TODAY’S HYDROGEN business is, in global terms, reasonably small, very dirty and completely vital. Some 90m tonnes of the stuff are produced each year, providing revenues of over $150bn—approaching those of ExxonMobil, an oil and gas company. This is done almost entirely by burning fossil fuels with air and steam—a process which uses up 6% of the world’s natural gas and 2% of its coal and emits more than 800m tonnes of carbon dioxide, putting the industry’s emissions on the same level as those of Germany.
The vital nature of this comes from one of the subsequent uses of the gas. As well as being used to process oil in refineries and to produce methanol for use in plastics, hydrogen is also, crucially, used for the production of almost all the world’s industrial ammonia. Ammonia is the main ingredient in the artificial fertilisers which account for a significant part of the world’s crop yields. Without it, agricultural productivity would plummet and hundreds of millions would face starvation.
Tomorrow’s hydrogen business, according to green-policy planners around the world, will be vital in a different way: as a means of decarbonising the parts of the economy that other industrial transformations cannot reach, and thus allowing countries to achieve their stated goal of stabilising the climate. But for that vital goal to be met everything else about the industry has to change. It can no longer stay small. Morgan Stanley, an investment bank, reckons that, if governments take their green commitments seriously, today’s market could increase more than five-fold to over 500m tonnes by 2050 as these new applications grow (see chart 1). And it has to become clean, cutting its carbon-dioxide emissions to zero.
Clean hydrogen is quite plausible. The current method of making it from fossil fuels could be combined with technology which separates out the carbon dioxide given off and stores it away underground, an option known as carbon capture and storage (CCS). Alternatively, fossil fuels could be taken out of the process altogether. Electricity generated from renewables or some other clean source could be used to tear water molecules apart, thus liberating their constituent hydrogen and oxygen, a process called electrolysis.
One way to make these technologies cheap quickly would be with a carbon price high enough to make the current industry adopt them. That looks highly unlikely. In its absence governments are trying to spur demand for clean-hydrogen capacity through industrial policy and subsidy, rather as they spurred the growth of renewables. As the European Union’s hydrogen strategy puts it, “From 2030 onwards and towards 2050, renewable hydrogen technologies should reach maturity and be deployed at large scale to reach all hard-to-decarbonise sectors.” Forcing the industry to the level of maturity which will allow that deployment is set to soak up $100bn-150bn in public money around the world in the decade to 2030. Some $11bn of that will be spent this year, according to BloombergNEF, a data company.
The problem with all this is that hydrogen is not like renewable electricity, the green transformation it seeks to build on. Green electricity helps the climate simply by replacing dirty electricity. For the most part hydrogen helps the climate only when used for new purposes and in new kit. For companies to build or purchase that kit, they need to be sure there will be plentiful and affordable clean hydrogen. For companies to produce clean hydrogen in bulk, they need to know that there will be users to sell it to. That is the rationale for public money being pumped in to prime both supply and demand.
The Hydrogen Council, an industry consortium, reckons some 350 big projects are under way globally to develop clean-hydrogen production, hydrogen-distribution facilities and industrial plants which will use hydrogen for processes which now use fossil fuels (see map). They will have electricity demands in the tens and hundreds of gigawatts, on a par with those of large countries, and are slated to receive $500bn of public and private investment between now and 2030. That expenditure could end up embarrassing governments and enraging shareholders if today’s high expectations do not pan out.
Hydrogen had its enthusiasts long before climate change became an issue. Its appeal was threefold. It is very energy-dense: burning a kilogram of it provides 2.6 times more energy than burning a kilogram of natural gas. When burned in air it produces none of the sulphates or carbon monoxide through which fossil fuels damage air quality both outdoors and in, though it does produce some oxides of nitrogen; when…