Hydrogen lobbying sets wrong priorities, says BloombergNEF founder

A green hydrogen electrolyzer feeding Voestalpine's steel processing plant in Linz, Austria. Heavy industry such as steel ought to be a use-case priority for the fuel, industry experts argue. Source: Voestalpine AG

Whether it is "green," made from renewables, or "blue," made from natural gas with carbon capture, low-carbon hydrogen could find its way into a large array of different usage settings. But should it?

Steelmaking, chemicals processing, aviation and mobility: Theoretically, all could become users of the fuel. But Michael Liebreich, chairman and CEO of energy advisory firm Liebreich Associates, likens hydrogen to a Swiss army knife: It can do a lot of different things, yet the settings in which a Swiss army knife is actually used are rare, because there are usually more convenient alternatives.

In hydrogen market design and the adoption of the fuel, there ought to be a clear focus on existing users such as fertilizers, while many other use-cases do not make economic sense, Liebreich said at the Eurelectric Power Summit on May 27, organized by Europe's main power sector association.

To describe the settings in which low-carbon hydrogen should be used, Liebreich, the founder of consultancy BloombergNEF, visualized a ladder. "On the top of the ladder will be things that are concentrated around hubs," he said. This means limited need for new infrastructure and a bigger pool of off-takers that may already use "gray" hydrogen, made from natural gas.

However, industries at the top of the ladder do not have sufficient incentives to make the green switch. For example, ammonia, the chemical primarily used to make fertilizer, is the second-largest user of gray hydrogen, but buyers are not signaling widespread interest in going green, and incentives for producers are lacking. Even record high prices in the EU Emissions Trading System, Europe's carbon market, are not enough to justify pursuing green ammonia, which is two to three times more expensive than the gray version.

Liebreich also sees misguided emphasis on use-cases in the lower rungs. "There's an enormous amount of lobbying down the ladder" for ventures such as hydrogen trains, buses or heating experiments, he said. "What we're seeing is the ladder almost being turned upside down."

Walburga Hemetsberger, CEO of industry group SolarPower Europe, called for a focus on direct electrification, particularly in mobility and heating. "We should not create artificial markets for hydrogen," she said at the Eurelectric event.

Those now hashing out market design also ought to be wary about building additional hydrogen infrastructure before a clear demand pattern has emerged, and instead respond to infrastructure needs as they arise. "We should avoid having stranded assets by building infrastructure for all kinds of different uses," Hemetsberger said.

Liebreich said "good" hydrogen ought to be defined by its emissions footprint rather than its color, with blue being a clean option under certain conditions. "If you have hydrogen where there are no fugitive methane emissions, and ... the capture of near 100% of CO2 ... I don't see why we would discriminate," he said.

Uniper SE COO David Bryson also argued in favor of color agnosticism, citing the significant challenges around costs, scale and regulation still ahead. "We will need to be pragmatic and open to all opportunities," Bryson said.

Those opportunities also include international imports from energy hubs across the world, with Uniper already in conversations with parties in the Middle East. "I believe there is a potential that we will have a global commodity of hydrogen," Bryson said.