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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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U.S. Gas Suppliers Are Betting Big On Hydrogen

This year will likely go down in history as the year when hydrogen won over the media. While it will still be a while before it becomes as mainstream as things like solar energy and battery storage, hydrogen has certainly been garnering a lot more attention recently. Now, even U.S. energy companies are beginning to experiment with it. Hydrogen, and more specifically green hydrogen, has been touted by the EU and the IEA, among others, as an indispensable part of the energy transition. Because hydrogen can be used as a fuel and as an energy carrier, it is a valuable addition to any energy transition plan. Unfortunately, the production of green hydrogen on any meaningful scale is currently prohibitively expensive. In the meantime, hydrogen is being used in a variety of different ways, including by the natural gas industry.

Reuters reported earlier this month that several oil and gas pipeline operators are experimenting with blending hydrogen into natural gas to see how it will affect the infrastructure, as well as appliances and equipment.

The companies doing the experimenting include Enbridge, Sempra Energy, and Dominion Energy, the report said, with Enbridge trying a 2-percent hydrogen addition to gas and Dominion going for 5 percent. For context, the maximum hydrogen portion natural gas can take if it is to be used to produce electricity is 10 percent, according to GE, as cited by Reuters.

Experiments like this may be relatively insignificant at the moment, but it demonstrates just how versatile and useful hydrogen may prove to be. As mentioned already, governments committed to net zero emissions are particularly interested in green hydrogen. There is some allowance for blue hydrogen — which is produced from fossil fuels alongside carbon capture and storage technologies — but not for the bulk of hydrogen the world produces today which is in the gray and brown part of the hydrogen production spectrum.

According to the International Energy Agency, the world will need some 306 million tons of green hydrogen to be produced every year if it is to achieve its net-zero goals. For this to become a reality, the cost of producing green hydrogen would need to decline substantially - as substantially as solar power costs declined over the last decade before material shortages began to push them back up.

There has been plenty of conjecture that these costs will soon go down but, ultimately, it would be up to governments to draft legislation to ensure that happens. The EU is currently doing this by tightening the supply of CO2 emission permits, pushing the price of the compound on the bloc’s carbon emissions market to historic highs.

In this context, adding 2 percent hydrogen to natural gas is not all that significant. According to some, it’s totally useless as well.

"Clean hydrogen will be constrained in supply for the foreseeable future," Julie McNamara, a senior energy analyst from the Union of Concerned Scientists, told Reuters. "Blending it at a low level into a gas pipeline that should be transitioned to electrification is just not the right pathway to be taken today.”

Related: Could East Africa Become The Next Major Oil Hotspot?

Many would argue that the complete electrification of everything is not only impossible but also undesirable as it would effectively amount to putting all of the world’s energy eggs in a single, electric, basket. The all-eggs-in-one-basket approach is considered a less-than-wise option—for good reason. Energy security and stability of supply are just a couple of considerations. The cost of energy supply is also of concern when considering the energy transition.

The latest hydrogen development came from Australia, where a startup claimed it had devised a new sort of electrolyzer that uses plasma to produce zero-emission hydrogen. According to the company, their electrolyzer can produce hydrogen for less than half the average cost for green hydrogen production to date. Depending on the cost of electricity that this electrolyzer would use, the cost could go even lower.

Earlier this month, Shell launched a hydrogen production plant in Germany. The project will have a production capacity of 1,300 tons annually. Still, Shell’s Germany chief executive admitted that green hydrogen costs about five times as much as brown and grey hydrogen. This could be halved through scale and efficiency improvements, he added, and further cut through government policies encouraging the use of renewable power at the expense of fossil fuels.

It will be a while until this happens--if it ever does. If a technology depends so heavily on government support, its commercial viability is questionable. Until it happens, blending hydrogen with natural gas to reduce emissions certainly seems like a worthy idea.

By Irina Slav for Oilprice.com

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