Brussels Behind the Scenes: Hydrogen hype or hysteria?

Hydrogen hype or hysteria

German Chancellor Olaf Scholz went cap-in-hand to Canada this week, in search of energy supply guarantees as a manic scramble to make sure there is enough power during the winter months continues. He came back to Europe with something a little different to that.

Canada is one of the world’s biggest gas producers, seemingly making it a logical destination for Scholz as part of Germany’s quest to ditch Russian fossil fuels without triggering a recession or dealing with blackouts.

There is only one problem with that logic though and it is a big one: Canada does not have any LNG export infrastructure. Piped gas is also obviously not an option given the rather large hurdle that is the Atlantic Ocean.

Instead, Scholz’s visit was more future-leaning, as the chancellor signed up to a hydrogen agreement with Canadian Prime Minister Justin Trudeau. Experts are, however, already sceptical about the actual value of the energy pact.

BRUSSELS BEHIND THE SCENES is a weekly newsletter which brings the untold stories about the characters driving the policies affecting our lives. Analysis not found anywhere else, Sam Morgan helps you make sense of what is happening in Brussels. If you want to receive Brussels behind the scenes straight to your inbox every week, subscribe to the newsletter here.

A short bit of background beforehand: hydrogen is not an energy source per se, rather an energy carrier or vector. You can produce it from fossil fuels or, ideally, use electricity from renewable sources to split water molecules up and harvest the leftovers.

Hydrogen ostensibly has an unlimited list of potential applications, ranging from powering giant cargo ships and airliners to heating homes and fuelling e-bikes. The offer of emission-free juice is tempting to every sector, after all.

But green hydrogen is expensive to produce and transporting it adds to the costs. Hydrogen is also not a perfect vector, meaning its efficiency is lower. Battery-powered cars, for example, are the future, rather than hydrogen fuel cells, for that very reason.

So what is the point of Scholz’s hydrogen deal across the Pond? Firstly, Germany’s all-important industrial heartland needs a reason to go green. It powers the economy but also produces a huge chunk of its greenhouse gas emissions.

Given that Canada is not going to start exporting its hydrogen for at least three years, that gives the big players plenty of lead-time to make the decisions necessary to accommodate the fuel. Plan now, get the payoff later.

Secondly, it is great for Canada. The hydrogen is going to use electricity from wind farms, which builds a better investment case to build renewable energy. Even if the deal does not come to pass, they will likely have the power generation in place to use for other means.

That creates a virtuous circle of sorts. More outlets for green power, means more renewable electrons are needed, and vice versa.

Thirdly, there are already companies in Germany using hydrogen, meaning this is no pie-in-the-sky pact. One perhaps surprising client is the train sector, which this week announced a new milestone in its hydrogen journey.

An entire train route in northern Germany, around the town of Bremerhaven, will soon be operated by a fleet of locomotives that are all hydrogen-powered. 

These next-gen trains have been running on the line for a couple of years and the operation has been such a success that French coach-builder Alstom was asked to provide additional units to completely phase out the existing diesel engines.

Hydrogen has limited potential for use in trains but along regional lines that are hard to electrify due to tunnels, natural landmarks like forests or simply a lack of budget to play with, it can be an option. 

In Lower Saxony’s example, the business case works. Germany’s Canada deal will increase the investment potential to a degree, as another fuel supplier will be available. Perhaps this will help fuel an uptick of low- and zero-carbon train travel.

Shortcomings

But there is a big problem with the deal. Canada does not have the export infrastructure in place on its east coast yet and the sheer effort of shifting hydrogen by ship is untested. It is also predicted to be fraught with difficulties. 

Michael Liebreich, an energy expert who founded Bloomberg NEF, insists that only “homeopathic quantities” of green hydrogen will be transported by boat under the pact, simply because of the scientific properties of hydrogen compared to LNG.

It is less dense and a lot of energy is wasted in the liquefaction process. Ships specially adapted to carry it – which do not actually exist yet – would have to be smaller than the giants that carry LNG. Less product means less appetite for investors to care about it.

Instead, the agreement could end up being a fertiliser export deal. Hydrogen can be mixed with nitrogen to produce ammonia, the key ingredient of fertiliser, which is at a premium because of sanctions on Russia.

Liebreich points out that because shipping hydrogen and also ammonia would be so costly and inefficient, it would simply be easier and more productive for Canada to produce the hydrogen, turn it into ammonia, make the fertiliser and ship out the product itself.

That does not mean that Germany’s Canada deal is a red herring. The world needs fertiliser to help combat a looming food shortage and Canada could also be a pioneer in trialling other hydrogen applications.

For example, ocean-going ships need to be decarbonised because of the sector’s climate impact – similar to that of Germany’s annual pollution output – and hydrogen or ammonia have been identified as potential fuel sources.

Prototypes are few and far between, as most big shipping companies do not want to make the first move and potentially yield their competitive advantage. Canada, as a fuel producer and fuel exporter, hypothetically has all of the pieces needed to build a business case.

If Canada and other aspiring hydrogen-producing nations corner the green fertiliser market, then that means hydrogen produced closer to home can be used for applications like aviation.

Hydrogen, as experts point out, is like Champagne. Expensive but great when enjoyed in the right quantities, at the right venue. Burning it to heat homes, for example, is like having a glass of the bubbly stuff with breakfast every day.

BRUSSELS BEHIND THE SCENES is a weekly newsletter which brings the untold stories about the characters driving the policies affecting our lives. Analysis not found anywhere else, Sam Morgan helps you make sense of what is happening in Brussels. If you want to receive Brussels behind the scenes straight to your inbox every week, subscribe to the newsletter here.