The Promise And Problems Of Hydrogen — BQ Explains
The global race to tackle the climate crisis by shifting away from fossil fuels has sent lawmakers and businesses back to the very first element of the periodic table: hydrogen.
A hydrogen-powered economy has been a long-awaited dream but the push for widespread adoption has never been this strong. Hundreds of billions of dollars have been pledged for producing so-called 'green' hydrogen—that's produced by splitting water into hydrogen and oxygen by passing electricity through it.
India is ready to take a lead. Two of the Asia's richest, Mukesh Ambani and Gautam Adani, have announced grand plans to locally produce electrolyser units and manufacture green hydrogen. Other companies like state-run NTPC Ltd., NHPC Ltd., Indian Oil Corp., and infrastructure conglomerate Larsen & Toubro Ltd. are also looking to tap into the emerging sector. The government has lent support by announcing a hydrogen policy to incentivise manufacturing. It aims to produce 5 million tonnes of green hydrogen per year by 2030.
But while the promise of clean hydrogen is full of sunshine, it remains an uncertain bet for the future. Costs associated with making green hydrogen remain unviable, while its applications are limited. At present, hydrogen forms only a minuscule portion of India's energy mix.
BloombergQuint unpacks the potential and challenges of the big bet on green hydrogen:
Why Is Green Hydrogen A Big Deal?
Hydrogen is the least complex element on earth. When it burns, it releases energy in the form of heat and water as a by-product. There's no greenhouse gas emissions.
That premise alone makes it a terrific substitute for industries that use fossil fuel to generate heat. Theoretically, hydrogen can power everything from the production of steel, cement, fertilisers, trains, ships and aircraft. It can help reduce emissions for sectors that have long been considered 'hard-to-abate' because of their inherent reliance on fossil fuels.
For India, it has macroeconomic benefits too. A viable hydrogen industry can help reduce its fuel imports—one of the largest burdens on its import bill.
As of now, India's annual hydrogen consumption is 6.7 million tonne—half of which is used for petroleum refining, while bulk of the rest is in fertiliser manufacturing. The Energy and Resources Institute estimates this demand to go up 10 times by 2050.
Currently, the hydrogen being used is 'grey'—that's produced using fossil fuels and releases carbon dioxide. A flourishing green hydrogen industry could potentially help India's decarbonisation efforts.
What's The Catch?
For starters, the costs involved in producing green hydrogen are high. Very high.
While electrolysis is easy to perform in a lab setting, using it to generate industrial levels of green hydrogen requires large-scale investment.
According to the International Energy Agency, producing 1 kilogram of green hydrogen can cost anything between $3-$7 right now. That compares to $0.7-$1.6 for producing the same amount of hydrogen using natural gas, and up to $2.5 per kg using coal.
Globally, the $2-mark is seen as a tipping point for green hydrogen to start seeing widespread adoption. Ambani has vowed to deliver it at $1 per kg by 2030.
And that's just the production costs. As hydrogen is the lightest gas, it needs to be compressed, mixed with natural gas, or chilled into a liquid for transportation that will add to costs. Beyond that, there's the cost incurred on integrating green hydrogen into manufacturing processes.
Why Is Producing Green Hydrogen So Costly?
The cost of green hydrogen relies on two key components: price of electrolysers and renewable energy.
Electrolysers, though commercially available, are pricey. Kashish Shah, energy analyst at the Institute for Energy Economics and Financial Analysis, said electrolyser prices need to come down by two-thirds for green hydrogen to be viable.
"Even the cheapest electrolysers cost $750 per kilowatt on average," Shah said. "We need it to come down to around $250."
Renewable energy prices, too, though declining significantly over the years need to come down as green hydrogen production has large electricity needs.
According to a 2019 report by Wood Mackenzie, it costs $38 to generate 1 megawatt hour of electricity in India. According to Shah, even now it remains north of the $30-mark.
"Renewable energy costs need to come down to below $20 per MWh. That's when we get green hydrogen costs down to $1.5 per kg," he said.
How Will Costs Come Down?
American aeronautical engineer Theodore Paul Wright had hypothesised that every time output is doubled, the cost of technology falls by a constant percentage.
With increased investments, factories will get more efficient at making electrolysers and, as a result, green hydrogen. Cheaper prices will drive more demand and the higher volume will in turn drive suppliers to produce raw materials for less.
"The best example is how we've seen the cost of battery and solar modules come down over the years," Shah said. "A larger scale of production will automatically bring average costs down."
As of now, India has only one electrolyser manufacturing unit. The Bengaluru factory of U.S.-based Ohmium International has a capacity of 500 MW per year and plans to scale it up to 2 GW per year.
For India's target of producing 5 million tonne of green hydrogen a year, it will need at least 10 gigawatts of electrolyser capacity.
Ambani will likely have a big role in that. His $75 billion investments towards clean energy include setting up four gigafactories—one of which will be solely dedicated to producing electrolysers. However, it is unclear what will be the capacity and when it will start commercial production.
Are Costs The Only Hurdle?
No, but they are the most immediate one.
Even if cost parity is achieved, green hydrogen will have to find where it can be used. And not all use cases are likely to succeed.
According to Leibreich Associates, certain sectors like fertilisers, oil refining and petrochemicals, where hydrogen is already being used, will be quick to transition as there's no other alternative.
Its success in the use for long-haul transport sector will remain limited as there are more economically viable alternatives available like biogas.
Another promising application is for the manufacturing of steel and cement—two of the largest emission sources. But, there has been little-to-no demonstration in the real world of producing these using green hydrogen.
The risk, as Michael Leibreich writes, is: "What if the world throws a hydrogen party and no one shows up?"
The other issue comes from the nature of renewable energy—electricity is generated only when the sun is out, or the wind is blowing at a certain velocity.
Shah points that most renewable plans operate at a low capacity utilisation of 25-30%. For hydrogen to be 'green', it needs to use renewable electricity. Which means the low capacity utilisation will prove to be a hurdle.
One way to offset that could be by using excess electricity on the grid to generate hydrogen, Shah said, which then can be stored and itself used as an energy source.
Aren't There Alternatives Like Blue And Turquoise Hydrogen?
Hydrogen is colourless. Colours are used to denote production methods through which it is obtained.
The most used method from natural gas, or methane, using steam reformation, produces grey hydrogen. It is the most environmentally damaging variant—10 kg of CO2 are released for producing 1kg of hydrogen gas.
Blue hydrogen—which is being touted for use till green hydrogen costs come down—uses the same process as grey but captures the CO2 that is released at the end. Ambani is planning to make Reliance Industries Ltd. the largest blue hydrogen maker in the world by repurposing a $4-billion plant.
Proponents say it is cost-effective and good for the environment. But it is not.
A study from last year showed that blue hydrogen has a 20% higher global warming footprint, compared to if natural gas was burned directly instead. Besides, it also leads to methane leakage that is 80 times more potent than CO2 in heating the Earth.
And carbon capture systems are expensive and unproven. The 27 carbon capture and storage facilities across the world together capture only about 0.1% of the global emissions.
"Blue hydrogen is not a viable alternative. It is greenwashing," said Shah. "Carbon capture storage have been around for a decade but have been a commercial failure."
'Turquoise' hydrogen is a low-emissions alternative that also uses natural gas as feed but siphons the polluting carbon as a solid instead. However, the technology is very much in a nascent stage with the U.S. having the sole commercial methane pyrolysis plant in the world. Its performance remains unclear due to lack of analysis.
There are other colours like pink (produced from nuclear energy), and white (encrusted in Earth), but they are not being considered for commercial use so far.
What's The Road Map For India?
The government is clearly pushing for India to be a driver for green hydrogen. It will waive inter-state transmission charges on renewable energy for production of green hydrogen, and allow free storage of surplus output for 30 days. Besides, manufacturers will be allowed to set up bunkers near ports for storage and exports.
In the second phase of the policy, which is still being prepared, the government is also considering subsidies for producers and mandates for refineries and fertiliser plants to use green hydrogen.
They key, Shah said, is to localise manufacturing. "We missed the boat with solar modules, and it led us to rely on imports for a long time," he said. "We don't want to make the mistake again."
Production and applications of hydrogen, Encyclopaedia Britannica. (Read more)
Hydrogen Tracking Report, IEA (Link)
A Green Hydrogen Economy For India, CEEW (Click here)
The Potential role of Hydrogen in India, TERI (Link)
Whether green, blue, or turquoise, hydrogen needs to be clean and cheap, Bulletin of the Atomic Scientists (Read here)