Recent reports suggest that oil companies in the U.K. have been exaggerating the costs of blue hydrogen projects, as well as the need for their development to decarbonize the industry, in order to gain additional funding for new hydrogen plants.
A U.K. government policy supporting hydrogen development was announced this month. The policy provides equal support for both blue and green hydrogen projects and a total projection of £4 billion in hydrogen investments by 2030. This will go towards the production of an estimated 5 gigawatts of hydrogen by the end of the decade to power heavy industry, transport, and homes. Ultimately, the policy is designed to see hydrogen cover 20 to 35 percent of U.K. energy needs by 2050.
The government hopes the investment will develop the U.K.’s hydrogen market, making it a world leader in clean energy production. According to the plan, the U.K. hydrogen economy could be worth around £900 million by 2030, creating over 9,000 jobs. This is expected to increase to £13 billion and 100,000 new jobs by 2050.
Oil majors have pushed the government to support the transformation of fossil fuel into hydrogen through carbon capture in order to access subsidies, assuring ministers that this will create a significant means of decarbonizing the industry.
Several oil firms in the U.K. made false claims stating that if multi-billion pound blue hydrogen projects gained funding now, they could be up and running by 2027 or 2028, and would be profitable by 2030. They used these promises in an attempt to gain taxpayer funding for such projects over the next quarter of a century.
And now several plans for blue hydrogen plants are already underway in the U.K., with BP planning to develop a hydrogen plant in Teesside and Norway’s Equinor developing the world’s biggest hydrogen production facility near Hull.
Blue hydrogen support is also growing in the U.S., with Biden outlining government support for 15 decarbonized hydrogen projects in his March infrastructure plan. Blue hydrogen projects also have the support of U.S. hydrogen lobbying organization the Fuel Cell and Hydrogen Energy Association. But industry heads are now pushing back as Chris Jackson, leader of the hydrogen industry association in the U.K., quit ahead of the recent government strategy paper supporting blue hydrogen. The reason he stated was the inclusion of major oil companies supporting blue hydrogen projects that were “not sustainable” and that “make no sense at all.”
Jackson explained of his decision to quit, “I believe passionately that I would be betraying future generations by remaining silent on that fact that blue hydrogen is at best an expensive distraction, and at worst a lock-in for continued fossil fuel use that guarantees we will fail to meet our decarbonisation goals.”
Likewise, electrolyzer producer Nel Hydrogen’s CEO, Jon Andre Lokke, stated earlier this year that blue hydrogen production would not be economical beyond the short term as the cost of green hydrogen production eventually decreases with developments becoming more commonplace.
If this is the case, why is there so much of a push for grey and blue hydrogen production? Instead, should we be encouraging oil majors to invest more heavily in green hydrogen, rather than developing huge fossil fuel conversion projects?
Nel Hydrogen believes it can attain a production cost of $1.5 per kilogram of green hydrogen by 2025 through water electrolyzation. This would make it a major competitor with blue and grey hydrogen, made using carbon capture and storage (CCS) technologies from fossil fuel production.
Lokke stated, “I think it is pushed very much by the big oil companies because they don’t have a choice, and they’re afraid of losing power and the oligopoly position.” “But I think with green renewable hydrogen, the cost is going to go down much faster than the analysts think. Look at what happened in wind.”
This adds to other criticisms for blue hydrogen projects as recent studies from Cornell and Stanford suggest that the carbon footprint of blue hydrogen production is around 20 percent greater than using natural gas or coal for heat, and around 60 percent more than using diesel oil.
Yet, more and more oil majors across the globe are hopping on the blue hydrogen bandwagon, seeing it as an obvious answer to calls to decarbonize the oil and gas industry and make it more sustainable.
While CCS is becoming a vital component in fossil fuel production, helping to decarbonise oil and gas output as countries around the world strive for net-zero carbon emissions over the coming years, is conversion to hydrogen the answer? If green hydrogen plants could be developed at the same long-term cost as blue and grey hydrogen operations, it would offer a more sustainable solution for the ultimate transition away from fossil fuels, which would spell the demise of blue and grey hydrogen projects, making facilities established now ultimately redundant.
At a Rystad energy transition event in May, Lokke and several others highlighted the importance of initial government support and funding for green hydrogen projects, to accelerate the energy transition, rather than funding intermediate solutions with no real long-term advantage.
As oil majors ask governments for their backing and financial support for the development of blue hydrogen projects, while continuing oil and gas operations, recent studies and industry experts suggest we should be putting our efforts and money elsewhere and funding long-term sustainable green hydrogen projects.