BP, Sinopec, Equinor ASA and Royal Dutch Shell are among the producers looking to hydrogen to help secure demand that otherwise may falter as decarbonisation speeds up. They want to utilise existing pipelines, storage tankers and fuel supply to make blue hydrogen, a process that uses natural gas but captures the carbon emissions and stores them. The straightest route to net-zero emissions uses hydrogen produced by renewable electricity – known in the industry as green hydrogen – but the blue variety is expected to be cheaper until at least 2030 as wind and solar power ramp up. Gas companies aiming to lower emissions now and avoid obsolescence next decade are planning to pour billions of dollars into building their blue businesses. At least 15 projects are scheduled to go online through 2027 in the UK, Germany, Norway, the Netherlands, Sweden and New Zealand.
Clean hydrogen could meet a quarter of the world’s energy needs by 2050, with annual sales reaching EUR630bn($770bn). Production of blue needs to be scaled up quickly because projects that don’t come online by 2030 risk becoming uncompetitive. Hydrogen is expensive to make without expelling greenhouse gases, is difficult to store and is so highly combustible that NASA uses it to propel rockets into space. Natural gas is used in almost all hydrogen production today. That earns the disdain of ESG investors, environmental groups and governments trying to slow climate change because the most common method, called steam-methane reforming, also produces large amounts of carbon dioxide, which are dumped in the air. The quickest way to remedy that is by capturing the carbon and storing it underground or reusing it. The process has been around for decades, and it’s usually deployed in natural gas plants, fertiliser manufacturing and ethanol production facilities. Gas currently is cheaper than renewable electricity, giving blue hydrogen an advantage even with the added costs of carbon capture and storage. The urgency for gas companies stems from the near-universal backing for green hydrogen, made from water and renewable electricity. The cost of green hydrogen is expected to fall 80 per cent by 2030 and be cheaper than blue in all 28 markets analysed by BNEF as renewable energy and the electrolyzers using it to make hydrogen both come down in price. Iberdrola, Europe’s biggest utility, is focusing on renewable power and green hydrogen, bolstered by Spain’s commitment to spend EUR35bn of EU stimulus on energy transition. American industrial giant Cummins said May 24 it will partner with Iberdrola to build a factory in central Spain for making electrolyzers. Such transitions are important for getting the clean hydrogen market off the ground.