Energy Giants Race For ‘Green Hydrogen’ Market Share

Alternative Energy Fuel CelGreen hydrogen is red hot. While hydrogen has long been touted as a virtually inexhaustible source of clean energy, with zero carbon emissions since this first element on the periodic table burns clean, leaving behind only water vapor. This makes hydrogen highly marketable as a promising fuel source option for a decarbonized economy of the future.

The idea of a new energy order has gained a ton of attention in the wake of the novel coronavirus’ unprecedented interruption to the energy sector status quo, with such influential organizations as the World Economic Forum calling for a “great reset”. Not all hydrogen is created equal, however. Hydrogen power is not a novelty; it is already widely used in commonplace industrial processes such as ammonia production, in refineries and as a feedstock for chemicals. The standard hydrogen used in these production processes, however, is not as “green” as you may think. It’s created through the use of fossil fuels, primarily coal and natural gas. This form of hydrogen is known as “grey hydrogen,” and is essentially useless in terms of reducing greenhouse gas emissions.

Green hydrogen, which is produced using renewable energy, is also currently in production, but it is still extremely cost prohibitive compared to gray hydrogen. But plenty of renewable energy projects have been trying to make green hydrogen competitive for years, and the sector got a major bump earlier this year as oil supermajor Royal Dutch Shell got involved in the initiative with an offshore wind farm. The green hydrogen revolution is upon us. And now it’s found itself at the center of the raging debate about the future of energy.

“Within the span of a week, major utilities Iberdrola, Uniper and NextEra all made moves into the hydrogen market, in a reminder that the miracle molecule is not the sole domain of the oil and gas sector,” Greentech Media reported just this week. “But whether utilities will have the ability — or need — to compete with oil companies in the emerging hydrogen market remains an open question.”

While supermajor oil companies like Shell, BP and Equinor have dominated the hydrogen sector in terms of gigawatt scale, utilities are giving them a run for their money, particularly in Europe, the U.S., and Canada.

“In the U.S., NextEra recently announced a 20-megawatt electrolyzer, essentially designed to produce green hydrogen for self-consumption at a gas-fired plant in Florida,” reports Greentech media. “The $65 million pilot will be fueled by the Sunshine State’s ample solar resources with the hydrogen mixed into the feedstock for the 1.75-gigawatt Okeechobee gas plant. It could be up and running in 2023, if regulatory approval is forthcoming.”

At the same time, German utility Uniper has created a green hydrogen partnership with GE and Siemens that aims for total decarbonization of the utility. “The two industrial giants will help Uniper gradually convert its gas power fleet to hydrogen, and Siemens will also work on electrolysis infrastructure for the firm.”

Despite all this progress and these major projects being unveiled rapid-fire, green hydrogen still is not a cost-competitive alternative to fossil fuels. In fact, one major green hydrogen project recently announced by Spain’s Iberdrola, does not plan on turning a profit at all. The €150 million ($176 million) 20-megawatt electrolyzer project for an ammonia factory in Spain is due to go live next year, but will not make any money. “This is an innovation project, to test technology, help to drive down costs for the future and increase Iberdrola’s knowledge and experience,” an Iberdrola spokesperson was quoted by Greentech Media.

“At the moment, the economics of green hydrogen can’t compete with fossil fuel-derived alternatives,” the report continues. “For green hydrogen to work, electricity prices will need to be near zero and electrolyzer utilization rates will need to be high.” This means that oil and gas firms will remain at the helm of the green hydrogen sector as long as the industry requires such deep pockets to survive. But as technology becomes more refined and efficient, and more governments around the world (with the notable exception of the U.S.) fall in line with green stimulus and big boons to renewable energy built into their post-COVID economic recovery plans, utilities may just win out in the end.

By Haley Zaremba first published in Oilprice.com

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