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Hydrogen Is The Energy of The Future, Up To A Point

Hydrogen has swept onto the world’s energy stage as the solution to decarbonization. As the clock ticks fast towards the 2050 carbon neutrality deadline and as global warming accelerates, the pressure to act is palpable. Indeed, hydrogen will play a key role in the energy transition in some sectors, if it is supported by heavy government subsidies to make it efficient and competitive. But in my view it is not the energy of the future across the board and the road to the so-called hydrogen economy is filled with pitfalls. 

After many false dawns, all eyes are on hydrogen. Europe, Australia, China, Japan, South Korea are making big bets on hydrogen, and the EU alone estimates up to 470 B€ of investments by 2030 to achieve its hydrogen targets as part of its Green Deal. The private sector is bustling with alliances and announcements of new hydrogen frontiers and applications. But even the greatest enthusiasts agree that this is a colossal experiment: can we really jump-start the hydrogen transition, or are we investing hundreds of billions of euros into what will turn out to be yet another bubble? This time around we have to get it right, and doing so requires less hype, more science and targeted capital allocation.

The advantages to hydrogen are huge when it is made with renewable energy (“green hydrogen”), because it simply emits water. In “hard-to-abate” sectors like steel, cement, shipping and aviation, where green alternatives do not exist, replacing fossil fuels with hydrogen could not only drastically eliminate the world’s CO2 emissions by 15% but also spark a virtuous demand for electrolyzer capacity (+ 5500 GW) which, in turn, would boost renewable electricity capacity by about 8 times the amount installed today, or the entire electricity produced globally in 2019. 

But the hydrogen hype also rests on the debatable assumption that hydrogen is the solution in other sectors like cars and heating. Electric cars are simply more efficient than their hydrogen counterparts, and recent advances in battery technology make the range and charging speed of electric batteries much more competitive. In long-haul heavy-duty trucks or any other high energy capacity application with very limited charging range, the jury is still out. 

In heating, utilities across Europe are planning to convert gas grids to hydrogen, initially blending it with natural gas. Even if it replaces gas altogether, hydrogen is not an efficient alternative. Generating electricity from renewable sources and then reconverting it to hydrogen is wasteful and makes no sense if we all agree that we need to save energy: in space and water heating, heat pumps and electric boilers are more efficient, especially if buildings have better thermal insulation. Further, hydrogen if blended in high concentrations, poses a major safety hazard because it is highly explosive, and the safety of millions of “last mile” pipelines would be increasingly harder to guarantee.  Finally, blending gas with hydrogen —20% hydrogen to 80% of natural gas— not only provides a mere 7% reduction in emissions but increases the end-user gas bill by 15%.  

Regardless of its use, hydrogen comes with basic challenges. Green hydrogen is 3-5 times more expensive than grey hydrogen (which is made from fossil fuels). Enthusiasts predict that prices will come down by 70%-80%, but even then green hydrogen will need to compete with increasingly cheaper alternatives. And that is a big gamble. Price reductions need to happen fast and will require technology and scale. Technology is still in its infancy and will need massive government intervention to reach scale. This is quite a feat, considering that today 99% of hydrogen is produced from fossil fuels. Even just turning this into green hydrogen would require up to $2.5 trillion investments and doubling global renewable capacity. But what about energy efficiency? The conversion of electricity to hydrogen and back is inefficient.  Plus, hydrogen is hard to store, and this further increases energy loss across the value chain: 50% to 80% of the renewable energy generated is lost in the process. If not managed and funded based on scientific evidence, hydrogen can become a greenwashing bonanza, which could set us back in reaching environmental targets and could eventually fuel scepticism instead of creating goodwill.  

As a physicist, an investor in sustainable businesses and an individual concerned with the environmental challenge, I ask myself the hard questions about hydrogen. While it will undoubtedly play a major role in decarbonising emissions in the hard-to-abate industries where there are no alternatives, it is not a panacea in others. If the massive scaling up doesn’t take place and prices don’t drop fast, we risk having wasted hundreds of billions of dollars on hydrogen instead of having opted for fully renewable resources. Public and private capital need to be allocated with a science-driven approach that clears the air of all the hype. 

Hydrogen has swept onto the world’s energy stage as the solution to decarbonization. As the clock ticks fast towards the 2050 carbon neutrality deadline and as global warming accelerates, the pressure to act is palpable. Indeed, hydrogen will play a key role in the energy transition in some sectors, if it is supported by heavy government subsidies to make it efficient and competitive. But in my view it is not the energy of the future across the board and the road to the so-called hydrogen economy is filled with pitfalls. 

After many false dawns, all eyes are on hydrogen. Europe, Australia, China, Japan, South Korea are making big bets on hydrogen, and the EU alone estimates up to 470 B€ of investments by 2030 to achieve its hydrogen targets as part of its Green Deal. The private sector is bustling with alliances and announcements of new hydrogen frontiers and applications. But even the greatest enthusiasts agree that this is a colossal experiment: can we really jump-start the hydrogen transition, or are we investing hundreds of billions of euros into what will turn out to be yet another bubble? This time around we have to get it right, and doing so requires less hype, more science and targeted capital allocation.

The advantages to hydrogen are huge when it is made with renewable energy (“green hydrogen”), because it simply emits water. In “hard-to-abate” sectors like steel, cement, shipping and aviation, where green alternatives do not exist, replacing fossil fuels with hydrogen could not only drastically eliminate the world’s CO2 emissions by 15% but also spark a virtuous demand for electrolyzer capacity (+ 5500 GW) which, in turn, would boost renewable electricity capacity by about 8 times the amount installed today, or the entire electricity produced globally in 2019. 

But the hydrogen hype also rests on the debatable assumption that hydrogen is the solution in other sectors like cars and heating. Electric cars are simply more efficient than their hydrogen counterparts, and recent advances in battery technology make the range and charging speed of electric batteries much more competitive. In long-haul heavy-duty trucks or any other high energy capacity application with very limited charging range, the jury is still out. 

In heating, utilities across Europe are planning to convert gas grids to hydrogen, initially blending it with natural gas. Even if it replaces gas altogether, hydrogen is not an efficient alternative. Generating electricity from renewable sources and then reconverting it to hydrogen is wasteful and makes no sense if we all agree that we need to save energy: in space and water heating, heat pumps and electric boilers are more efficient, especially if buildings have better thermal insulation. Further, hydrogen if blended in high concentrations, poses a major safety hazard because it is highly explosive, and the safety of millions of “last mile” pipelines would be increasingly harder to guarantee.  Finally, blending gas with hydrogen —20% hydrogen to 80% of natural gas— not only provides a mere 7% reduction in emissions but increases the end-user gas bill by 15%.  

Regardless of its use, hydrogen comes with basic challenges. Green hydrogen is 3-5 times more expensive than grey hydrogen (which is made from fossil fuels). Enthusiasts predict that prices will come down by 70%-80%, but even then green hydrogen will need to compete with increasingly cheaper alternatives. And that is a big gamble. Price reductions need to happen fast and will require technology and scale. Technology is still in its infancy and will need massive government intervention to reach scale. This is quite a feat, considering that today 99% of hydrogen is produced from fossil fuels. Even just turning this into green hydrogen would require up to $2.5 trillion investments and doubling global renewable capacity. But what about energy efficiency? The conversion of electricity to hydrogen and back is inefficient.  Plus, hydrogen is hard to store, and this further increases energy loss across the value chain: 50% to 80% of the renewable energy generated is lost in the process. If not managed and funded based on scientific evidence, hydrogen can become a greenwashing bonanza, which could set us back in reaching environmental targets and could eventually fuel scepticism instead of creating goodwill.  

As a physicist, an investor in sustainable businesses and an individual concerned with the environmental challenge, I ask myself the hard questions about hydrogen. While it will undoubtedly play a major role in decarbonising emissions in the hard-to-abate industries where there are no alternatives, it is not a panacea in others. If the massive scaling up doesn’t take place and prices don’t drop fast, we risk having wasted hundreds of billions of dollars on hydrogen instead of having opted for fully renewable resources. Public and private capital need to be allocated with a science-driven approach that clears the air of all the hype.

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