The promise of ‘green’ hydrogen
By Thomas Koch Blank/ Stockholm
While we already have mature technologies that can replace fossil fuels in many parts of our economy, there are areas where eliminating carbon pollution will be much more difficult. Steel, shipping, aviation, and trucking, for example, account for a combined 40% of our global carbon footprint and are on track to consume two times the remaining carbon budget for staying below 1.5C of warming.
Fortunately, “green” hydrogen – H2 produced through electrolysis using renewable energy – holds enormous promise for these sectors. Through various applications, this tiny molecule can provide the heat, reduction properties, fuel, and other services needed to replace fossil fuels. In fact, given the technical challenge of getting these “hard-to-abate” sectors to a state of carbon neutrality, hitting 2050 net-zero targets without it would be virtually impossible.
H2 uptake can serve other objectives beyond decarbonisation. For example, hydrogen’s ability to substitute for natural gas in many applications allows for a degree of energy independence and reduced reliance on liquefied natural gas or pipeline imports from Russia. And while renewables like solar and wind are limited by the extent of electrical grids, hydrogen can be transported by pipeline or potentially by ship. That means it could become an exportable renewable-energy source, eventually replacing petroleum as the main global energy commodity.
H2 uptake is starting from vastly differing points, depending on the market. In Europe and Southeast Asia, political and market incentives are already fully aligned for the deployment of H2 infrastructure. But in large oil- and gas-exporting economies, the incentives are often conflicting. Notably, there is significant misalignment in the United States, where natural gas fulfils all the political priorities that hydrogen can provide for other markets.
As a crucial element in achieving 2050 net-zero targets, hydrogen production, storage, and transport represents a multi-trillion-dollar opportunity, not only for energy incumbents but also for investors. While hydrogen is currently more expensive (per unit of energy delivered) than competing options such as fossil fuels, the scaling up of electrolyser production is driving down costs. Within the next decade, we can expect H2 to reach break-even points with fossil fuels across different applications, after which hydrogen uptake will bring cost savings.
Green hydrogen is particularly attractive for developing economies. There is a strong geographical overlap between countries and regions with the lowest production cost for renewable energy and those with lower per capita GDP. These countries thus could secure a global competitive advantage by becoming hydrogen producers and exporters. Doing so would also help them attract zero-carbon heavy industry, such as fertiliser manufacturing or hydrogen-based direct reduction steelmaking. And, of course, the development of these sectors would lead to significant job creation.
H2 is also attractive for wealthy industrialised countries, which currently lead the world in the manufacture of hydrogen electrolysers. However, if the recent history of the photovoltaic (solar panel) industry is any guide, wealthy countries may need stronger industrial policies to ensure that production does not migrate to China and other regions.
There is more work to do before hydrogen can realise its full decarbonisation potential. As matters stand, green hydrogen represents a very small portion of existing hydrogen production. Instead, most hydrogen is “gray,” because it is made using fossil fuels through a steam methane reforming (SMR) process. Though there is potential to capture and store some of the associated carbon dioxide emissions to make a slightly cleaner fossil-based “blue” hydrogen, this option would not be emissions-free. H2 therefore has a complex CO2 footprint, for now.
Furthermore, for hydrogen to deliver on its promise, the decarbonisation of electric grids must happen in parallel. But as with electric vehicles (EVs), we cannot wait for a 100% clean grid to begin deploying electrolysers; we must start now.
This is not as financially risky as it sounds. There will undeniably be a threshold where green hydrogen becomes the lowest-cost source of hydrogen generally. Notably, the US Department of Energy’s recently announced goal of reducing the cost of “clean hydrogen” to $1 per kilogram is nearly impossible to achieve with hydrogen produced through the SMR process at sustainable price levels for natural gas. That means US policy is already aligned behind green hydrogen.
Nonetheless, using green hydrogen to decarbonise heavy industry will demand a truly awesome amount of electricity. Producing the necessary volume of hydrogen would almost double total current global electricity generation. The only way to meet this demand is to build renewable energy even faster.
That, in turn, will lead to critical infrastructure-design questions, such as whether to prioritise H2 pipelines or power lines. And the growth of this sector will have many regulatory implications. To ensure a rapid build-out of hydrogen infrastructure, it will be important to enable monetisation, create rate structures to encourage capital-expenditure deferral, and provide system-wide planning across infrastructure types.
Equally, a move to H2 will accelerate the obsolescence of many fossil fuel-based assets. For these large volumes of stranded assets not to produce negative side effects, they will need to be repurposed or helped into early retirement with various financial incentives.
One high-potential area for repurposing infrastructure is in natural-gas pipeline networks, which, in some cases, can be retrofitted to allow for hydrogen transport. Some thermal power plants can also potentially be repurposed; but, here, the end-to-end efficiency of power-to-hydrogen-to-power is low, so the profitable use cases are limited. For the steel industry, the picture is grimmer, as existing blast furnace capacity may need to be replaced with direct reduction. Similarly, gasoline and diesel fuelling infrastructure will need to be replaced. But the future of such infrastructure is already in doubt, owing to the growing market for battery EVs.
Hydrogen brings enormous opportunities but also a daunting scaling challenge. Globally, the industry currently has the capacity to produce only around one gigawatt of hydrogen electrolysers each year, whereas, according to the International Energy Agency’s analysis on what a 1.5C pathway requires, green hydrogen production will need to grow 1,000-fold from today to 2030.
There are actions that can and must be taken to meet this challenge. First, we need policies to ensure stable demand at scale, so that electrolysis makers can leap-frog into industrialised manufacturing. Second, governments must provide subsidies to cover the initial “green premium” until learning-curve effects take over. And, finally, we must address the tension between current asset locations and the places with the lowest-cost clean-sheet footprint for decarbonised industries.
Backed by direct and indirect political priorities, hydrogen markets have already gained momentum and crossed the point of no return. As such, they are quickly bringing cleaner industry and a decarbonised economy within striking distance. – Project Syndicate
• Thomas Koch Blank is Senior Principal of Breakthrough Technologies at RMI.
AMMAN – The hottest day on record in Jordan since 1960 was a staggering 49.3° Celsius, (120.7° Fahrenheit) in July 2018, one month after I became prime minister. Jordan is not unique: heat waves have been causing record-high temperatures in countries from Canada to Australia in recent years. The effects of climate change (including increased frequency and severity of floods, hurricanes, and droughts), while felt locally, demand a global response, which should set binding targets that take into account countries’ contributions to the problem and to the solution.
Jordan has been actively pursuing policies and programs to reduce carbon-dioxide emissions. Over the past 15 years, Jordan’s annual emissions per capita fell from 3.5 tons to 2.5 tons. But Jordan, like the vast majority of countries, accounts for a negligible share of global CO2 emissions – just 0.04% annually. So even if Jordan was to turn its whole economy green overnight, it would hardly make a dent. This does not absolve us of responsibility, but we cannot overlook the fact that emissions are concentrated: the top 20 emitters account for almost 80% of the annual total, with the United States and China alone accounting for 38%.
In many countries, the ramifications of climate change for water supply have been staggering. In the case of Jordan, it made an already tight constraint much more acute. Rainfall was previously the savior for rural communities that engaged in seasonal rainfed agriculture and herding on semi-arid land. Over the last decade, however, a steady decline in average annual rainfall and an increase in the frequency and severity of droughts have undermined these modes of agriculture, deepening the socioeconomic divide between rural and urban areas.
Jordan is by no means unique: the World Health Organization estimates that half of the world’s population will be living in water-stressed areas by 2025. In essence, what was previously a regional challenge has now become a serious global governance issue with environmental, political, and economic ramifications.
More broadly, other manifestations of climate change, and the lack of an internationally coordinated response to them – not to mention to additional threats such as the COVID-19 pandemic – suggest that something is seriously wrong at the global level. According to the recent sober assessment by the United Nations Intergovernmental Panel on Climate Change, the world will not meet the 2015 Paris climate agreement goal of limiting global warming to well below 2°C unless it makes huge additional cuts in CO2 emissions.
Quite simply, the results of the world’s climate efforts are dangerously inadequate. According to the Climate Action Tracker, current policies put the world on course to be an alarming 2.7-3.1°C warmer by 2100, relative to pre-industrial levels. Yes, many emerging green technologies are promising and should be supported. But in the absence of a global approach, these innovations risk merely redistributing the impact of climate change among countries and regions.
Raising awareness and nudging (and shaming) policymakers is necessary, but not sufficient to avert what UN Secretary-General António Guterres has referred to as a “climate catastrophe.” Climate-change mitigation must be pursued as a global public good. The problem is that such goods are plagued by collective-action problems, because the costs tend to be spatially and temporally concentrated while the benefits are diffuse. These difficulties can be tackled only by global governance structures that reduce the cost of collective action, internalize externalities, and counter short-term biases in decision-making.
To address climate change more effectively, we need global governance arrangements that amount to a new global social contract. Existing international governance structures can serve as a foundation for these new institutions, but will need to be amended and supplemented to address specific problems related to public goods and collective action.
For starters, we need a governance structure whose jurisdiction is limited to global public goods that cannot be provided adequately at the national level. Nation-states would be free to opt in and opt out, with the benefits of opting in outweighing those of opting out. Decisions would be taken on a majoritarian basis, with no single country having veto power. There would also be an appeals and adjudication process that allows decisions to be challenged.
Second, a custodial entity would keep track of global natural wealth accounts to address intergenerational equity issues. This entity should be able to place items on the global governance institution’s agenda and to appeal decisions.
Lastly, a regime of incentives and disincentives would aim to preserve nature and biodiversity and tax those who consume it, taking wealth and income disparities across countries into account.
Establishing global governance mechanisms that focus on the public-goods and collective-action challenges of climate change will not be easy. Concerns and fears related to a “democratic deficit” and the need to protect national sovereignty are legitimate, and cannot simply be brushed aside.
Nevertheless, we are not starting from scratch. The World Trade Organization provides an example of a strong and successful global governance structure with binding rules. It is thus both ironic and sad that the WTO has failed to incorporate trade-related environmental and human-rights issues into its regulations in order to ensure a level international playing field. After all, with its sanctioning authority, the WTO is best positioned to link issues such as greenhouse-gas emissions and labor rights to trade rules.
Jordan cannot successfully tackle today’s global climate challenges on its own. Nor can the Middle East, owing to regional conflicts and rivalries. Now that the world has become a village, the task facing the region is instead to agree with other countries – our fellow villagers – on how to mitigate our own excesses and avert an existential threat. This can be achieved only by finding suitable ways to hold ourselves and each other accountable. The solution lies in establishing a global governance system that is based on the nation-state but has the capacity to sanction harmful behavior.
Some might regard the idea of creating such a structure as far-fetched. But unless we do, there is scant hope of preventing the climate crisis – already apparent in Jordan and around the world – from continuing to destroy countless lives and livelihoods.
OMAR RAZZAZ
Writing for PS since 2021
1 Commentary
Omar Razzaz is a former prime minister of Jordan.