The end goal is green, but does blue play a role too?

Blue hydrogen is made from natural gas. This process also makes CO2 which is then stored underground in geological formations, typically in petroleum reservoirs that have trapped natural gas for millennia. Green hydrogen, on the other hand, is made from water using an electrolyser powered by renewable energy.

The reality is that both options, green and blue, will likely be pursued by industry to enable a swift energy transition. But why both – why can’t this be an all-green solution, at least in the immediate term?

While it is certain the renewable power industry and the green hydrogen industry is set for dramatic growth, it is by no means certain that green hydrogen can grow at a sufficient rate to play the part that low carbon hydrogen needs to play in the multipronged decarbonisation transition.

Consideration of the magnitude of some of the challenges for rapid scaleup of the green hydrogen industry is useful in building an understanding of the role that blue hydrogen will play in the mix for the transition to net zero.

Detailed modelling in the International Energy Agency (IEA) Net Zero Emissions by 2050 (NZE2050) scenario and Princeton University’s Net-Zero America (NZA) report demonstrate the need for blue hydrogen.

According to the NZE2050 report, the world will require an aggressive uptake of low carbon hydrogen to meet decarbonisation targets with the scenario requiring 150 MT of low carbon hydrogen per year by 2030 and 520 MT by 2050.

Electrolysers won’t always be working at full capacity, so the real installed base would need to be far greater, with the NZE2050 estimate being 850 GW.

By comparison, Australia is just embarking on its first 10 MW scale projects with ARENA support. Globally, we would need an industry more than 45,000 times the size of one of these plants by 2030 – in just nine years – and it is believed that no orders have yet been placed on suppliers for electrolysers at a scale close to a GW. Germany is a leader in developing and scaling up electrolysers but is planning only 5 GW by 2030 in its current hydrogen strategy, less than 1 percent of the requirement. Achieving more than 450 GW of installed electrolyser capacity by 2030 looms as a very significant challenge.

The other significant challenge for rapid scale-up of green hydrogen is the ability of the renewables industry to ramp up at very low cost to facilitate a price for green hydrogen that is commercially within range of the fuels it would be displacing. This comes on top of the need for renewables to replace current fossil fuel power generation and supply additional power to match the rapid increase in overall power demand as other energy needs are electrified in order to be decarbonised. We could need two to three times more power than we currently use. Of course, the transmission grids need to also keep up with this expansion

This feels like a big ask for the renewable sector in the timeframe, especially at the low cost required for green hydrogen. Additionally green hydrogen generation is third in line, after decarbonising current power requirements and then the decarbonisation by electrification, when it comes to priorities for the renewable power sector when assessed for ‘bang for renewable MWh’ in decarbonisation.

We all understand that scaling up and continued technology development will help bring costs down, but what if both the renewables and electrolyser market growth rate remain so high that the forecast reductions are not met?

Can blue hydrogen help to achieve meaningful decarbonisation and be rolled out at a scale to meet its envisaged role in the transition to net zero? When you study a blue hydrogen project in detail, taking account of full lifecycle emissions, you gain confidence that it can be developed with its carbon footprint substantially reduced and that, if implemented at large scale, blue hydrogen can be produced at the $2/kg price range documented in many public domain studies, including the cost of carbon capture and storage.

Making the 69 MT per annum of blue hydrogen allocated in the NZE2050 scenario requires the equivalent of approximately 50 LNG trains globally of blue hydrogen. For comparison, Australia added the equivalent of about 17 LNG trains to its LNG capacity between 2009 and 2017. Building 50 trains would still be a significant challenge, but achieving it at a global level is not unrealistic. Blue hydrogen could also potentially leverage LNG export infrastructure as a way of reducing the near term investment required.

Of course, for blue hydrogen, carbon capture and storage has to be ramped up on a large scale as well. This is not a standing start though. There are several large scale facilities around the world in operation already and the oil and gas industry is awash with mature and depleted reservoirs and a detailed knowledge of which ones will be suitable for permanent and safe storage. Furthermore the NZE2050 and NZA studies both found that carbon capture is, in its own right, needed to achieve net zero emissions as part of the solution for decarbonising heavy industry. The CCS industry is being re-imagined as a shared sequestration resource of CO2 transmission pipelines and injection hubs thereby cutting the cost of access to emitters needing to use this to decarbonize.

Australia should fully expect the Middle East and North America and possibly Russia to rapidly progress blue hydrogen. Like Australia, they are also blessed with abundant depleted petroleum reservoirs that have trapped natural gas for millennia and can now do the same for CO2. They still have ample gas available to feed a blue hydrogen industry.

Cost will drive large scale fuel switching decisions and if Australia has backed a green only strategy but then suffers delays in delivering on the low-cost forecasts and the necessary volumes it could find itself squeezed out of large scale international hydrogen trade as the demand for low carbon hydrogen of many ‘colours’ grows. Having to finance the cost of the Australian large scale export infrastructure could prove to be a significant barrier to entry for the green hydrogen industry compared with sharing and ultimately taking over existing infrastructure from blue hydrogen.

We all love green and for good reason, and we are expecting it to ramp up quickly and perhaps in the 30-to-50-year time frame our renewable power systems will be able to support an energy landscape with predominantly green hydrogen in use and, ultimately perhaps only green.

The future of this green hydrogen industry and the renewables industry is secure and, if anything the magnitude of the task in the near term even more daunting than even the most ambitious of proponents are contemplating.

But, if we remain on task with our focus on rapid decarbonisation and de-risking the path to net-zero, then blue hydrogen should remain firmly in consideration for the ramp up pathway it can provide.

This view is based on a solid understanding of what hydrogen projects cost, what decarbonisation benefit they bring and what it will take to implement them at scale. It is only by achieving scale that we can achieve meaningful decarbonisation.