19 October 2020
When oil runs out: The world prepares to switch to a new superfuel
New views on the environment, the inevitable decline of the era of hydrocarbons and the continuing need for affordable energy are steadily leading the world to the discovery of a new source of energy. However, a replacement for fossil fuel was found quite a long time ago – in hydrogen and hydrogen fuel.
Some time ago, only Europe was able to take a decisive step towards it, faced with the need to quickly recover its economy after the “first wave” of the COVID-19 pandemic. To this end, the EU accelerated the decarbonization of the European economy, and the main role was assigned to hydrogen. Today the volume of this market is estimated at about $700 billion, for which the leading industrial countries are already fighting.
Jules Verne make it come true
The European course on decarbonization with a radical reduction of greenhouse gas emissions by 95% compared to the 1990 level has viewed hydrogen as one of the promising directions for the last 15 years. However, the COVID19 pandemic has seriously accelerated this process and literally pushed the global market towards the development of a hydrogen economy. According to the German Minister of Economy and Energy Peter Altmeier, corona gave Europe a chance to quickly develop climate-friendly technologies. In all strategic energy documents adopted by the European Union over the past month, hydrogen is identified as the main driver of economic growth to overcome the recession caused by COVID-19. “In this regard, hydrogen plays a decisive role,” stressed Altmeier.
To assess the possibilities of modern hydrogen energy, “Ridus” asked someone who knows almost everything about it: Florian Willershausen, director of Creon Capital, the management company of the Luxembourg-based Creon Energy Fund, which invests in green technology, renewable energy and logistics projects. The fund is part of the CREON Group, a strategic consultant in the field of sustainable development based on ESG factors.
Ridus: Florian, what role does hydrogen energy play in global energy production today?
– Hydrogen energy is, in principle, an old topic that has become a new trend. Jules Verne wrote about the possibilities of hydrogen as a source of energy. They started talking seriously about the practical use of hydrogen in Europe in the 1980s, and the first pilot projects appeared already in the 1990s and 2000s: Mercedes-Benz, for example, began small-scale production of the A-class based on hydrogen fuel cells. Recently, the company introduced the GenH2 hydrogen truck. However, hydrogen has not yet received mass development due to the high cost of technologies and more affordable fossil energy resources.
But hydrogen has become more important now, amid the flaring discussions on reducing emissions and greenhouse gases, as well as the search for new points of economic growth after the COVID-19 pandemic.
Today, many countries of the European Union, and first of all Germany, have identified green hydrogen as a basic energy carrier for the development of clean and really “green energy” without harmful emissions. In Europe, renewable energy sources (RES) – primarily solar panels and wind power – have been actively used for 20 years already. For example, Germany already covers 42% of its energy needs with the help of RES. Therefore, hydrogen is the next logical step in the development of the European Union’s energy supply system. And it will become the main driver of the European energy sector.
Clean from dirty
The desire of European countries to “green” the energy sector has long been known. However, the use of hydrogen as a fuel cannot be called wholly and completely “green” today. Here an old anecdote about business in Russian involuntarily comes to mind: steal a box of vodka, sell it and drink the proceeds … The very process of obtaining hydrogen, the combustion of which is so wonderful and environmentally friendly, since it does not give harmful emissions and greenhouse gases, needs energy, which can be obtained in a variety of ways, often far from the “green tones”. We asked Florian to explain the peculiarities of the hydrogen “palette”.
“Ridus”: What is the principle of energy production underpinning hydrogen energy?
– There are different ways of producing hydrogen. The most popular and affordable method today is the production of hydrogen from light hydrocarbons, primarily natural gas, by steam reforming. The output is gray hydrogen, which can be easily stored and transported. However, if the combustion of hydrogen itself is completely environmentally friendly, then its production requires very high energy costs and emissions of greenhouse gases, which makes it “dirty”. When Europeans speak of hydrogen as a clean energy carrier, they mean green hydrogen. The energy for its production – that is, the separation of water into oxygen and hydrogen – comes entirely from renewable energy sources, for example, wind farms. This is very important, because hundreds of millions of tons of precisely green hydrogen are needed to create a power industry without harmful emissions. However, for its production on an industrial scale, Europe still lacks the capacity of renewable energy sources.
Ridus: So the main problem in hydrogen production is that it is far from being “green”?
– Quite right. Gray hydrogen is produced, but this is no longer fashionable, it is harmful, the society doesn’t want it. Europeans check for “greenness” not only the final product, but also the entire value chain, including production. Strategic partners of the companies do not support investments in such projects. Therefore, we must try to minimize harmful emissions at all stages of production. But, from my point of view, there is still room for interpretation as to whether it is possible to consider purely environmentally friendly hydrogen based on water electrolysis using RES. Alternatively, production based on natural gas or nuclear power can still be considered just as clean, but at the same time a simpler and possibly cheaper alternative. Today this has become possible thanks to new technologies.
Reference: the colors of hydrogen
Green hydrogen is produced from water by electrolysis, which uses electricity exclusively from renewable sources. Regardless of the electrolysis technology, all the “green” hydrogen produced is produced without CO2 emissions.
Gray hydrogen is produced from light hydrocarbons (natural gas) by steam reforming. In its process, CO2 is not captured and is released into the atmosphere, negatively affecting the climate and aggravating the greenhouse effect. When producing one ton of hydrogen, up to ten tons of CO2 are emitted into the air.
Blue hydrogen is produced from hydrocarbons, like gray hydrogen, but with capturing and isolating of CO2 during the reforming process (Carbon Capture and Storage, CCS). In the overall energy balance, blue hydrogen is considered climate neutral.
Turquoise hydrogen is produced through methane pyrolysis, in which carbon is released instead of CO2. Turquoise hydrogen is considered climate neutral if two conditions are met: 100% of the energy for pyrolysis comes from renewable energy sources, and all the carbon released is bound.
Source: CREON Market Monitor
Do not name yellow …
The listed four “colors” of hydrogen correspond to the European classification. In Russia, one more is used – yellow. It characterizes hydrogen produced using atomic energy. We could not help but ask Florian why such an advanced Europe in terms of hydrogen categorically ignores “yellow” hydrogen.
Ridus: But there is nuclear power, which is relatively clean. By using nuclear energy to produce hydrogen, emissions can be avoided.
– I agree. I personally believe that nuclear power is a safe technological way to generate energy. Pure hydrogen can be produced using atomic energy. Nevertheless, the very topic of nuclear energy after the Chernobyl and Fukushima accidents in Europe is very politicized and perceived differently. People in countries like Germany are afraid of nuclear technology, France or the Czech Republic take it easier. Germany has completely abandoned nuclear energy, pledging to shut down all German nuclear power plants until 2022. Therefore, if you invest in a new direction of green hydrogen, it is better to consider RES as energy sources, and not nuclear power. There is no unanimous position in Brussels on this issue, so we cannot expect financial or political support for responsible investments.
Ridus: But the attitude to nuclear energy is different in the world. For example, in Europe – in Germany, for example – it is considered dangerous and dirty, in Russia there is a calmer attitude towards it. Is it possible to use atomic energy to produce hydrogen, say, in Russia and then supply this hydrogen to Europe? Are such opportunities being considered?
– I see great potential in this. Perhaps it will be a difficult product to export to Germany, but it may be much more understandable, for example, for the Czech Republic. The main thing is to establish a mass and harmless production of hydrogen. And this applies not only to the yellow hydrogen based on nuclear energy, but globally all long-term development. We need to think about how it is more profitable to convert natural gas into hydrogen, because this market is growing in China, Europe and other regions of the world. The demand for natural gas will definitely decrease in the future, this is inevitable. Therefore, large gas companies in Russia should now think about where to sell this gas. In 30 years, in the worst case scenario for Russia, the demand for gas will drop to almost zero, and in the best scenario it will be only half of the current volume. The production of environmentally friendly green hydrogen from natural gas, which is in demand all over the world, could be a good export case.
In this context, hydrogen poses great risks for Russian energy exporters, but it could also be an excellent opportunity if Russian companies begin to shape new value and supply chains.
Ridus: What do you mean?
– In Russia, they are used to the fact that gas is produced cheaply and sold at a high price, because there will always be export buyers for it. However, this model has become obsolete. In the future, gas producers will not only have to deliver gas through pipelines to the border, but process it on their own or with partners on site into a more complex product – for example, hydrogen – and then sell it to the industry on the basis of long-term contracts. Only those who shape the value chain through their own investments and sales strategies can be confident that they have a role to play.
However, in order to supply a new product for export, you must first show that it is of high quality and in demand on the domestic market. That is why it makes sense for Russian companies to launch pilot projects and develop in parallel the supply of industrial enterprises with hydrogen, as well as the infrastructure for hydrogen transport – cars and buses. A very interesting consumer sector is hydrogen-based rail transport. Indeed, in the Russian domestic market, it is not so important whether hydrogen is produced using nuclear energy, from gas or from renewable sources. It is important to show the world that Russia itself produces green hydrogen, creates infrastructure and uses new technologies. With this reasoning, one can safely enter foreign markets – to China, to India and even to Europe.
Hydrogen and Russia
Despite the fact that Russia is initially positioned in the world as an exclusively hydrocarbon power, nothing advanced is alien to it. The potential of the Russian hydrogen market is reflected in the Energy Strategy of the Russian Federation, published on June 10, 2020. The document ascribes to hydrogen a high export potential, which should amount to 0.2 million tons per year by 2024, and by 2035 – to grow tenfold, to two million tons. According to the plans of the Russian Ministry of Energy, which is simultaneously developing a hydrogen concept, Russia could potentially produce 3.5 million tons of hydrogen per year. This is equivalent to approximately 15% of the global hydrogen market.
Ridus: Florian, is anyone in Russia already engaged in hydrogen energy?
– Yes, large Russian energy companies are seriously developing this topic. There are also several pilot projects already in existence. A hydrogen tram is being tested in St. Petersburg. At the research level, some projects are being developed at the faculties of a number of Russian institutes. Gazprom is working on the prospects for converting natural gas into hydrogen as a potential product for the European market, including in partnership with German companies and research institutes.
On earth and in heaven …
For a long time, one of the main obstacles to the use of hydrogen as a fuel has been the increased flammability of this gas. Attempts to refuel cars with it (and not only) have been made since the middle of the last century, but they have not become widespread. Is the situation changing today?
Ridus: As far as I know, hydrogen technology (especially transport) is quite fire hazardous and explosive. Is something being done now to address this issue?
– This problem was solved long ago. I am not a technologist, but the safety of hydrogen transport is much higher now than it was 20 years ago. The same is with cryogenic technologies. True, until now, especially in Hollywood films, we see how some cars explode. Cars actually don’t explode, no matter what kind of fuel they have in their tank. Security systems are on a completely different level today.
Ridus: What can you say about the initiatives to switch aviation to hydrogen? Now they talk about this a lot, how real is it?
– There are already the first developments in the aviation industry. For example, Airbus has unveiled the concept of the ZEROe passenger aircraft, which is set to begin commercial flights as early as 2035. However, in the short term, this is hardly possible on a large scale, because for new types of fuel it is necessary to create, accordingly, infrastructure. The plane consumes a lot of fuel, it flies in different directions, so providing the necessary infrastructure to supply aircraft with hydrogen fuel is very large-scale and difficult. It is much easier to use hydrogen in the railway industry and in cars.
Ridus: So far, I see that the rate is mainly on electric vehicles.
– This is true. The EV is now widely supported. In Europe and Japan, automakers have focused on developing new electric vehicles. American Tesla has been doing this for a long time and even became the most expensive car company.
And yet I am a skeptic of the sustainability of this technology. Remember, even the most advanced electric vehicles need to be recharged. And they need to be recharged often, for a longer period of time and at the expense of electricity, which is not always generated from “environmentally friendly” sources.
For example, in Germany, about 40% of energy is green. But the other part, 28%, is energy obtained from coal, that is, using a completely dirty technology. In China, they live even more off coal, despite ambitious plans and achievements in the development of renewable energy. Therefore, I do not yet see that an electric car is capable of ensuring environmental friendliness. A completely green concept assumes that meeting a country’s energy demand is also completely green, without emitting carbon.
Hydrogen vs LNG
Despite the promise of hydrogen fuel, it still has a strong competitor – LNG. The EU Hydrogen Strategy is indirect evidence of who can win this confrontation.
Ridus: What is the EU Hydrogen Strategy and what is it for?
– This is a new defining document that the European Union published in June, a month after Germany. This document confirms the EU’s intention to support investments in hydrogen infrastructure and new technologies. The strategy is not yet synchronized with other EU member states. Several countries will go further and are already setting specific goals for themselves, planning financial support for some companies. But on the whole, the strategy makes it clear that the European Union has made a bet on hydrogen energy and will seriously support and develop it. On the other hand, we have been waiting for several years for the EU to support the idea of converting freight transport to liquefied natural gas. Truck manufacturers have the necessary infrastructure and technology to do this, and they are more advanced than anything else when it comes to hydrogen. But the EU believes that the savings in greenhouse gas emissions from the use of LNG are insufficient compared to hydrogen.
Ridus: But for LNG there is already the necessary infrastructure, but for hydrogen there is none.
– Quite right. I think it will take some more time, but we need to prepare for this. I also think that LNG for freight transport is a more viable option than hydrogen for the next decade. It is simply unrealistic to build new hydrogen filling stations everywhere. Both technologies and both types of fuel will exist in parallel. But hydrogen is still a very attractive topic for rail transport. I would like the EU to develop a common strategy. It would be better to say clearly that “we see hydrogen as the fuel of the future and support the development of this technology in all directions where appropriate.” But for some reason the EU does not want to do this in order to transfer freight transport to LNG. For some reason, European officials are embarrassed to admit that they have all the necessary infrastructure and that in this way harmful carbon emissions can be reduced by 20%. This is incomprehensible to me.
Ridus: Can the European hydrogen strategy somehow affect energy relations with Russia? There are now a large number of pipelines that carry Russian gas to Europe. Could hydrogen energy lead to a reduction in gas imports from Russia and an underload of transport infrastructure?
– In the short term – no, because the global competition is formed around gas. There are many gas suppliers: besides Russia, these are the USA, Qatar, Algeria and other countries. Over the past five to six years, a buyer’s market has emerged, where the price is determined by an excess of supply. And this means that gas prices will continue to fall. For Russia, this is not a big problem, because here it is possible to produce gas very well and cheaply and process it into LNG, a very competitive product compared to the United States.
Ridus: As far as I understand, hydrogen energy will not become an alternative to natural gas and LNG in the near future?
– This is a long process. Now it is advisable to use hydrogen as an additional opportunity, gradually developing its technologies. But in 20 or 30 years, it is possible that pure natural gas will no longer be exported. The drop in demand will become noticeable in five years, both in Europe and in China. Russian companies need to prepare for this now.