Green hydrogen may get all the headlines, but the prospect of it fueling Europe's future hydrogen economy on its own looks increasingly questionable.
Blue hydrogen is produced from natural gas, with carbon capture and storage (CCS) technology scooping up the resulting CO2. Green hydrogen, in contrast, is produced by using (ideally dirt-cheap) renewable electricity to power an electrolyzer that splits the hydrogen from water molecules. (Read GTM's recent explainer on green hydrogen here.)
Both blue and green hydrogen have their problems. Blue hydrogen locks in dependence on natural gas, with all the price volatility and geopolitics that comes with it, and it also relies on the development of cheap and effective CCS. Green hydrogen, however, requires cheaper electricity than is currently available as well as an end market for hydrogen that can sustain high electrolyzer utilization rates.
With the European Union set to announce its long-term hydrogen strategy in mid-July, one question has emerged at the heart of the debate: Should blue hydrogen be excluded from the plans?
A cluster of powerful European governments says a hydrogen economy has to be fueled by renewables, not natural gas. The natural-gas industry and other voices counter that any hydrogen future should be technology-neutral, allowing the hydrogen market to scale up more quickly and potentially lead to a quicker decline in overall emissions.
The EU is aiming to be net-zero carbon across all sectors by 2050. Hydrogen is likely to play a substantial role in getting carbon out of those hard-to-reach sectors like heavy industry and freight.
Germany, France, the Netherlands, Belgium, Switzerland, Austria and Luxembourg — operating under the banner of the Pentalateral Energy Forum — declared their cooperation on hydrogen development “with a particular focus on renewable [green] hydrogen.”
Germany’s own national hydrogen strategy (PDF), approved by the government on June 10, also leaves the door open for blue variants. “The Federal Government considers only hydrogen that has been produced using renewable energy (green hydrogen) to be sustainable in the long term,” the German strategy states. However, given that it expects a global and European market for other forms of low-carbon hydrogen to emerge, the government says Germany will participate too.
Meanwhile, the U.K. government’s climate advisers, in their annual report released last week, backed blue hydrogen as a means to help scale-up the hydrogen economy quickly — in tandem with, not instead of, the development of green hydrogen.
"Reluctant acceptance" of blue hydrogen in policy circles
Last week, the European gas lobby, Eurogas, sent a letter to the European Commission’s Executive Vice-President Frans Timmermans calling for a technology-neutral approach in the EU’s hydrogen strategy. Among the co-signatories were many of the energy industry's biggest players: Equinor, GE, ExxonMobil, Eni and others.
“The reality is that all the scientific community, the U.K.’s Committee on Climate Change, the [U.N.'s Intergovernmental Panel on Climate Change], the [International Energy Agency], everybody else is saying [that to] realistically [limit warming] to 1.5° C by 2050, Europe's going to have to use CCS,” James Watson, secretary-general of Eurogas, told GTM in an interview. Before taking the helm at Eurogas, Watson served as CEO of SolarPower Europe trade group.
“There is somehow a reluctance to accept [blue hydrogen] publicly, but I can assure you [that] in private, from Timmermans down, the conversations that we're having are that there is a reluctant acceptance of blue hydrogen. They know that they need it. They know that they won't get to carbon-neutrality without it. It's just I think that it's difficult for them to openly say that,” Watson said.
“The politicians know that the scientists tell them they have to use CCS. They know that it's not a super sexy thing to tell the electorate. So they like to talk about green hydrogen...and the ultimate domination of green hydrogen, but they know that if they're going to get there, they're going to need to use blue. And that's why I say we see it as a transition.”
Watson describes blue hydrogen as performing the same kind of bridge-fuel status for hydrogen that natural gas has performed for the growth in renewables in the power mix. In the long term, however, Eurogas' members know that green hydrogen is the goal.
Green hydrogen not without its own problems
One of the principal challenges for blue hydrogen is that as things stand, the CCS technology it depends on is not widespread at the required efficiency levels — 60 to 70 percent is more common than the 95 percent that would be required for net-zero credentials to hold water.
Despite that, Equinor has already closed finance on the Northern Lights CCS project and this week announced a 600-megawatt blue hydrogen project in the U.K. known as Saltend, with a final investment decision expected in 2023. Saltend will form part of the Zero Carbon Humber project, a collaboration with National Grid and Drax Power to feed negative-emissions power and hydrogen to a cluster of industrial centers in the east of England.
Blue hydrogen is not a perfect solution, but neither is green. A recent report by Wood Mackenzie showed that lower electricity prices and high electrolyzer utilization rates will be needed to make green hydrogen competitive. That means vast renewables deployment and creating the demand for hydrogen that will sustain those high capacity factors.
Electrolyzer manufacturing is another piece of the green hydrogen puzzle that needs to be addressed, though progress is now being made. Gigafactory-scale electrolyzer additions are underway in Norway, Germany and the U.K. courtesy of Nel, ThyssenKrupp and ITM Power, respectively.
The European Commission has set out along the road to achieving a climate-neutral economy by 2050. But where do the opportunities lie and what technologies are poised to benefit?
Wood Mackenzie has launched a European Green Deal guide to help businesses understand how the European Green Deal will shape the future energy market and evaluate the potential new opportunities. Click here to find out more.