Hydrogen’s time is now in post-pandemic world

Hydrogen’s time is now in post-pandemic world
EU heads are beginning to pay closer attention to cleaner energy sources, like hydrogen, which advocates say is “ready” for the big time. (Reuters)
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Updated 10 May 2020

Hydrogen’s time is now in post-pandemic world

Hydrogen’s time is now in post-pandemic world
  • Alternative fuel hailed as the “holy grail” in bid to move away from oil and gas

LONDON: Hydrogen has long been touted as a clean alternative to fossil fuels. Now, as major economies prepare green investments to kickstart growth, advocates spy a golden chance to drag the niche energy into the mainstream of a post-pandemic world.

Green hydrogen was pushed to the fore last week when Fatih Birol, head of the International Energy Agency, said the technology was “ready for the big time” and urged governments to channel investments into the fuel.
Some countries, including the Netherlands, Australia and Portugal, have already begun investing in the technology. Now investors, politicians and businesses are pushing the EU and others to use its post-crisis recovery plan to support hydrogen in areas like trucking and heavy industry.
The promise of hydrogen as a fuel to help power vehicles and energy plants has been a talking point since the 1970s, but it is currently too expensive for widespread use. Proponents say infrastructure investment and more demand from transport, gas grids and industry will bring the cost down.
Most hydrogen used today is extracted from natural gas in a process that produces carbon emissions, which defeats the object for many policymakers. But there is potential to extract “green” hydrogen from water with electrolysis, an energy-intensive but carbon-free process if powered by renewable electricity.
EU officials, one of whom described green hydrogen as the “holy grail,” said it could replace fossil fuels in sectors that lack alternatives to align operations with the EU’s Green Deal plan to reduce net emissions to zero by 2050.
“Hydrogen could solve a lot of problems. We need everything else as well but the political interest is because to achieve deep energy efficiency and decarbonization, hydrogen seems relatively easy,” said Jesse Scott, senior advisor at think-tank Agora Energiewende.
“It is less alarming (for policymakers) than some other elements for meeting net zero,” she added, such as carbon removal technology for example.
Momentum appears to be building; EU industry chief Thierry Breton met hydrogen companies online this week to discuss the bloc’s recovery from the pandemic.
“We could use these circumstances, where loads of public money are going to be needed into the energy system, to jump forward towards a hydrogen economy,” said Diederik Samsom, who heads the European Commission’s climate cabinet.
This could result in hydrogen use scaling up faster than was expected before the pandemic, he added.
The European Commission has earmarked clean hydrogen — a loose term which can include gas-based hydrogen, if fitted with technology to capture the resulting emissions — as a “priority area” for industry in its Green Deal.
Over the past year, several governments, including Germany, the UK, Australia and Japan, have announced they were working on hydrogen strategies, and the pace has picked up over the past month during the coronavirus pandemic.
This week, Australia set aside A$300 million ($191 million) to jumpstart hydrogen projects. Portugal plans to build a new solar-powered hydrogen plant which will produce hydrogen by electrolysis by 2023.
The Netherlands unveiled a hydrogen strategy in late March, outlining plans for 500 megawatts (MW) of green electrolyser capacity by 2025. A German hydrogen strategy is expected later this month.

HIGHLIGHTS

● Hydrogen long touted as clean alternative energy source.

● COVID-19 stimulus packages present unique opportunity.

● Companies, investors, politicians push for a green recovery.

● Hydrogen firms in talks with EU over pandemic plant.

The Dutch government is pushing for the EU to follow suit and present an “action plan” for clean hydrogen, a spokesperson told Reuters.
When it comes to transport, hydrogen fuel cells trail electric batteries in the push for greener cars, given their higher price and the lack of refuelling stations. But proponents see potential for heavier vehicles.
Daimler and Volvo Trucks unveiled plans last month to bring hydrogen fuelled heavy-duty vehicles to market within the decade.
Hydrogen gas is already used in industry to produce ammonia, which goes into fertilisers, and methanol, used to make plastic.
A major drawback of the green hydrogen that governments are most interested in is that it requires a large amount of renewable electricity to produce. The good news is renewables prices have fallen sharply in recent years.
According to Bernstein analysts, hydrogen made from fossil fuels currently costs between $1-$1.8 per kilogram (kg). Green hydrogen can cost around $6 per kg today, making it significantly more expensive than the fossil fuel alternatives.
However, increased demand could reduce the cost of electrolysis. Coupled with falling renewable energy costs, green hydrogen could fall to $1.7 per kg by 2050 and possibly sub-$1 per kg, making it competitive with natural gas. Higher carbon prices would also encourage the shift.
“Clean hydrogen produced from electricity is around three times more expensive than that from natural gas, but solar and wind costs have decreased in recent years and if they continue to fall, clean hydrogen produced with lower electricity costs would become more affordable,” said Philippe Vie, global energy and utilities lead at consultancy Capgemini.
“On hydrogen we are right now where we were with renewables in 2000-2005. Ten to 15 years is probably a good time lapse to become competitive,” he added.
Any serious attempt at large-scale use — either in industry or transportation — would require major infrastructure investments. For example, power from an offshore wind farm would need to be connected to an electrolyser that produces the green hydrogen, which would then need to be transported to end users.
Europe has around 135 MW of electrolyser capacity, but planned green hydrogen projects could bring that to 5.2 gigawatts, according to consultancy Wood Mackenzie. But many projects hinge on further investment partners or subsidies, which advocates fear will be scarcer in the coronavirus-induced economic slump.
“Investments that would have been foreseen to be done now are not made because production is delayed,” Jorgo Chatzimarkakis, secretary general of lobby group Hydrogen Europe, told Reuters.
To help lower costs, several projects are being worked on across the gas infrastructure, industry, mining and energy sectors.
Royal Dutch Shell and Dutch gas firm Gasunie unveiled plans in February to build a mammoth wind-powered hydrogen plant in the northern Netherlands, capable of producing 800,000 tonnes of hydrogen by 2040.
In Germany, oil refinery Raffinerie Heide is embarking on a project using excess wind energy and abundant water supply in the region to produce hydrogen to make kerosene.
"The price of hydrogen we pay for now is four times natural gas from an external source fed through the pipeline and produced 30 km away," said CEO Juergen Wollschlaeger.
A big fear for companies in the hydrogen industry is that they will be unable to take advantage of the unique opportunity presented by vast economic stimulus packages, and that governments will favour supporting traditional high-carbon fuel sectors that have been hit hard by a collapse in energy demand.

"For us, that will be the question to be answered in the next weeks. Will the carbon fuel industry succeed in convincing the officials to support them?" Bernd Hübner, chief financial officer at German green hydrogen start-up Hy2gen said.


Global shares, oil prices falter as US stimulus buzz fades

Global shares, oil prices falter as US stimulus buzz fades
Updated 36 min 33 sec ago

Global shares, oil prices falter as US stimulus buzz fades

Global shares, oil prices falter as US stimulus buzz fades

LONDON: Global shares stumbled on Friday as hopes of a fiscal boost from a $1.9 trillion US stimulus plan were smothered by the prospect of stricter lockdowns in France and Germany and a resurgence of COVID-19 cases in China.
European stocks followed Asian markets lower, with the pan-European STOXX 600 down 0.8 percent and London’s FTSE 100 0.8 percent weaker, with the latter clobbered by data showing Britain’s economy shrank in November for the first time since the initial COVID-19 lockdown last spring.
The MSCI world equity index, which tracks shares in 49 countries, was 0.3 percent lower. S&P 500 e-mini futures shed 0.3 percent to 3,779.
Oil prices, which had risen on a weak dollar and strong Chinese import data, dropped as COVID-19 concerns in China hit sentiment.
Brent was down $1.33, or 2.3 percent, after gaining 0.6 percent on Thursday. US West Texas Intermediate crude was down $1.17, or 2.1 percent at $52.44 a barrel, having risen more than 1 percent the previous session.
Brent and US crude were heading for their first weekly declines in three weeks.
Spot gold rose 0.1 percent to $1,847.00 per ounce.
While oil producers are facing unparalleled challenges balancing supply and demand equations with calculus involving vaccine rollouts versus lockdowns, financial contracts have been boosted by strong equities and a weaker dollar, which makes crude cheaper, along with strong Chinese demand.
“The recent resurgence in coronavirus infections, appearance of new variants, delayed vaccine rollouts and renewed lockdown measures in most major OECD economies has clouded the economic and demand recovery,” said Stephen Brennock of oil broker PVM.
“Simply put, near-term demand expectations aren’t too promising.”
Earlier on Friday, an Asian regional share index had edged near record highs after US President-elect Joe Biden proposed a $1.9 trillion stimulus plan to jump-start the world’s largest economy and accelerate its response to the coronavirus.
In prime time remarks on Thursday, Biden outlined a proposal that includes $415 billion aimed at the COVID-19 response, some $1 trillion in direct relief to households, and roughly $440 billion for small businesses and communities hard hit by the pandemic.
But that initial boost later faded as risk appetite waned, lifting bond prices and the dollar, and hitting equities.
“People are saying it’s a big number but markets are almost acting like its a disappointment,” said James Athey, investment director at Aberdeen Standard Investments.
“I think maybe the market was pricing an additional $2,000 cheque going to the US population, but what’s being proposed is a top-up of $1,400 to take the total to $2,000 because $600 has already been agreed.”
Investors also digested the prospect of rising taxes to pay for the plan.
“The concern is what it’s going to mean from a tax stand point,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.
“Spending is easy to do but the question is how are you going to pay for it? Markets often ignore politics but they don’t often ignore taxes.”
Biden’s comments came after US Federal Reserve Chair Jerome Powell struck a dovish tone in comments at a virtual symposium with Princeton University.
Powell said the US central bank is not raising interest rates anytime soon and rejected suggestions the Fed might start reducing its bond purchases in the near term.
Investor concerns over the prospects for a global economic recovery were raised after France strengthened its border controls and brought forward its night curfew by two hours to 6 p.m. for at least two weeks to try to slow the spread of infections.
German Chancellor Angela Merkel called for “very fast action” to counter the spread of variants of the coronavirus.
Chinese blue chips eased 0.2 percent, snapping a four-week winning streak, after the country on Friday reported the highest number of new COVID-19 cases in more than 10 months.
US earnings season kicked into full swing with results from JPMorgan, Citigroup and Wells Fargo.
JPMorgan Chase reported a much better-than-expected 42 percent jump in fourth-quarter profit on Friday, driven by the release of some of the reserves it had built up against coronavirus-driven loan losses.
Investors will be looking to see if banks are starting to take down credit reserves, resume buybacks, and provide guidance that shows the economy is improving, said Thomas Hayes, chairman of Great Hill Capital in New York.
In the currency market, the US dollar rose.
The dollar index was at 90.407 versus a basket of currencies, up 0.2 percent on the day.
It was on track for a weekly gain of around 0.4 percent, making this its strongest week since November.
Against the stronger dollar, the euro was down 0.2 percent at $1.21325.
US yields stepped back as risk appetite waned. Benchmark 10-year Treasury notes yielded 1.1039 percent, down from a US close of 1.129 percent on Thursday, while the 30-year yield dipped to 1.8451 percent from 1.874 percent.
In Europe, Italy’s bond market was poised to end the week calmer, as 10-year bond yields were down 2 basis points at 0.59 percent.
Italian Prime Minister Giuseppe Conte resisted calls to resign on Thursday after a junior coalition party led by former premier Matteo Renzi pulled out of the government on Wednesday and stripped it of its majority.