Will 2023 be hydrogen’s year?

GUEST COLUMN

Scott Nyquist debates both sides of the hydrogen argument in this week’s ECHTX Voices of Energy guest column. Photo courtesy of Aramco.

Yes and no.

Yes, because there is real money, and action, behind it.

Globally, there are 600 projects on the books to build electrolyzers, which separate the oxygen and hydrogen in water, and are critical to creating low-emissions “green hydrogen.” That investment could drive down the cost of low-emissions hydrogen, making it cost competitive with conventional fuels—a major obstacle to its development so far.

In addition, oil companies are interested, too. The industry already uses hydrogen for refining; many see hydrogen as supplemental to their existing operations and perhaps, eventually, supplanting them. In the meantime, it helps them to decarbonize their refining and petrochemical operations, which most of the majors have committed to doing.

Indeed, hydrocarbon-based companies and economies could have a big opportunity in “blue hydrogen,” which uses fossil fuels for production, but then captures and stores emissions. (“Green hydrogen” uses renewables; because it is expensive to produce, it is more distant than blue. “Gray hydrogen” uses fossil fuels, without carbon capture; this accounts for most current production and use.) Oil and gas companies have a head start on related infrastructure, such as pipelines and carbon capture, and also see new business opportunities, such as low-carbon ammonia.

Houston, for example, which likes to call itself the "energy capital of the world,” is going big on hydrogen. The region is well suited to this. It has an extensive pipeline infrastructure, an excellent port system, a pro-business culture, and experience. The Greater Houston Partnership and McKinsey—both of whom I am associated with—estimate that demand for hydrogen will grow 6 to 8 percent a year from 2030 to 2050. No wonder Houston wants a piece of that action.

There are promising, near-term applications for hydrogen, such as ammonia, cement, and steel production, shipping, long-term energy storage, long-haul trucking, and aviation. These bits and pieces add up: steel alone accounts for about 8 percent of global carbon-dioxide emissions. Late last year, Airbus announced it is developing a hydrogen-powered fuel cell engine as part of its effort to build zero-emission aircraft. And Cummins, a US-based engine company, is investing serious money in hydrogen for trains and commercial and industrial vehicles, where batteries are less effective; it already has more than 500 electrolyzers at work.

Then there is recent US legislation. The Infrastructure, Investment and Jobs Act (IIJA) of 2021 allocated $9.5 billion funding for hydrogen. Much more important, though, was last year’s Inflation Reduction Act, which contains generous tax credits to promote hydrogen production. The idea is to narrow the price gap between clean hydrogen and other, more emissions-intensive technologies; in effect, the law seeks to fundamentally change the economics of hydrogen and could be a true game-changer.

This is not without controversy: some Europeans think this money constitutes subsidies that are not allowed under trade rules. For its part, Europe has the hydrogen bug, too. Its REPowerEU plan is based on the idea of “hydrogen-ready infrastructure,” so that natural gas projects can be converted to hydrogen when the technology and economics make sense.

So there is a lot of momentum behind hydrogen, bolstered by the ambitious goals agreed to at the most recent climate conference in Egypt. McKinsey estimates that hydrogen demand could reach 660 million tons by 2050, which could abate 20 percent of total emissions. Total planned production for lower-emission green and blue hydrogen through 2030 has reached more than 26 million metric tons annually—quadruple that of 2020.

No, because major issues have not been figured out.

The plans in the works, while ambitious, are murky. A European official, asked about the REPowerEU strategy, admitted that “it’s not clear how it will work.” The same can be said of the United States. The hydrogen value chain, particularly for green hydrogen, requires a lot of electricity, and that calls for flexible grids and much greater capacity. For the United States to reach its climate goals, the grid needs to grow an estimated 60 percent by 2030.That is not easy: just try siting new transmission lines and watch the NIMBY monsters emerge.

Permitting can be a nightmare, often requiring separate approvals from local, state, interstate, and federal authorities, and from different authorities for each (air, land, water, endangered species, and on and on); money does not solve this. Even a state like Texas, which isn’t allergic to fossil fuels and has a relatively light regulatory touch, can get stuck in permitting limbo. Bill Gates recently noted that “over 1,000 gigawatts worth of potential clean energy projects [in the United States] are waiting for approval—about the current size of the entire U.S. grid—and the primary reason for the bottleneck is the lack of transmission.”

Then there is the matter of moving hydrogen from production site to market. Pipeline networks are not yet in place and shifting natural gas pipelines to hydrogen is a long way off. Liquifying hydrogen and transporting is expensive. In general, because hydrogen is still a new industry, it faces “chicken or egg” problems that are typical of the difficulties big innovations face, such as connecting hydrogen buyers to hydrogen producers and connecting carbon emitters to places to store the carbon dioxide. These challenges add to the complexity of getting projects financed.

Finally, there is money. McKinsey estimates that getting on track to that 600 million tons would require investment of $950 billion by 2030; so far, $240 billion has been announced.

Where I stand: in the middle.

I believe in hydrogen’s potential. More than 3 years ago, I wrote about hydrogen, arguing that while there had been real progress, “many things need to happen, in terms of policy, finance, and infrastructure, before it becomes even a medium-sized deal.” Now, some of those things are happening.

So, I guess I land somewhere in the middle. I think 2023 will see real progress, in decarbonizing refining and petrochemicals operations and producing ammonia, specifically. I am also optimistic that a number of low-emissions electrolysis projects will move ahead. And while such advances might seem less than transformative, they are critical: hydrogen, whether blue or green, needs to prove itself, and 2023 could be the year it does.

Because I take hydrogen’s potential seriously, though, I also see the barriers. If it is to become the big deal its supporters believe it could be, that requires big money, strong engineering and construction project management, sustained commitment, and community support. It’s easy to proclaim the wonders of the hydrogen economy; it’s much more difficult to devise sensible business models, standardized contracts, consistent incentives, and a regulatory system that doesn’t drive producers crazy. But all this matters—a lot.

My conclusion: there will be significant steps forward in 2023—but take-off is still years away.

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Scott Nyquist is a senior advisor at McKinsey & Company and vice chairman, Houston Energy Transition Initiative of the Greater Houston Partnership. The views expressed herein are Nyquist's own and not those of McKinsey & Company or of the Greater Houston Partnership. This article originally ran on LinkedIn.

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Houston startup launches groundbreaking mineral hydrogen pilot

pilot project

Houston climatech company Vema Hydrogen recently completed drilling its first two pilot wells in Quebec for its Engineered Mineral Hydrogen (EMH) pilot. The company says the project is the first EMH pilot of its kind.

Vema’s EMH technology produces low-cost, high-purity hydrogen from subsurface rock formations. It has the capacity to support e-fuel and clean mobility industries and the shipping and air transport markets. The pilot project is the first field deployment of the company’s technology.

“This pilot will provide the critical data needed to validate Engineered Mineral Hydrogen at commercial scale and demonstrate that Quebec can lead the world in this emerging clean energy category,” Pierre Levin, CEO of Vema Hydrogen, said in a news release.

Levin added that the sample collected thus far in the pilot is “exactly what we expected, and is very promising for hydrogen yields.”

Through the pilot, Vema will collect core samples and begin subsurface analysis to evaluate fluid movement and monitor hydrogen production from the wells. The data collected from the pilot will shape Vema's plans for commercialization and provide documentation for proof of concept in the field, according to the news release.

“Vema Hydrogen perfectly embodies the spirit of the grey to green movement: transforming mining liabilities into drivers of innovation and ecological transition,” Ludovic Beauregard, circular economy commissioner at the Thetford Region Economic Development Corporation, added in the release.

“This project demonstrates that it is possible to reconcile the revitalization of mining regions, clean energy and sustainable economic development for these areas.”

In addition to its pilot in Canada, Vema also recently signed a 10-year hydrogen purchase and sale agreement with San Francisco-based Verne Power to supply clean hydrogen for data centers across California. The company was selected as a Qualified Supplier by The First Public Hydrogen Authority, which will allow it to supply clean hydrogen at scale to California’s municipalities, transit agencies and businesses through the FPH2 network.

Vema aims to produce Engineered Mineral Hydrogen for less than $1 per kilogram. The company, founded in 2024, is working toward a gigawatt-scale hydrogen supply in North America.

Houston startup wins funding through new Bezos Earth Fund initiative

global winner

A Houston-based climatech startup is one of the first 16 companies in the world to receive funding through a new partnership between The Bezos Earth Fund and The Earthshot Prize.

Mati Carbon will receive $100,000 through the Bezos Earth Fund’s Acceleration Initiative. The initiative will provide $4.8 million over three years to support climate and nature solutions startups. It's backed by The Bezos Earth Fund, which was founded through a $10 billion gift from Amazon founder Jeff Bezos and aims to "transform the fight against climate change."

The Acceleration Initiative will choose 16 startups each year from The Earthshot Prize’s global pool of nominations that were not selected as finalists. The Earthshot Prize, founded by Prince William, awards £1 million to five energy startups each year over a decade.

"The Earthshot Prize selects 15 finalists each year, but our wider pool of nominations represents a global pipeline of innovators and investable solutions that benefit both people and planet. Collaborating with the Bezos Earth Fund to support additional high-potential solutions is at the heart of commitment to working with partners who share our vision," Jason Knauf, CEO of The Earthshot Prize, said in a news release. "By combining our strengths to support 48 carefully selected grantees from The Earthshot Prize’s pool of nominations, our partnership with the Bezos Earth Fund means we will continue to drive systemic change beyond our annual Prize cycle, delivering real-world impact at scale and speed.”

Mati Carbon was founded in 2022 by co-directors Shantanu Agarwal and Rwitwika Bhattacharya. It removes carbon through its Enhanced Rock Weathering (ERW) program and works with agricultural farms in Africa and India. Mati Carbon says the farmers it partners with are some of the most vulnerable to the impacts of climate change.

"As one of the first 16 organizations selected, this support enables us to expand our operations, move faster and think bigger about the impact we can create," the company shared in a LinkedIn post.

The other grantees from around the world include:

  • Air Protein Inc.
  • Climatenza Solar
  • Instituto Floresta Viva
  • Forum Konservasi Leuser
  • Fundación Rewilding Argentina
  • Hyperion Robotics
  • InPlanet
  • Lasso
  • Mandai Nature
  • MERMAID
  • Asociación Conservacionista Misión Tiburón
  • Simple Planet
  • Snowchange Cooperative
  • tHEMEat Company
  • UP Catalyst

Mati Carbon also won the $50 million grand prize in the XPRIZE Carbon Removal competition, backed by Elon Musk’s charitable organization, The Musk Foundation, last year.

Texas' oil and gas foundation could boost its geothermal future, UH says

future of geothermal

Equipped with the proper policies and investments, Texas could capitalize on its oil and gas infrastructure and expertise to lead the U.S. in development of advanced geothermal power, a new University of Houston white paper says.

Drilling, reservoir development and subsurface engineering are among the Texas oil and gas industry’s capabilities that could translate to geothermal energy, according to a news release. Furthermore, oil and gas skills, data, technology and supply chains could help make geothermal power more cost-effective.

Up to 80 percent of the investment required for a geothermal project involves capacity and skills that are common in the oil and gas industry, the white paper points out.

Building on its existing oil-and-gas foundation, Texas could help accelerate production of geothermal energy, lower geothermal energy costs and create more jobs in the energy workforce, according to the news release.

The paper also highlights geothermal progress made by Houston-based companies Fervo Energy, Quaise Energy and Sage Geosystems, as well as Canada-based Eavor Technologies Inc.

UH’s Division of Energy published the white paper, Advanced Geothermal: Opportunities and Challenges, in partnership with the C.T. Bauer College of Business’ Gutierrez Energy Management Institute.

“Energy demand, especially electricity demand, is continuing to grow, and we need to develop new low-carbon energy sources to meet those needs,” Greg Bean, executive director of the institute and author of the white paper, said of geothermal’s potential.