Hydrogen storage in Spain in May 2022. Hydrogen has multiple uses and can be deployed in a wide range of industries.

Angel García | Bloomberg | Getty Images

The buzz around hydrogen has grown louder in the past few years – seen by many as an important tool in reducing the environmental footprint of heavy industry and helping economies reach net zero goals.

The green hydrogen sector, which focuses on its production using renewable energy sources such as wind and solar, has attracted particular interest and boasts some notable backers.

Among them is German Chancellor Olaf Scholz, who in 2022 called it “one of the most important technologies for a climate-neutral world” and “the key to decarbonising our economies”.

In the business world of multinational companies from Iberdrola on Siemens Energy also trying to play games in green hydrogen.

But while there is a huge amount of excitement about hydrogen’s potential – the International Energy Agency describes it as a “versatile energy carrier” – there are also undoubted challenges.

The vast majority for starters hydrogen production it is still based on fossil fuels, not renewables – a fact that clearly contradicts net zero goals.

And when it comes to green hydrogen specifically, production costs are a significant issue and will need to be reduced in the coming years.

Transporting hydrogen from production sites to users is another equally important factor to consider.

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“Moving hydrogen is quite expensive,” said Murray Douglas, head of hydrogen research at Wood Mackenzie, during an interview with CNBC.

“It’s more difficult to move than natural gas … technically, engineering … it’s just harder,” he added.

Douglas is not alone in highlighting some of the hurdles in getting hydrogen to work.

US Department of Energy e.g. highlights key challenges “includes reducing costs, increasing energy efficiency, maintaining hydrogen purity and minimizing hydrogen leakage.”

The DOE adds that more research is needed to “analyze the trade-offs between hydrogen production options and hydrogen delivery options when considered together as a system.”

An important place

In connection with the logistics surrounding green hydrogen in particular, one area which will require attention is the location of production facilities.

They are often earmarked for areas where renewable energy sources are abundant – such as Australia, North Africa and the Middle East – but many kilometers away from where the hydrogen will actually be used.

Wood Mackenzie’s Douglas mentioned transport options when considering the investment horizon for the next 10 years.

“Of course you can pipe it, but you probably need a dedicated pipe,” he said, adding that it would likely have to be new construction and close to end users.

According to him, the only other real possibility in this investment horizon concerns the export of hydrogen as ammonia.

“You make hydrogen, green hydrogen, and then you would synthesize it into ammonia with nitrogen,” he said.

Ammonia shipping was, as Douglas noted, “a fairly established technology and industry – there are already plenty of receiving ports”.

This ammonia could then be sold directly to end users such as fertilizer manufacturers.

An alternative option would be “cracking ammonia back to hydrogen”, although this would not be without its own problems.

“Once you start ‘cracking’ back to using hydrogen, you start to see some … pretty big energy losses,” Douglas said.

An efficient delivery system is needed

Sticking point

Although the technology and know-how to produce and deliver hydrogen exists, one catch remains.

“Industry knows how to transport hydrogen,” Wood Mackenzie’s Douglas said, adding that the energy and chemical sectors have been transporting it “for a long time – it’s nothing new, it’s just expensive.”

Douglas went on to say that reducing production costs is key. The lower they are, the more manageable the shipping costs will be.

“I’m not sure if there’s some kind of magical … cost-cutting technology that will enter the transportation part of the equation,” he added.

“We’re not going to suddenly find … a better material to transport hydrogen with,” he said.

“If you’re liquefying it, you have to cool it down a lot, and that’s just expensive,” he added. “If you’re converting it to ammonia, there’s a cost, and then there’s a lot of toxicity issues.”

“They know how to do all these things,” he continued. “It’s still just about the price.

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