Newsletter February 2024

Reality check for global hydrogen hype

The great attraction of green hydrogen has been and is that it can be used to gene­rate CO2-free electricity when needed to compensate for variation in wind and solar power generation – and that it can be used to maintain combustion as a source for industrial heat, building heat and vehicle propulsion. That is why green hydrogen has been seen as a key part of the renewable energy future for the past 30 years and subsidized to the tune of hundreds of billions USD.

But so far, green hydrogen has not delivered on the hype. The recent Global Hydro­gen Review 2023 of the International Energy Agency shows that demand for green hydrogen still hovers at less than 1% of total hydrogen demand and 0,004% of global energy use. Wind power alone generated more than 800 times that much energy.

The main reason is that so far and for the foreseeable future there is no business case for green hydrogen, where electric or biogas alternatives exist. The World Energy Council currently sees the levelized cost of producing renewable hydrogen at an average of 3,50 USD per kg or 0,35 USD/kWh (hydrogen-derived efuels will necessarily be even more expensive). That is some 10x more than the current cost of wind and solar power of 0,03-0,04 USD/kWh. In addition to this gap in energy costs, most vehicle and other technology for hydrogen use is significantly more expensive to buy and operate than equipment for using electricity or biogas.

This lack of good business cases is illustrated by some snap shots of the industry:

In other words, it is time to scale the scenarios down to where green hydrogen is and could remain without alternatives as governments are beginning to realize:

  • contribution to longer term storage of wind and solar power
  • selected industrial processes and perhaps – as efuel – in aviation

This reduces the amount of pipelines and other infrastructure needed for green hydrogen and allows both private investors and governments to focus on competitive applications instead of generating expensive stranded assets.