Many people believe that hydrogen is the best substitute for gasoline and diesel, considering that it is virtually zero-emission and abundant. However, many hydrogen projects are quietly killed because finding customers for green hydrogen, the cleanest variant of gas, is almost impossible.
Even as electric vehicles take the auto industry by storm, some still see hydrogen as the best fit for the world’s decarbonization needs. On paper, hydrogen offers many advantages, from being the most abundant element on Earth to burning without releasing harmful emissions into the atmosphere. However, these qualities come with a small print, which explains why producing, storing, and using hydrogen has not become humanity’s favorite pastime.
Yes, it is the most abundant element on our planet, but it is almost never found in its pure form. It must be extracted by processing other substances such as natural gas, oil or water. This is highly polluting, energy intensive, or both. The cheapest way to produce hydrogen is from natural gas, but this involves the generation of CO2 as a byproduct. The only environmentally friendly way to produce hydrogen is from water using renewable energy (hydro, wind and solar). However, this is also the most expensive way, which is why the vast majority of hydrogen sold today comes from fossil fuels.
Burning hydrogen is also not entirely clean, considering that air is 78% nitrogen. Therefore, anything that burns in the presence of air produces harmful nitrogen oxides. This makes hydrogen combustion engines not much better than gas engines. Fuel cells are the cleanest way to use hydrogen without emitting harmful gases. However, it is also the most expensive, which explains why sales of hydrogen cars like the Toyota Mirai are still not taking off after decades on the market.
Despite looking promising on paper, all these shortcomings have prevented hydrogen from becoming a mainstream fuel. However, many government programs aim to pour billions in subsidies for hydrogen projects, from generation to storage and use. Despite this, a recent report by BloombergNEF (BNEF) shows that many hydrogen projects are dying because there are no buyers for the green fuel.
There are about 1,600 hydrogen generation plant projects under development around the world, but only a handful have signed binding agreements with a customer to sell the hydrogen. This will likely mean that many of those plants will never be built. “No sane project developer will start producing hydrogen without having a buyer, and no sane banker will lend money to a project developer without a reasonable certainty that someone will buy the hydrogen,” says BNEF analyst Martin Tengler.
Hydrogen produced using clean energy (so-called “green hydrogen”) costs four times more than hydrogen from natural gas, which is not cheap to begin with. However, the biggest problem is the lack of infrastructure, since storing and transporting hydrogen is not a trivial task. That is why the hydrogen projects with the highest chance of success are those that include the entire ecosystem, from production to a clean energy source nearby and a ready customer close to the plant.