Opinion: Hydrogen Industry Held Back By Lagging Development Pace

(Reuters) - Hydrogen bulls have taken a beating recently, with the International Energy Agency (IEA) cutting demand for the fuel in key forecasts and oil major Shell announcing job cuts and reduced scale in its hydrogen business.

The downbeat outlook is in stark contrast to the mood surrounding hydrogen just a few years ago, when it was widely hyped as a potential fuel for the freight sector and input or power source for hard-to-electrify industries.

Hydrogen's chief problem is that the pace of development in the sector - in terms of both supply and demand - has been sharply lagging developments elsewhere, most notably in the electrification of vehicle fleets that seemingly negate the need for hydrogen-powered engines in key transportation segments.

However, while the prospects for hydrogen may be diminished from earlier characterizations as a clean-burning energy panacea, the sector will likely benefit from the resulting narrower focus by developers on making the fuel fit-for-purpose for the many use cases for which hydrogen is still promising.


A major drawback for potential green hydrogen users is that there has been too little of the stuff available to allow for much real-world testing.

Global production of low-emissions hydrogen (produced from water electrolysis or from fossil fuels that use carbon abatement methods) was less than 1 million tonnes in 2022, according to the IEA.

What's more, green hydrogen currently costs multiple times an equivalent volume of natural gas.

That combination of scarcity and high expense has made it a challenge for potential end users to properly assess the viability of using hydrogen as a power fuel or heat source instead of current fuels.

Compounding the issue of supply shortages has been the proposed use of hydrogen in applications that can be better and more cheaply served by other energy sources.

For example, hydrogen-powered passenger trains have been developed in Germany that emit only water from their exhaust.

As trains can easily be electrified at lower cost, it has been doubtful for some time that so-called "hydrail" could be a mass market solution for global train systems.

Yet these train systems have occupied the time and attention of hydrogen system developers that may have been better spent elsewhere.

Hydrogen fuel cells have also been tested as a source of household heating, but would require extensive retrofitting of key appliances such as boilers and cooking appliances to work.

And as heat pumps have been making rapid inroads into home heating markets across Europe and elsewhere in recent years - at a fraction of the cost of a potential hydrogen set up - it is clear that household hydrogen applications will remain scarce.

Hydrogen has also been considered as a fuel for airlines, with proponents of it claiming that as hydrogen is much lighter than traditional jet fuel, hydrogen-powered planes could have smaller wings and be lighter.

However, merely to equip global airports with the necessary hydrogen fuelling tanks and equipment - on top of the existing fuel infrastructure - is widely deemed to be cost prohibitive, even if the idea of hydrogen planes takes off with airlines.

In all, some large investments in pilot programs and usage studies for clean hydrogen applications in heating and transport systems may have been wasted, as it is becoming clear that alternative power sources that are both cheaper and easier to deploy are already in effect.

In addition, expertise in the development of hydrogen generation and applications may also have been dispersed too thinly by these alternate deployment efforts, denying the industry the chance to develop the concentrated proficiency required to refine and expand the overall market.


The most promising areas for potential hydrogen use have been highlighted by industry analyst Michael Liebreich in his so-called Hydrogen Ladder.

Rather than attempt to deploy hydrogen against lower-cost options in homes and transport systems, Liebreich suggests that the hydrogen industry pursue demand opportunities in helping heavy industry to decarbonize.

Hydrogen could be highly effective in the production of fertilizer - which currently is heavily reliant on natural gas - and in several chemical production and oil refining applications.

Indeed, Liebreich's ladder classifies fertilizer production, along with hydrogenation, hydrocracking and desulphurisation plants, as having no other viable option than to use hydrogen as the primary input and power source instead of fossil fuels.

Such applications may lack profile-building potential of hydrogen-powered bus fleets and airlines, but are nonetheless key to the production of critical industrial ingredients on which scores of other major industries depend.

And with fewer distractions from attempts to generate demand growth in heating and transport systems, hydrogen developers may be able to speed up the delivery of scalable solutions for heavy industry, and thereby make a key contribution to global emissions reduction efforts.

<The opinions expressed here are those of the author, a columnist for Reuters.>

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