The potential of hydrogen as a fuel and as a source of light and heat was already predicted in the distant 1874 by Jules Verne. More than one hundred years later, in 2002, Jeremy Rifkin dedicated one of his most important works, Hydrogen Economy, to this topic. Rifkin discussed the fundamental role that hydrogen could play in the transition to a safe and clean energy production. Nowadays the ideas of these two visionaries, strongly supported by the International Energy Agency (IEA), have become a reality. However, the vast potential of the hydrogen and its application in the field of renewable energies has yet to be fully developed. Thanks to its intrinsic characteristics, this elements could lead us to a future of production and consumption of zero emission energy. European Union (EU) has shown much confidence in a hydrogen-based economy, thus the launch, last July, of its ambitious European Hydrogen Strategy, considered to be the link between sustainability and functionality of a future de-carbonized energy systems on a global scale.
The Covid emergency is challenging the economic system in which we live, showing its fragility as well as the environmental impacts of human activity. Recent studies highlighted the correlation between the loss of biodiversity and the increasing spread of new viruses. There is therefore an urgent need for targeted and incisive actions whose aim is to strengthen the sustainability of ecosystems. With the Green New Deal, the European investment plan to invest 1,000 billion euros in ten years to achieve independence from fossil fuels by 2050, the EU is opting for a more incisive policy in this sense. In fact, despite the high costs of the technologies still in development and a regulatory framework not yet clear on key points, the EU is leading toward a future where hydrogen is a fundamental pillar. As an "energy carrier", it can contribute to significantly reduce the triple dilemma of energy. First, it allows decarbonisation, having a zero emission factor in end uses, especially in hard to abate sectors (chemical, steel and transport) and can be produced through totally de-carbonised processes (green hydrogen) or with very limited emissions (blue hydrogen). Secondly, it can guarantee flexibility and resilience to the energy system, flattening the peaks of electricity production from non-programmable sources (wind, solar and hydroelectric), supporting its diffusion on a large scale: these can be converted into hydrogen and stored in tanks. In addition, it can be easily transported through the existing gas network and used as a vector capable of efficiently and versatilely transferring energy produced from renewable sources to distant locations, allowing to connect the poles of production and demand: in this way, supply costs are reduced and security and continuity of supply is guaranteed.
Today, however, more than three-quarters of hydrogen, used mainly in the chemical and steel industries for processing oil and fertilizers, is "grey", which means that it is . produced from fossil fuels through CO2 emitting processes, responsible for 830 million tons of emissions, the equivalent of the annual carbon emissions of the United Kingdom and Indonesia combined. To achieve the goal of decarbonisation by 2050, governments, but also companies, are mobilising to change the trend, with major projects and investments along the entire value chain, from production, transport and storage, to end uses.
Clean or low emission hydrogen can be produced through a process of electrolysis from renewable sources (green hydrogen) or through refinery processes from fossil sources, especially from natural gas, combined with Carbon Capture and Storage technology (blue hydrogen), which allows to capture carbon dioxide and store it in special geological sites (although it is the most abundant element in the universe, hydrogen does not exist free in nature, but must be extracted from the substances that contain it). In both cases, the costs are much higher than the production of grey hydrogen, but with the development of more performing technologies and the increase of renewable sources available it is estimated that they will be competitive in the short term.
However, the race to production has already begun. The EU will increase the production of green hydrogen by 1 million tons per year. In order to achieve this goal, it plans to install at least 40 GW of electrolysers by 2030, compared to the 150 MW found today globally, as well as to double the research funds up to 1.3 billion euros. In Linz, Austria at the Voestalpine AG steelworks, the world's largest electrolysis plant with a capacity of 6 MW, used for industrial applications requiring large volumes of hydrogen, went into operation at the end of 2019. The electrolyser was built by Siemens and the renewable energy is supplied by the utility Verbund AG. In March of this year a 10 MW project started in Japan and another 20 MW project is planned in Canada. If green hydrogen will be the most widespread solution in the long run, blue hydrogen, obtained from carbon compounds, can play a strategic role in a first phase, with a gradual increase of biomethane production instead of natural gas, and can represent a complementary solution to green hydrogen in the long run: it is a prospect strongly advocated by fossil gas utilities.
In end uses, the real challenge is played in the gradual growth of hydrogen as an energy carrier to be transformed into electricity or thermal energy in the residential, industrial, but especially in transport sectors. The main technology used for the conversion into electrical energy is the combustion cell: an electrochemical reactor, where the synthesis of water takes place starting from the elements that compose it, hydrogen and oxygen. This is a very promising process in terms of environmental sustainability, since the only by-product is water. Moreover, it is three times more efficient than the battery-powered rechargeable electric vehicles. Unlike the latter, which are charged from external sources, combustion cell cars, where hydrogen is stored in pressurized tanks, produce their electricity on board, using much smaller, and therefore lighter, batteries.
The refuelling times are faster, with much larger autonomy: 3/5 minutes of recharge for about 500 km of travelling distance. The sector enjoys the support of many governments. Germany and Japan want to put 1.8 million and 0.8 million hydrogen vehicles on the road respectively, as well as 1,000 and 900 refuelling stations by 2030. China aims at 50,000 vehicles and 300 stations by 2025 and 1 million vehicles and 1,000 stations by 2030. In close cooperation with industry, the United States wants to build 1,000 stations and increase sales to 1 million vehicles by 2030. Because of its range, which allows long distances without supply, the combustion cell system offers many opportunities especially for heavy traffic. Hyundai has already put on the road the first hydrogen powered truck, with the objective to build 50 by the end of 2020 and 1,600 by 2025, while the French industrial group Alstom has obtained the approval for the production of 41 hydrogen trains in Germany and Holland.
Although the hydrogen vehicle market is still in an embryonic phase, it is expanding rapidly, catalysed by the strong development lead by Asian countries (Japan, China and Korea). In 2019 the stock of hydrogen vehicles, 25,210 units, almost doubled compared to the previous year and sales increased from 5,800 units in 2018 to 12,350 units a year later. The forecasts are very encouraging for investors: the sector was estimated at 278 million dollars in 2016, but it is expected to reach 12 billion dollars in 2023, with a considerable annual growth rate of 72.4 percent. By way of comparison, the electric vehicle market was around $119 billion in 2017 and is expected to reach $567 billion in 2025, with an annual growth rate of 22.3 percent. Overall, from production to end uses, the hydrogen market has accelerated strongly in the last two years. It was precisely the two main segments related to decarbonisation that galvanized it: infrastructure and production techniques for electrolysis and combustion cells in transport. In 2019 the sector was estimated at around 145 billion dollars and is expected to grow at an annual rate of 25%, according to the Global Cleantech 100 report published this year by the Cleantech Group, leader in sustainable growth consulting. Globally, hydrogen is estimated to reach a quarter of the final energy demand by 2050, creating 5.4 million jobs in a 95 percent de-carbonized scenario.
Who are the main investors?
In the energy sector, many gas and oil companies have incorporated blue hydrogen into their non-fossil portfolio. Last May, five of the major gas leaders (Cadent, National Grid, NGN, SGN and Wales & West) proposed a $1.1 billion plan to unlock within 5 years the British hydrogen/biomethane network. Equinor also focuses on blue hydrogen, with important projects in the UK and especially in the Netherlands, where it wants to convert a gas-fired power plant in Vattenfall into one based on de-carbonized hydrogen, reducing Dutch CO2 emissions by 4 million tons per year. In 2023, once completed, it will be the largest plant in the world that produces clean electricity from hydrogen.
Shell and BP aim to produce green hydrogen. Together with Gasunie, the Anglo-Dutch giant is planning the world's largest facility to produce green hydrogen from offshore wind power off the North Sea. In 2040 it could reach a capacity of 10 GW, with a potential of 800,000 tons of clean hydrogen. BP is building an electrolysis plant of 250 MW capacity for the generation of green hydrogen from renewable sources, in collaboration with the chemical industry leader Nouryon and the Port of Rotterdam.
Utilities with a high share of renewables are also starting to mobilize funds to produce green hydrogen, but in minimal quantities compared to investments in non-programmable energy. Iberdrola plans to build a 100 MW solar plant and a 20MWh battery to power the electrolysis system in the industrial city of Puertollano, Spain. EDP, together with the Portuguese government and the oil company Galp Energia, has started the construction of a power plant for the production of hydrogen from solar energy, with a capacity of 1 GW, able to supply 1 million homes, near the port of Sines, Portugal. Finally, RWE wants to build a 100 MW green hydrogen plant in Lower Saxony, de-carbonizing the activities of the steel group ThyssenKrupp in Duisburg.
In the industrial sector, leading companies like Paul Wurth and ArcelorMittal claim that hydrogen plays a key role in their long-term decarbonisation strategy, using hydrogen furnaces and turbines for electrolysis in high temperature applications. EPC and Paul Wurth will rely on the German company Sunfire, leader in the production of electrolysers, for the commissioning of an innovative large-scale, high-temperature electrolysis plant.
For its part, US-based Cummins, a power generation giant, recently acquired Hydrogenics, which manufactures batteries for combustion cells as well as electrolysers for commercial and industrial customers. These batteries are more efficient than electric and diesel batteries. Plug Power, a global supplier of combustion cells, has also just completed two acquisitions (the American company Giner, specializing in the supply of innovative electrolysers with electrolytic polymer membrane (PEM), and the United Hydrogen Group, based in Pennsylvania, which produces hydrogen), strengthening its leading position in the market.
But it is above all in the transport industry where greatest turmoil takes place, thanks to the stimuli coming from the fuel cell car sector (defined by the English acronym FCEV - fuel cell electric vehicle). The FCEV market is dominated by Asian original equipment manufacturers (OEMs), who currently have three models on the market: Toyota Miari, Hyundai Nexo and Honda Clarity. Toyota has long been committed to the energy transition and intends to increase annual production of FCEVs to 30,000 units by the end of this year, with the aim of lowering their costs. Hyundai also plans to increase annual production to 40,000 units by 2022. The Chinese startup Grove Hydrogen Automotive, which produces innovative hydrogen cars with particularly lightweight materials and improved efficiency, should be kept an eye out: it has already extended its distribution to Australia, New Zealand, Nepal and Brazil. In Germany, BMW is working on the idea of making different systems (combustion, hybrid, electric and FCEV) coexist on a single vehicle: a dynamic car like the BMW X5 could have FCEV technology integrated.
FCEV technology attracts large sums of money particularly in heavy traffic and commercial vehicles. Hyundai has partnered with Cummins to improve the combustion cell system for its heavy vehicles, Daimler has announced a joint venture with Volvo Group to accelerate the production of its truck fleet and DHL is working with German heavy truck manufacturer Steetscooter for delivery vans. Among the most promising new companies in the industry is the US-based Nikola, which specializes in the production of commercial vehicles (class 6/8) powered by both electric battery and hydrogen. Recently the group, even if lately a bit chatted, has received funding for 250 million dollars and has declared to have more than 14,000 orders for combustion cell trucks, as well as wanting to build 700 filling stations for trucks by 2028 in the United States and Canada; in California it has just opened about forty. Also as far as hydrogen filling stations are concerned, several projects are on the table: ITM Power, manufacturer of electrolysers and other equipment integrated in the production of hydrogen, has raised 47 million dollars and announced a collaboration with Shell to build this type of infrastructure, while Total already occupies a leading position in Germany, after having founded with five other industrial partners the Joint venture H2 Mobility, which owns about 100 filling stations.
There is also a growth in specific investment funds that invest in startups active in the branch. The UK has just launched HydrogenOne Capital, a $315 million fund set up by JJ Traynor, a former Shell executive, and Richard Hulf, a former Exxon Mobil executive and former energy fund manager at Artemis. In 2018 Hyundai launched a $100 million fund, Hydrogen Energy Fund, investing in 3 companies: GRÀ Technologies, H2Pro and Impact Coatings.
In the last two years the hydrogen venture activity has exploded, reaching a total of 460 million dollars at the end of 2019 and swinging upwards the shares of companies like Bloom Energy and Ceres Power.
To get large projects off the ground, strategic partnerships have been used: in Saudi Arabia, Air Products, ACWA Power, Neom, Thyssenkrup plan to build a 4GW green hydrogen production plant by 2025, to manage 20.000 combustion cell buses and to export clean ammonia; in Australia, Vestas, CWP Renewables, Intercontinental Energy, Macquarie are collaborating to build the Asian Renewable Energy Hub (AREH), the world's largest renewable energy plant with a capacity of 26 GW, 12 of which are dedicated to the production of green hydrogen; in Norway, Norsk e-Fuel, the joint venture between Sunfire, Climeworks, Paul Wurth and Valinor, is building the first European plant for the conversion of renewable energy into zero emission fuel for commercial aviation.