Using vast quantities of renewable energy to produce green hydrogen will slow down the fight against climate change, due to its poor economics and inefficiency compared to direct electrification, influential analyst and investor Michael Liebreich told delegates at the World Hydrogen Congress yesterday.
“We’ve got this thing called the climate crisis. Climate crisis means, surely, if we can only build so much renewables at any time… if there’s a limit on how much clean energy you can generate, we should surely use it for the things that cut carbon the fastest and the most,” he stated.
“The only pathway [for green hydrogen] that makes any sense at all from a climate perspective today is steel.
“The rest, every terawatt-hour you use for anything else, that could have been used for displacing coal, a heat pump, or electric vehicle… is slowing down action on climate change.”
Even producing green hydrogen to displace current grey H2 “is a worse use case” for renewable electricity, Liebreich added.
In his speech, the analyst also declared that green hydrogen will require subsidies for a long time to come, and that the EU will not be able to reach its renewable H2 targets for 2030.
“If you go back to the hydrogen strategy in Europe, which was published in 2020, it was going to be 5GW of electrolysis by 2024, the number is probably going to be 600MW,” he said.
“It was going to be 10 million tonnes production by 2030, that’s within Europe, and then of course there’s another 10 million [tonnes of] imports to the EU... I think it’s going to be doubtful whether instead of 20, whether you reach even five million tonnes by 2030.
“And the reason fundamentally is there’s a green cost penalty for clean hydrogen. And the European hydrogen strategy was predicated on costs for green hydrogen by 2030 being €1.1-2.4 [$1.16-2.53] per kilo.”
He pointed out that a hypothetical cost premium of even €1/kg over fossil equivalents, would require €1bn of subsidies for every million tonnes of renewable H2.
“And the problem is, you don’t just need it for one year, you need it for at least ten years, to be guaranteed for ten years to make the project bankable.”
This means that in order to replace 42.5% of H2 consumed in Europe today for industrial use, as targeted under the recently updated Renewable Energy Directive, around $4-5bn would need to be “on the table” to cover a €1/kg cost gap — or more if that gap is higher.
In a separate conversation with Hydrogen Insight, Liebreich noted that the renewable hydrogen targets set by the EU for 2030 “arose primarily out of lobbying by interested parties” rather than a realistic prospect of how far costs can actually fall.
“It says in that hydrogen strategy that hydrogen would cost €1.1-2.4 per kilo by 2030, we're miles away from that. Now the question is, who said that, and where did the 10 million tonnes of this and the 10 million tonnes of that come from?”
And in his speech, he cautioned that escalating subsidies to support production — what he dubs a “carrots-on-carrots” approach — is ultimately untenable.
“The carrots-on-carrots problem is masking a lot of stuff that really shouldn’t be happening, that is currently being funded. If anybody’s business is based on carrots-of-carrots... that is your risk,” he said, noting that “over-subsidies, repetitive subsidies” ultimately get removed if there is enough public pressure on politicians over wastes of taxpayer money.
He cited Tree Energy Solutions (TES), which plans to export so-called “e-methane” (made by combining green hydrogen with captured carbon), as an example of a company with a business model that only works if the subsidies continue to flow.
And given US tax credits would ultimately give TES $70 per million BTU of e-methane — compared to a US (Henry Hub)enchmark price of $2.70 per million BTU of natural gas — Liebreich questioned how long the government would continue to pay out.
“If you think that that business model is going to be tolerated by Senator [Joe] Manchin, or the American taxpayer, or President Trump in his potential second term... I think this is just such an obviously risky strategy,” he warned.
And more broadly, Liebreich questioned the logic of politicians pushing hydrogen as a way to use renewables still awaiting grid connection or to avoid curtailment.
According to his calculations, for every 1TWh of renewable electricity used to produce heat — either via electric heat pumps (curtailed 5-15% of the time) or green hydrogen-fired boilers — “you get vastly more heating done with your terawatt-hour” with the former.
Green hydrogen would only provide more heating per TWh if curtailment was “over 80%”, he added.
“Curtailment right now has got to 3-4%, I worry that by 2030, 2040, it might be 10-15%, if we don’t build transmission. It’s going to get nowhere near 80%,” Liebreich said, adding that the more urgent priority should be to expand transmission networks and directly electrify processes.
Liebreich also delivered a controversial speech at last year’s World Hydrogen Congress, when he declared that H2 was “starting to look like an economic bubble”.
Like last year, he also presented an updated graph comparing sales in the millions of battery-electric versus fuel-cell vehicles — which again showed steady growth for the former, and barely visible figures for the latter.
Liebreich also questioned whether the longer range of fuel-cell heavy vehicles — often cited as a point in their favour over electric options — would be enough to make them a viable option.
“There is no a priori reason why trucks would be any different from cars,” he said. “The only difference is the 15% of traffic that goes very long distances in one day, which is fairly rare for drivers, they don’t tend to do 700, 800, 1,000 miles a day. Trucks sometimes do, but most of them don’t.”
Liebreich quipped: “I love hydrogen buses, because they have incredible range, they run and run, they have much better range than electric buses. They run and run and run and run and run until the subsidies run out.”
Citing reports that hydrogen-powered trains and other public transport options had been shelved due to poor economics, “these are all things that... should never have been done, were going to waste money and were proven to have wasted money”, he said.
However, Liebreich admitted he was “wrong last year” when it came to a mocked-up design of an airplane, having originally argued that it would be impossible to design a plane with the necessary on-board storage to carry enough hydrogen fuel.
Since H2 is lighter than conventional jet fuel, future planes could be redesigned to run on hydrogen with “smaller wings, smaller engines, lighter landing gear and so on… you have to make the planes longer and fatter, it looks a bit like a cruise missile”, he noted, citing a correction from Rob Miller, a professor of aerothermal technology at the University of Cambridge and director of the aviation technology prize-winning Whittle Laboratory.
But Liebreich continued to press that direct hydrogen fuel would never work in aviation simply due to logistics, which he described as “a priori absurd”.
“Even if you took those planes and wanted to fill them with hydrogen, you would need to have 2.7GW of power going into Heathrow [just] to liquefy hydrogen for those planes — by the way, you can’t build a data centre in west London — and the heat that you reject would raise the temperature of the [River] Thames by 18°C,” he said.
Meanwhile, trucking the fuel in would mean thousands of liquid hydrogen tankers moving “through the streets of Hounslow”, a suburb of west London.
At the conference, Liebreich also unveiled an update of his “Hydrogen Ladder” — a chart that ranks potential uses of hydrogen in terms of their competitiveness and effectiveness at reducing emissions.
The new version has raised hydrogen as a feedstock e-fuels for aviation and vintage cars to the second rung from the top, along with so-called PBTL [power and biomass to liquid] — which combine green hydrogen and biofuels to make products such as jet fuel — which Liebreich noted could be useful given the limited availability of biomass for fuels.
However, hydrogen as a fuel for non-road mobile machinery, such as on construction or mining sites, was lowered a rung.
This is again due to logistics, since one truck delivering diesel would have to be replaced by 18 compressed gaseous hydrogen trailers to account for the lower density, he explained.