Once dismissed as too expensive, hydrogen is now being championed by politicians, executives, and activists as the zero-carbon fuel of the future. New research and a slew of industry announcements promise clean-burning hydrogen at $1 per kilogram will displace fossil fuels used in industries from steel to shipping.
In September, European researchers in the peer-reviewed journal Solar RRL predicted hydrogen (H₂) produced from renewable energy (known as green hydrogen) would fall to as low as $1.13/kg in a matter of years, dramatically beating previous forecasts and undercutting dirty, methane-derived sources of hydrogen.
If true, entire industries could make the switch from today’s polluting fossil fuels to clean, green H₂ years earlier than expected—and bypass the need for blue hydrogen, the ostensibly low-carbon approach that the oil and gas industry favors because it involves the use of natural gas (the hydrogen in the gas is split from the carbon, and the latter is captured and stored).
The question for the energy industry is whether green hydrogen, which splits water molecules by applying an electric current, can be made more affordable. Right now it’s still cheaper to burn natural gas we pump out of the ground, says Martin Tengler, the lead hydrogen analyst at BloombergNEF. Conventional fossil-based hydrogen costs about $1.80/kg. Adding carbon capture for blue hydrogen raises the price to $2.40/kg. Green hydrogen, meanwhile, costs between $3/kg and $7/kg, according to the European Commission. Other sources put the cost as high as $12.
But Siemens Energy announced in March that it would begin using commercial wind projects to generate green hydrogen for just $1.50/kg by 2025, calling it “the second stage of the energy transition.” More sources of green hydrogen at that price would likely strand billions of dollars in fossil-fuel infrastructure meant to support a blue-hydrogen future.
Why hydrogen
Hydrogen is an attractive fuel because it is energy-dense, packing 2.6 times more energy per kilogram than natural gas. In applications demanding lots of energy (steelmaking), or small volumes (aviation), green hydrogen rivals fossil fuels. And it burns clean—very clean. Exhaust from a hydrogen fuel cell or furnace is mostly water.
But that’s not true about its manufacture. Most hydrogen today—more than 98%—is derived by superheating methane or coal with steam. The $150 billion industry is an energy hog, gobbling up 6% of the world’s natural gas and 2% of its coal while emitting as much greenhouse gases as Germany (more than 800 million tonnes of carbon dioxide).
Little of the hydrogen produced around the world today is used for energy. Most of it is used (pdf) for ammonia (in fertilizer), oil refining, and methanol to make products including glues, foam, and solvents. The vision, however, is for green H₂ to someday power a major chunk of the global economy. Steel foundries, airplanes, ships, power plants, and building furnaces could all, theoretically, switch to hydrogen to achieve net-zero emissions. But for now, those applications are nascent at best.
Whitney Herndon, who leads US energy research at the Rhodium Group, says green hydrogen won’t catch on unless governments impose net-zero emission mandates. Without them, the massive economies of scale that drove down manufacturing costs in the solar and wind sectors won’t materialize for green hydrogen.
A less ambitious decarbonization scenario means the market will likely settle for cheaper, easier solutions than green hydrogen—by bolting carbon capture onto traditional, methane-fueled hydrogen plants employing steam-methane reformation (all those plants, she notes, are already paid off, unlike financing new plants and risky technology).
Either way, Herndon thinks green hydrogen at $2/kg to $3/kg by 2030 is “optimistic.” Instead, she predicts much of the world’s hydrogen capacity will still come from blue hydrogen pairing existing natural gas plants with carbon capture.
Oil and gas bets on blue hydrogen
For the oil and gas industry, that would be a lifeline. Oil giants already have sunk trillions of dollars into natural-gas infrastructure. Now they’re spending heavily on developing a new generation of blue hydrogen projects that can take advantage of it. All that will depend on capturing carbon and pumping the CO₂ underground safely and at a reasonable cost. So far, the evidence for this is thin: pilot projects have suffered huge cost overruns, low capture rates, and methane leaks.
There’s no shortage of blue hydrogen skeptics who question the cost and the practicality of carbon capture. Chris Jackson, the former chair of the UK Hydrogen and Fuel Cell Association, quit his industry group, calling blue hydrogen an “expensive distraction.”
But that hasn’t stopped billions from being invested from Texas to North Dakota to turn massive natural gas reserves and refineries into lower-carbon infrastructure. This year, BP announced it would build a 1-gigawatt blue hydrogen facility to meet 20% of the UK’s hydrogen target by 2030, as the country looks to repurpose much of its gas infrastructure for hydrogen. Countries like South Korea are negotiating with Saudi Arabia to turn liquefied petroleum gas (LPG) into blue hydrogen for future refueling stations.
The green hydrogen boom
The market, and global politics, may already be making Jackson’s case against blue hydrogen.
In the last few years, the pipeline of green hydrogen projects has grown five-fold: 350 projects are now slated through 2030 expected to receive $500 billion in financing and subsidies. Japan, Canada, and the EU all have formal roadmaps for a hydrogen economy. The US Department of Energy has a “Hydrogen Shot” initiative to achieve $1/kg by 2030. And China’s state-owned industries, mindful of the country’s 2060 net-zero target, have already announced massive green H₂ projects boasting 300 MW electrolyzers, dwarfing any of those in Europe.
“Given the degree of explicit policy, corporate and social support that has blossomed in 2020,” says the energy consultancy firm WoodMcKenzie, “green hydrogen will successfully scale and realize huge production cost declines. Given the scale-up we’ve seen so far, the 2020s is likely to be the decade of hydrogen.”
But first, electrolysis (pdf) needs to get much better. Today, most hydrogen is still produced by heating up fossil fuels, a process known as steam methane reforming. In green hydrogen production, a device known as an electrolyzer cleaves apart hydrogen and oxygen atoms, in a process called electrolysis.
“Green hydrogen is fundamentally tied to how cheaply you can produce clean electricity and how cheaply you can produce electrolyzers,” says Daniel Esposito a policy analyst at Energy Innovation, a nonpartisan energy and environmental policy firm.
With prices tumbling, and net-zero mandates on the horizon, green hydrogen could see the steep price declines solar, wind, and lithium-ion battery technology have enjoyed in recent decades. That would dash the oil and gas industry’s dreams of a blue hydrogen future.