Hydrogen isn’t a panacea for the carbon economy

Hydrogen, the clean-burning fuel that produces water as a byproduct, is having another moment, as governments line up to tout the value of a hydrogen economy.

On Tuesday, the U.K. outlined its plan for building a hydrogen economy, pledging to develop subsidy schemes that would incentivize $5 billion of investment into the industry by 2030. According to the government’s projections, the British domestic hydrogen industry could generate $18 billion of value added, create 100,000 new jobs and power 35% of the U.K.’s energy consumption by 2050.

On the face of it, governments investing billions in a clean-burning super fuel looks like a win for the environmental movement. And hydrogen has many advantages—such as its ability to utilize existing energy infrastructure. But not all hydrogen is created equal and, according to a report last week, some hydrogen could even be worse for the environment than burning fossil fuels.

Let me explain.

There are two types of hydrogen worth considering: blue and green. Green hydrogen is a carbon-neutral product synthesized through electrolysis, which involves shocking water with jolts of electricity powerful enough to split H2O molecules into their constituent H and O parts. The electricity is generated by renewable energy.

Blue hydrogen, meanwhile, is produced by steam reformation, where natural gas is mixed with steam and heated until the mist resolves into carbon dioxide and hydrogen. The carbon byproduct needs to be caught and sequestered away by carbon capture tech.

But, as we’ve covered before, carbon capture technology doesn’t really work. The world’s largest carbon capture scheme, operated by Chevron in Australia’s Gorgon gas fields, failed to capture even half the volume of carbon Chevron said it would.

Blue hydrogen, then, is a myth—albeit a popular one among oil and gas giants that want to make the most of fossil fuel resources during the transition to net zero. However, relying on ineffective carbon capture tech to clean-up the pollution from blue hydrogen is especially dangerous because the “clean fuel” produces as much, if not more, pollution than natural gas.

A study published last week by a team of Cornell and Stanford researchers found that blue hydrogen creates up to 20% more carbon emissions than simply burning natural gas would for the same amount of fuel. Those emissions are generated not only by the steam reformation process but also the generation of electricity needed to power the lumbering carbon capture tech.

“This is a warning signal to governments that the only ‘clean’ hydrogen they should invest public funds in is truly net zero, green hydrogen made from wind and solar energy,” Robert Howarth, one of the authors of the report, said. Environmental groups have already criticized the U.K.’s hydrogen economy proposal for wasting resources on chasing blue hydrogen production.

Fortunately, governments and corporations are developing green hydrogen projects. On Wednesday, China approved a green hydrogen production site in arid Inner Mongolia that will use wind and solar energy to produce 66,900 tonnes of hydrogen a year. That’s equal to around 180 million gallons of gasoline.

Japan has green hydrogen projects in the pipeline, too, which primarily involve harvesting offshore wind power. In fact, despite the government’s continued support of carbon capture solutions, Australia intends to be the world’s largest exporter of green hydrogen by 2030 as well.

The downside to green hydrogen, however, is that electrolysis is inefficient and costly. That means the clean fuel can’t be a replacement for every fossil-fueled process. As David Cebon, professor of mechanical engineering at Cambridge university, told the FT this week, hydrogen should be “a last resort” for sectors that have no option to electrify.

Cebon says, “Directing public funds towards hydrogen in sectors that have more effective alternative solutions is a mistake.”

So what are the right sectors for green hydrogen? Let me know.

Eamon Barrett
eamon.barrett@fortune.com

CARBON COPY

Poland goes nuclear

Poland is reviving plans to develop a domestic nuclear power industry, some four decades after its last attempt was abandoned amid anti-nuclear protests. Under plans signed by the government last year, Poland will open its first nuclear power plant by 2033, followed by five more by 2043. Protesters are already planning their objections, particularly if the new reactors threaten to disrupt the natural landscape—which they will. But Poland still generates some 70% of electricity through coal and desperately needs a decarbonization plan. Nuclear energy might be its best chance. FT

BHP shifts ground

On Tuesday Australian mining giant BHP agreed to sell its oil and gas business to Woodside Petroleum in a $20 billion merger, maintaining a 48% stake in the new joint venture. The merger needs regulatory and investor approval. Activists had urged BHP to retain and wind down its petroleum business in a controlled way, rather than sell it. On Tuesday BHP also announced it would delist from the London Stock Exchange, exiting the FTSE 100, and maintain a sole listing on the Australian Securities Exchange. WSJ

De-damming

China is shutting down a staggering 40,000 hydropower plants across the country, as many of the dams scattered throughout China lay dormant and wasting. Many of the dams are either too small to provide meaningful energy or sit on rivers that have since dried up—sometimes stymied by even more dams built further upstream. Others pose a significant flood risk, as the aging levies threaten to burst under increasingly heavy rains. Bloomberg

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As climate worries spike, green bonds are having a moment. Should you invest? by Jessica Mathews

CLOSING NUMBER

$16.5 billion

Fannie Mae—the U.S. government-backed mortgage financier—is the world’s largest issuer of green bonds, selling a total $95 billion of climate-backed debt since 2012. Around 80% of those bond sales are used as fundraising for Fannie Mae’s Green Rewards programs, which provides homeowners with low-interest financing on the condition that they reduce domestic energy and water usage by 30% within a year. But some of that is greenwash. According to analysis in a long-read by Grist, some $16.5 billion of Green Rewards recipients have stagnated or grown less energy efficient since receiving Fannie Mae financing. Fannie Mae has verification procedures, to check whether borrowers are living up to their agreements, but zero tools to enforce the rules if they’re not.