Why hydrogen will remain a carbon-intensive solution until we can produce it cleanly

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Mo Chatterji, Project Fellow, Scale360° and Senior Consultant at Kearney, World Economic Forum & Fiona Walman, Senior Consultant, Kearney

• Hydrogen has great scope to power many industrial applications.

• But even producing it using renewable electricity is less efficient than using that electricity as a direct power source.

• Hydrogen is best used to power hard-to-electrify sectors.

Global CO2 emissions fell by 6.4% (roughly double Japan’s annual emissions) in 2020, mainly due to the impact of COVID-19. Whilst this was a significant decline, it puts the carbon reduction required to hit the Paris Agreement very much in perspective. To do this (thereby limiting global warming to 1.5°C above pre-industrial levels), carbon emissions need to decline by 7.6% year-on-year. In short, we need to reduce emissions at a faster pace than in 2020 every year for the next decade.

On paper, this is extremely difficult; in practice, even harder.

One solution which we hear a lot about is hydrogen. Hydrogen has the potential to power vast swathes of industrial applications, from heavily polluting metals to cement. However, based on where we are today, and the speed with which we are progressing with the renewable energy capacity needed to cleanly produce it at scale, hydrogen will remain a carbon-intensive solution for many years to come.

Hydrogen in 2021: a carbon-intensive technology

Hydrogen is already extensively used across industrial applications. However, less than 1% of global hydrogen production is derived from renewable energy (green hydrogen) or from fossil-fuel plants equipped with carbon-capture storage (blue hydrogen). The remaining 99% is sourced from carbon-emitting fossil fuels (e.g. grey hydrogen) that emit as much CO2 emissions as the United Kingdom and Indonesia combined, and cannot therefore be considered as low-carbon options. And even blue hydrogen should not be regarded as CO2-neutral or as clean alternative, as it is often the case. New research has just investigated its emissions and found out that it may be causing more harm than burning natural gas or coal directly for heat.

Indeed, simply to produce all of today’s dedicated hydrogen output (69 Mt) using renewable energy (rather than fossil fuels) would require more electricity than the annual amount generated by the European Union. Considering that in 2020, 38% of EU’s electricity came from renewables, it is clear that renewable energy capacity needs to be increased vastly to produce enough energy to meet both the world’s growing electric needs and to convert water into hydrogen to power industrial (and eventually domestic) applications. This urgent need to increase capacity was made clear in an open letter from wind energy executives to the G20 nations in July.

Not-so-green hydrogen

Even with higher supplies of renewable energy, producing green hydrogen this way is not the most efficient usage of energy – and not necessarily a quick fix to the 99% of current hydrogen production that currently entails a substantial carbon footprint.

This is because green hydrogen always comes with a significant energy loss. The efficiency of electrolyzers that convert water to hydrogen ranges from about 60-80%, meaning 20-40% of energy is lost in the process. Further conversion of hydrogen to other carriers (e.g. ammonia) results in further energy loss, and then it also needs to be transported. This means that 100 kWh of renewable energy usually produces somewhere between 60-80 kWh of hydrogen energy.

As renewable energy only contributes a small fraction of the world’s total energy consumption, to effectively cut emissions it makes more sense to use renewable energy directly as electricity for end uses (assuming energy storage is available), rather than losing significant amounts of it through green hydrogen production (which indirectly leading to higher fossil fuel requirements to make up for the 20-40% loss). Exceptions exist for renewable electricity generation that cannot be easily connected to grids and/or where storage of electricity is not yet possible (e.g. floating offshore wind or solar farms) – then it using it to produce hydrogen does make sense.

Bringing hydrogen to life

1. Expand renewable capacity – fast

As already explained, renewables capacities are far too low, and are not increasing quickly enough. The first step to bringing hydrogen’s potential to life is simply to increase this capacity – fast. Considering technology for wind and solar power already exists, and they are often cheaper than fossil fuel energy (even without a carbon tax!), this should be an eminently achievable goal. But governments all over the world are dragging their feet.

2. Electrify everything possible

Energy use from buildings and from transport represent almost a third of all CO2 emissions and should be decarbonized as quickly as possible. The most sensible way to do this is through electrification. Electrification boils down to switching fossil feedstocks with renewable energy, such as replacing petrol/diesel cars with electric cars and gas boilers with heat pumps. Crucially, the electricity that powers these electrified applications must also come from renewable resources; otherwise the decarbonization impact remains minimal. The most efficient use of renewables is to power these sectors using all the green energy we have at our disposal.

3. Hydrogen as a final step

Once renewable energy capacities rise, and excess capacity becomes available, green hydrogen should play a key role in decarbonization, particularly for industries that cannot be electrified: the so-called “hard-to-abate sectors”, such as long-haul road transport, maritime shipping and aviation. As well as this, sectors currently using hydrogen in their processes (e.g. steel, cement and chemical industries) should transition to the green alternative and replace existing fossil fuel feedstock-driven applications with green hydrogen whenever possible. While industries are already starting to build their own production plants for on-site hydrogen supply, efforts for new usages (e.g. Power-to-X technologies, where surplus electricity is converted into liquid or gaseous fuel) need to start today to ensure that economies of scale and cost efficiencies can be maximized for when enough renewable energy capacity exists to produce the huge amounts of green hydrogen required to fuel this.

The path to a hydrogen future

Implementation will most likely differ between regions and countries. Creating low-carbon domestic heating, for example, will vary in different contexts. While in some regions (e.g. Europe, with its built-up areas with old apartment buildings) it will be very difficult to electrify the current building stock, hydrogen will likely need to replace fossil fuels to some extent. In areas where many new buildings are being built (e.g. China), electrification will be much easier.

It is safe to say that it will still take many years to provide enough green hydrogen both to transition today’s dedicated demand for the fuel as well as future demand for the hard-to-abate sectors.

What’s the World Economic Forum doing about the transition to clean energy?

Moving to clean energy is key to combating climate change, yet in the past five years, the energy transition has stagnated.

Energy consumption and production contribute to two-thirds of global emissions, and 81% of the global energy system is still based on fossil fuels, the same percentage as 30 years ago. Plus, improvements in the energy intensity of the global economy (the amount of energy used per unit of economic activity) are slowing. In 2018 energy intensity improved by 1.2%, the slowest rate since 2010.

Effective policies, private-sector action and public-private cooperation are needed to create a more inclusive, sustainable, affordable and secure global energy system.

Benchmarking progress is essential to a successful transition. The World Economic Forum’s Energy Transition Index, which ranks 115 economies on how well they balance energy security and access with environmental sustainability and affordability, shows that the biggest challenge facing energy transition is the lack of readiness among the world’s largest emitters, including US, China, India and Russia. The 10 countries that score the highest in terms of readiness account for only 2.6% of global annual emissions.

To future-proof the global energy system, the Forum’s Shaping the Future of Energy and Materials Platform is working on initiatives including, Systemic Efficiency, Innovation and Clean Energy and the Global Battery Alliance to encourage and enable innovative energy investments, technologies and solutions.

Additionally, the Mission Possible Platform (MPP) is working to assemble public and private partners to further the industry transition to set heavy industry and mobility sectors on the pathway towards net-zero emissions. MPP is an initiative created by the World Economic Forum and the Energy Transitions Commission.

Is your organisation interested in working with the World Economic Forum? Find out more here.

Hydrogen is not a green technology until we have an excess of renewable energy to produce it. At the speed we are currently going, hydrogen will not be able to cure many ills in the foreseeable future. Now is the time to focus on renewables – we cannot delay any longer.