By Michael Liebreich
Two years ago, BloombergNEF published my two-part primer on hydrogen, Separating Hype from Hydrogen. On the supply side, I was optimistic: green hydrogen (produced from renewable energy) would over time become cheaper than blue hydrogen (produced from natural gas but with carbon captured) and eventually cheaper than gray hydrogen (produced form natural gas without carbon capture).
On the demand side I was more skeptical. While clean hydrogen will be needed to decarbonize a number of use cases in industry, and perhaps for long-duration storage, I found it hard to identify any role for it in applications like land transportation or space heating. Since then, as I have done more work on industrial heat, I have even come to believe it has a limited role even there.
If my intention at the time was to inject some reality into discussions about hydrogen, I clearly failed. Rhetoric around hydrogen has become ever more overblown.
According to lobbying group the Hydrogen Council, citing a series of reports commissioned from McKinsey over the past three years, hydrogen can be expected to contribute more than 20 percent of emissions reductions needed for the world to reach net-zero emissions – a figure repeated by politicians and journalists seemingly without the slightest critical examination.
German Chancellor Olaf Scholz has called hydrogen “the gas of the future” and promised “a huge boom.” Japan’s Prime Minister Fumio Kishida has declared that “shifting to and developing a hydrogen society is critical for achieving decarbonization.” Frans Timmermans, the EU Executive Vice-President for the European Green Deal believes that “hydrogen rocks.” Jacob Rees Mogg, briefly UK Secretary of State for Energy this year, called hydrogen “the silver bullet”.
Public money is starting to flow. The EU has approved the first 13 billion euros ($13.7 billion) of the 430 billion euros ($450 billion) promised under its 2020 Hydrogen Strategy and is now working to launch a “Hydrogen Bank”. The US Inflation Reduction Act (IRA) provides a ten-year tax rebate per kilogram of green hydrogen worth $3, which will soon be more than the production cost itself. Free hydrogen anyone?
Of supreme import
In October this year the Hydrogen Council and McKinsey released another report entitled Global Hydrogen Flows, predicting long-distance transport of 400 million tonnes of clean hydrogen and its derivatives (calculated on a hydrogen-content basis) by 2050, out of total global production of 660 million tonnes of hydrogen. It is worth bearing in mind that today, 94 million tonnes of hydrogen are used annually, virtually all of it made from fossil fuels, creating 2.3% of global emissions. The vast bulk of today’s hydrogen never leaves the compound on which it is made, let alone cross an international border.
The idea of hydrogen imports as a way of decarbonizing major industrialized economies is enormously seductive – so much so that Germany and Japan have made it central to their decarbonization strategies. Here’s Japanese PM Kishida again: “Japan aims to commercialize an international hydrogen supply chain by producing hydrogen in bulk at low cost in countries blessed with bountiful renewable energy resources coupled with marine transport infrastructure.”
Chancellor Scholz is promoting hydrogen imports not just as a way of decarbonizing the German economy, but as a replacement for Russian gas. In August he and Canadian Prime Minister Justin Trudeau flew to Newfoundland and Labrador to sign an agreement to “create a transatlantic supply chain for hydrogen well before 2030, with first deliveries aiming for 2025”. As I write this, German Economy Minister Robert Habeck is on a five-day trip to Namibia and South Africa to secure hydrogen supplies.
The problem with this vision of large-scale imports of hydrogen is that the physics of hydrogen is unlikely to play ball.
The unbearable lightness of hydrogen
In February this year, Kawasaki Heavy Industries’ Suiso Frontier arrived in Kobe, Japan carrying the world’s first ever cargo of liquid hydrogen from Australia. Did this momentous occasion herald the start of a brave new world of trade in liquid hydrogen, as the press coverage suggested? In a word, no.
Set aside the A$500 million ($334 million) cost of the project; set aside the fact that most of the hydrogen on board the Suiso Frontier was made from coal; and set aside the fire that broke out on board while loading. The 1,250 cubic metres of hydrogen carried by the Suiso Frontier contained just 0.2% of the energy content of a single large LNG carrier. Okay, the first ever LNG cargo, carried 63 years ago from the Calcasieu River on the Louisiana Gulf to the UK, consisted of a similarly picayune 2,475 tonnes. Surely liquid hydrogen can be scaled up in the same way as LNG has been? Kawasaki Heavy Industries, builder of the Suiso Frontier claims it has already lined up the first order for a much larger, 160,000 m3 carrier from Nippon Kaiji Kyokai.
This is where the physics of liquid hydrogen step in. Although the scaled-up vessel would carry 60% of the volume of an LNG Q-Max, it would carry only 22% of the energy.
Hydrogen has very good gravimetric energy density – the amount of energy carried per unit weight. On this measure, hydrogen beats diesel, petrol and jetfuel by a factor of around three, and LNG by a factor of 2.7 – which is why it makes a great rocket fuel. However, it has very poor volumetric energy density – the amount of energy carried per unit volume. It’s worth remembering that while a cubic meter of water weighs 1,000 kilograms; a cubic meter of hydrogen weighs only 71 kilograms.
On a volumetric basis, hydrogen’s energy density is a quarter that of jet fuel, and only 40% of that of LNG. Since ships are volume constrained (think Suez Canal, Panama Canal, etc.), this inevitably means more trips. Even if Kawasaki Heavy Industries was to scale its hydrogen carrier to the same size as a Q-Max, it would need to make 2.5 deliveries to carry the same amount of energy as one cargo of LNG. You don’t need to know anything at all about shipping to know that 2.5 times the trips are going to cost you 2.5 times as much.
But this is only the start. A liquid hydrogen carrier will inevitably be more expensive than an LNG carrier. Its load will be at -253C instead of -162C, and all pipes, valves, pumps and tanks have to resist hydrogen embrittlement. And because liquid hydrogen is both colder and lighter than LNG, the liquid hydrogen ship would have up to nine times more boil-off en route (these ships let some of the load boil off as heat enters the tanks, and then use that as fuel for their engines), unless you add either much more insulation or a complex cryogenic recycling system.
Overall, you would be wise to assume that the seaborne segment of your hydrogen trade will cost around four times the cost of LNG per unit energy.
It’s the physics, stupid
But that only deals with the seaborne segment. We still have to talk about liquefaction and regasification.
Liquefying hydrogen is a is a hugely energy-hungry process, made complex by the quirks of hydrogen physics – things like its negative Joule-Thomson Effect (unlike most gases, hydrogen gets warm when it expands and cold when compressed) and ortho-para isomer conversion (without which liquid hydrogen re-evaporates, irrespective of insulation). Liquefaction of hydrogen currently consumes 30-40% of its energy content, versus no more than 10% for LNG. Ways to improve this are being researched, but nothing can change the fact that liquefying hydrogen is, quite simply, a bear.
As for regasification, again the plants will be more expensive than for LNG. They need to operate at lower temperatures; all valves, pumps, pipes and tanks have to resist embrittlement; and compressors have to be of larger capacity because pressurizing hydrogen gas requires more work than pressurizing natural gas. European politicians, scrambling to build new terminals to receive LNG in replacement of Russian gas, are suggesting that these terminals will be repurposed to receive hydrogen or its derivatives. This is nonsense. You can re-use the docks and infrastructure, and any distribution pipelines can be upgraded, but 70% of everything else has to be scrapped.
In summary, while LNG approximately doubles the cost of gas delivered by pipeline, shipping liquid hydrogen will cost four to six times more than LNG. In other words, you can’t power an economy on imported liquid hydrogen, and that is not because of things that can be fixed – scale, technology, cost of capital and so on – but because of the underlying physics: volumetric density, liquefaction temperature and interactions with other materials.
It’s a gas, gas, gas!
If importing hydrogen in liquid form is out, what about importing hydrogen as a gas?
Here, things look much better. Gaseous hydrogen is already transported by pipeline – all the pipes, pumps, valves and tanks need to be appropriately engineered, but the economics are not terrible. Just as well, given the volume of hydrogen we are going to need at industrial “hydrogen hubs” for industrial uses and to provide long-duration back-up power.
Just replacing the current production of gray and black hydrogen would create demand for 94 million tonnes of clean hydrogen. Pipeline imports are well-placed to meet a decent proportion of this.
There is, however, a caveat. The longest natural gas pipeline in the world (excluding side branches) is Brazil’s National Unification Gas Pipeline (GASUN), just under 5,000 kilometers long. In their report on hydrogen trade, McKinsey and the Hydrogen Council predict 40 hydrogen “trade routes” connecting the globe. Those serving Europe by pipeline from Norway, North Africa and the Gulf are certainly feasible (the one from Russia is clearly off the cards for decades). However, none of the longer trade routes linking the US West Coast with Asia, the US East Coast with Europe, or the Gulf, Africa or Australia with Asia are likely to carry a single cubic meter of gaseous hydrogen.
There are a few companies proposing to carry compressed hydrogen gas by ship. This would allow them to avoid the cost and complexity of liquefaction but would expose them to the same problems of lower volumetric energy density, only more so. Provaris Energy has designed a ship carrying hydrogen gas at 250 bar. But this translates to just 25 kilograms of hydrogen per cubic meter – just over a third of the very poor volumetric density of liquid hydrogen. Scaled up to the size of a Q-Max, their ship would carry around one seventh of the energy. Seven ships to do the work of one, you can imagine what that does to costs.
There may be some niche applications for shipping gaseous hydrogen, for instance moving stranded supplies between islands, but it is not going to happen in more than homeopathic quantities.
There are other ways of transporting hydrogen beyond liquid and gas. We’ll get on to derivatives of hydrogen in a moment, but first I want to deal with the exotics – liquid organic hydrogen carriers (LOHCs) and metal hydrides. Here the goal is to load hydrogen into a chemical or metal carrier, which allows it to be transported at ambient temperatures and pressures. On arrival the hydrogen is released and the carrier returned to the point of origin.
One promising LOHC is benzyl toluene, being marketed as a solution for hydrogen shipping by a company called Hydrogenious. But again it has a volumetric density problem. One cubic meter of benzyl toluene can only be loaded with 54 kilograms of hydrogen – which means four times as many trips for each energy cargo as you would have with LNG. In addition, loading hydrogen into the organic solvent is an exothermic process, generating heat where you don’t need it, and then you need to add energy at 300C at the arrival location to extract it – using up around 30% of the delivered energy.
That’s not to say LOHCs are not interesting: they could perhaps find a role in long-duration stationary storage – not everywhere has the salt caverns or depleted gas fields required to store gaseous hydrogen, but any tanker farm would be able to handle benzyl toluene and there may be options to store and reapply the process heat between cycles. There may even be a modest import market for LOHCs, to replenish long-duration storage tanks.
Metal hydrides offer the hope of transporting up to twice as much fuel per cubic meter as liquid hydrogen – but each family of hydrides studied so far has shown disadvantages: cost, gravimetric density, time to charge, absorptive capacity, heat required to release the hydrogen and so on. It would be a brave investor who thought we were going to move hydrogen at scale this way, when 50 years of research has not yielded as single commercial application.
Next up, hydrogen derivatives – e-methane, e-methanol. These are certainly easier to transport – drop-in replacements for their fossil equivalents. Their problem is high production cost. For each of them you need a source of clean hydrogen – whether blue, green, pink or red (from nuclear power, whichever color code you use) or whatever – plus a source of carbon nearby, and then you need to combine them into molecules of varying degrees of complexity.
The cheapest source of carbon would be captured from the combustion of fossil fuels – but that would make no sense as it would not be compatible with net zero. The only thing that could possibly make sense would be to use direct air capture (DAC) or secure carbon from a bio-based source, so that when it is burned it just returns to the atmosphere.
A bit of systems thinking, however, shows that even this makes no sense. Take e-methane. By the time you have gone to the cost of securing your carbon, why not just sequester it, instead of incurring further costs in producing hydrogen and combining them into your derivative. You could then just deliver plain old fossil gas to the importing country – along with a carbon credit if needed. That would be identical from a climate perspective and vastly cheaper.
Methanol can and must be made in future using clean hydrogen. Some of it will be made where hydrogen is cheap and exported, but only for use cases where it will be consumed as methanol. In 2022, global production of methanol was 110 million tonnes – but adjusting for molar weights, that is equivalent to just 14 million tonnes of hydrogen. Should demand double and a third of that get traded internationally, only a 9 million-tonne import market by hydrogen mass would be created. That barely scratches the surface of the Hydrogen Council’s 400 million tonnes.
E-methanol also represents a potential pathway to decarbonize shipping – but ammonia and waste-based biofuels both look like being cheaper. Even using nuclear power for the world’s largest ships would most likely be cheaper than e-methanol. Global shipping fuel demand today is around 300 million tonnes per year; let’s suppose, optimistically, that demand increases by 50% by 2050, that 20% is replaced by methanol, and a third of that methanol is traded internationally. Once you adjust for the molar mass and energy content of methanol, that would only create annual demand for another 8 million tonnes of hydrogen imports.
Some continue to promote e-fuels as the solution for land transportation, particularly in Germany and Japan. They point to the fact such fuels require no changes in consumer behavior, highlight the millions of jobs that depend on the internal combustion engine and claim that scrapping 1.4 billion internal combustion vehicles on the world’s roads would be unaffordable.
Their arguments have no merit. First, those 1.4 billion vehicles will be scrapped anyway before whichever year countries select for net zero. In most cases, electric vehicles are already competitive on a total-cost-of-ownership basis with petrol and diesel. E-fuels, by contrast, will still be three to five times as expensive in 2050, driven by their production complexity and the efficiency losses at each production stage. Yes, Porsche is building a pilot project in Chile to produce e-fuels, but theirs is not exactly a cost-conscious customer base.
The fact is that those jobs associated with internal combustion engine manufacturing will be disappearing anyway, the only question is whether they are lost to other technologies or to China. As for behavioral change, most EV users like the fact that they can charge anywhere, rather than having to visit a gas station every week.
Flights of fancy
Time for a deep dive into hydrogen’s potential use in aviation. Airbus has said that it “considers hydrogen to be an important technology pathway to achieve our ambition of bringing a zero-emission commercial aircraft to market by 2035,” and this month, Rolls-Royce and EasyJet made the news by testing a turboprop engine on pure hydrogen.
It turns out that running an aircraft engine on hydrogen is not the difficult bit – the Soviet Union did it back in 1988, not on a test bench but in the air. The real problems are caused, once again, by the physics of hydrogen.
With just 25% of the energy density of kerosene, replacing the maximum take-off fuel load for a long-haul aircraft would require more space than the entire swept volume of its fuselage – a non-starter. For short-haul flights, the focus of Easyjet’s interest, the fuel tank would take up around a third of the fuselage. That means ticket prices 50% higher than now, even before paying for the higher costs of the plane, the cost of the liquid hydrogen, and cost of its ground handling equipment. In total, expect a doubling or tripling of prices.
The real show-stopper, however, is getting the fuel to the airport. Liquid hydrogen transfer lines exist, but there is no way to keep miles of pipeline at -253C and handle the safety issues of any potential leaks. That leaves road tankers or gas pipelines.
Let’s do a thought experiment: try to replace all 20,000 tonnes of jet fuel delivered daily to Heathrow airport with 7,200 tonnes of liquid hydrogen. By tanker truck, that would mean 2,300 daily movements of liquid hydrogen in West London. The safety and traffic implications don’t bear thinking about. Now the only option is to bring the hydrogen in by gas pipeline, and liquefy it on site. But that would require 2.7GW of electrical power, according to engineer and Oxford University ammonia expert Dr. Mike Mason – approximately the output of a new nuclear power station the size of Hinkley C, plus a lot of pylons. And then you need to dump enough heat to raise the temperature of the Thames by 18 degrees C.
The bottom line is that liquid hydrogen could perhaps end up powering a few executive jets – startup ZeroAvia certainly hopes so – but not aviation as we know it. The only substantial role for hydrogen in aviation would be through the production of e-fuels. These are certainly technically feasible – UK company Zero Petroleum has already made some – but they look like being at least twice as expensive as sustainable aviation fuels (SAF) based on agricultural or forestry waste.
If potential volumes of SAF are limited by feedstock availability, then there is a market opportunity for hydrogen in aviation fuels, if not, there isn’t. Global aviation fuel demand was around 300 million tonnes in 2019, which translates to 46 million tonnes on a hydrogen mass basis. If demand grows by 50%, 25% is met by e-jetfuel and one third of that is shipped internationally, that only generates 6 million tonnes of traded hydrogen.
Moan, moan, ammonia
That brings us, finally, to ammonia – the last option for those hoping to develop substantial long-distance hydrogen imports.
Around 190 million tonnes of ammonia are produced each year, mainly for fertilizer and as a chemical feedstock, almost all of it from fossil feedstock. Around 10 percent of current production is already traded internationally but this only comes to around three million tonnes by hydrogen mass.
Switching to clean ammonia for fertilizer production will without doubt drive a big increase in traded hydrogen. Where there are pipelines, hydrogen can be made where renewable power is cheap and imported in place of natural gas and used to make ammonia at the destination. Where there are no pipelines, green ammonia or finished fertilizer will be produced and shipped instead.
Supposing the fertilizer market grows by half by 2050, all of it goes low-carbon and a third of it ends up being shipped internationally, that would increase ammonia trading from 18 to 95 million tonnes per year – a lot of ammonia. This will be a relief for those investing in ammonia projects in Chile, Canada, Namibia and South Africa: their output may not find much use in the energy sector, but at least they should have access to a very substantial market. It is, however, only 17 million tonnes on a hydrogen mass basis.
Back to shipping fuels. Since ammonia will be cheaper than methanol, as discussed, let’s be optimistic and say half of the volumes described above are replaced with ammonia, and a third of it is traded internationally. That would drive an additional 25 million tonnes of demand by hydrogen mass.
Japan’s big bet
Japan is betting that imported ammonia will be used to generate power. Its national decarbonization plan is based on retaining its coal-fired power stations, but fueling them with increasing proportions of ammonia – first 20%, then 50%, then 100% by 2050. So confident is it – and so keen to keep selling its technology internationally – that it is encouraging Vietnam and other South-East Asian countries to keep building coal-fired power stations. Will the bet pay off?
Let’s look first at ammonia made from green hydrogen. That means generating wind and solar power; using it to produce hydrogen (80% efficiency); making ammonia via the Haber-Bosch process (70% efficiency); liquefying it (90% efficiency); shipping it (90% efficiency); and burning it to generate power (45% efficiency). Your end-to-end efficiency will be an astonishingly poor 20%. Although it might be possible to improve the efficiency of each of stage, the tyranny of multiple process steps means your end-to-end efficiency is hard to budge.
What 20% end-to-end efficiency means is that the resulting power will cost five times as much as the original power – and that is before accounting for capital invested in all those process stages and maintenance. In addition, combustion of ammonia produces nitrous oxides – hazardous to health and powerful greenhouse gases in their own right.
Now, ammonia from blue hydrogen. You eliminate the electrolysis stage, so your end-to-end efficiency is a little higher at 26%, but you have the extra cost of carbon capture and sequestration, so the resulting power cost is going to be about the same. The real question, however, is why bother? Why not just ship the natural gas to Japan instead of ammonia – LNG has 1.7 times the volumetric energy density of ammonia, so you need fewer cargoes. Then you capture the CO2 at the other end, and either sequester or send it back to the point of origin on the same ships. You have the same climate impact, approximately the same cost of carbon capture and sequestration, but significantly greater efficiency and lower shipping costs.
The bottom line for ammonia as a fuel for power generation, whether co-fired or pure, is that no economy can be internationally competitive based on the resulting power prices. My estimates are in line with the more detailed modelling work undertaken by BloombergNEF: BloombergNEF found that 100% ammonia-fired power in Japan would cost around $260 per megawatt-hour in 2030 and $200 by 2050 – around double the cost of renewable energy.
The fact that Japan could generate large amounts of renewable energy – in particular, offshore wind – at much lower cost points to the role that clean ammonia could in fact play in the country’s power system: providing back-up. Bill Gates likes to quote Vaclav Smil on the three-day cyclones that hit Tokyo almost every year – which would shut down renewable generation and leave it short of 22GW of power. He laughs at the idea that batteries could fill the resulting gap, and he is correct to do so. However, the gap is only 1,600 GWh, which could be generated from a million cubic meters of ammonia – an amount that could be brought in on just four Q-Max-sized carriers.
So, while basing Japan’s economy on electricity generated from imported ammonia is an economic non-starter, storing a few million tonnes of ammonia and using it for long-duration storage looks a lot more realistic.
Conclusions and implications
This has been a long journey and we have covered a lot of ground. I want to leave you with a few conclusions by way of summary.
The only way to move hydrogen economically is as a gas, by pipeline. Forget liquid hydrogen: it will struggle to find any role in the future energy or transport systems because of its poor volumetric energy density and difficulties with handling. It will have no role at all as a traded commodity.
Ammonia will be traded and transported, primarily for use in fertilizer production, plus as a shipping fuel. It will not be imported to power bulk power generation, but will be imported and stored to deliver long-duration storage. Some LOHC might also be imported, but only where it is stored for resilience purposes.
Clean methanol will be made near to sources of cheap clean hydrogen and some of it will be shipped around the world for use as a chemical feedstock. E-fuels – whether methanol, petrol, diesel or kerosene equivalents – will not be shipped around the world in meaningful volumes because their cost will severely limit their uptake, with the possible exception of aviation.
Totting up the various future hydrogen trade flows covered here, it is clear that the Hydrogen Council/McKinsey figures of 660 million tonnes of clean hydrogen production and 400 million tonnes of long-distance transportation are out by a factor of at least three. In addition, given that China and India have only pledged net zero by 2060 and 2070 respectively, such flows that do materialize will take decades beyond 2050.
The implications reach far beyond the question of international trade in hydrogen and its derivatives. The prohibitive cost of long-distance imports means that energy-intensive industries will inevitably migrate to regions with cheap clean energy. It is inconceivable for any country to import iron ore from Australia or Brazil, hydrogen from Australia, the Gulf, Canada or Africa, and make steel at a globally competitive cost. Magical thinking will be no defense against de-industrialization.
Finally, it is worth noting that none of this calls into question the fact that clean hydrogen will be required to decarbonize certain sectors, which will eventually create more than 100 million tonnes per year of demand. Just as railway mania left the world with railways, electricity mania left the world with power networks, and the dot-com bubble left the world with broadband fiber, so hydrogen mania will leave the world with a lot of clean hydrogen.
The worry is that, along the way, we are going to waste huge amounts of money on the wrong use cases for hydrogen and the wrong infrastructure in the wrong places. Worse than wasting money, we will also be wasting time – and that is the one thing we don’t have. Let’s be smart.
Michael Liebreich is the founder and senior contributor to BloombergNEF. He is also the CEO and chair of Liebreich Associates, founding managing partner of EcoPragma Capital and an advisor to the U.K. Board of Trade.