is little sense in green hydrogen appropriating wind and solar power from the grid – which together account for only 11% of total US electricity, according to the Kiplinger Letter – when it is comparably more costly and less efficient for commercial and residential users.

Despite these criticisms, we cannot ignore the opportunities to explore green hydrogen given its potential to reduce greenhouse gases from the atmosphere, decrease global temperatures and improve environmental quality. Though a high-volume gas, hydrogen is lightweight, carbonless and energy-dense; higher on the latter count than natural gas, when burned in the air it does not produce carbon monoxide or sulphates associated with hydrocarbons. However costly, when used in fuel cells it produces electricity without combustion, and its only byproduct is water. Using electrolysis, hydrogen can balance out supply and demand on electrical grids and respond better to seasonal adjustments because of its storage capacity once compressed. Also often overlooked by policy strategists are its geopolitical implications: It could redraw the energy map, reduce global income inequality, and increase wealth of newly minted hydrogen energy suppliers in developing countries such as Chile, Columbia, Uruguay, India, Indonesia, Morocco and Namibia.

Once science and technology catches up to the aspirations of green hydrogen and we overcome the arduous trial and error process, a decarbonized promised land awaits. Resiliency, operational reliability and overcoming supply chain constraints are equally important. Economic history clearly demonstrates how human ingenuity has always found a way to solve what appeared at the time to be insurmountable hurdles. Discoveries that we benefit from today were once dormant in our collective imaginations. As Albert Einstein observed: “You can’t solve a problem on the same level that it was created. You have to rise above it to the next level.” This is the hopeful trajectory that we find ourselves in today with regard to green hydrogen.