If you want a symbol of how energy is a global industry as fundamental as the trades in metals or government bonds, one image has held sway for decades: The monumental black-and-red hull of a crude-oil supertanker.
It is only natural, then, that a world transitioning to cleaner sources of energy should seek out a comparable emblem for the net zero era. A prime candidate to replace petroleum is another substance that can be moved around in tankers: green hydrogen (so-called because it is produced by using renewable energy to split apart water molecules, ignoring some current processes that emit more greenhouse gases or are unlikely to be cost-competitive).
About 400 million tonnes of hydrogen a year (not necessarily green) will be moved over long distances by 2050, according to the Hydrogen Council, which represents the nascent industry. Countries rich in cheap renewables, such as Australia, Brazil and Chile, hope to become hydrogen hubs every bit as pivotal to the global economy as the Persian Gulf is in our current hydrocarbon era. Even Saudi Arabia is working on an US$8.5 billion green hydrogen plant.
Will a worldwide trade in hydrogen grow to take on the same role that the oil industry has right now? It is not likely. To see why, it is worth looking at how green hydrogen will be made, transported and used — and considering the parallels with existing flows of commodities.
One binding constraint on commerce since the dawn of history has been the cost of transport. Only higher-value items are worth moving over long distances. Ancient China and Rome traded silk and glassware, but not wheat and rice. It is not so different these days. You will typically pay between US$10 and US$50 a tonne to ship a non-containerized product like oil, wheat or coal across an ocean. As a result, materials like cement and sulfur — abundant and relatively cheap — are mostly consumed close to where they are produced. It is simply not worthwhile putting them on a ship.
For most commodities, trade rises with increasing prices. The exceptions to that rule are telling. High-quality reserves of iron ore and crude oil are scarce globally, so consumers have no choice but to transport them from further afield. Technological innovation will never make Japan a major petroleum producer or South Korea a powerhouse of iron ore. Geology is destiny, giving those commodities a special cachet.
Green hydrogen is different. No major economy faces a permanent shortage of hydrogen’s raw materials: water and renewable energy. In that sense, it more closely resembles products like gypsum and ammonia, which can be manufactured almost anywhere.
The prices of renewable energy do differ from country to country, to be sure — but not by enough to overcome the transport issue. Hydrogen is hard to move in its raw form, being highly reactive, far less dense than liquefied natural gas (LNG) and very, very cold. It only liquefies at minus-253°C, almost as far below the temperature of LNG as ice is from steam. The costs of chilling substances increase dramatically the colder they get.
Most plans to solve this issue involve putting the hydrogen through a reactor at either end of the journey to convert it into a more easily transportable form, with the prime candidates being ammonia, methanol and the toluene used in paint thinner, but the amount of energy used to drive those reactions pushes the costs up further. Because of that, even Brazil — with some of the cheapest renewables — will struggle to build an export trade that can compete with domestically produced green hydrogen.
You can shave these costs somewhat if you burn ammonia directly as fuel rather than attempting to convert it back to hydrogen, but the challenges involved have thwarted engineers since World War II and chemists are still getting to grips with the processes involved. Burning ammonia is also a potent source of particulates from nitrogen oxides, one of a suite of major pollutants responsible for about 6.7 million deaths a year. It even generates nitrous oxide, a chemical that warms the atmosphere about 273 times as much as carbon dioxide that is rarely produced by current industrial activities.
Green hydrogen might yet remake the world of energy. In many parts of the world, it will be well within range of the US$7 million to US$10 per million British thermal units cost of natural gas by the end of this decade, according to BloombergNEF. That should enable it to displace fossil fuels in a swath of applications requiring high-temperature heat, large-scale energy storage or molecules for chemical compounds.
However, what it will not do is generate fleets of tankers connecting the globe. Like sulfur and ammonia — and the existing hydrogen trade that consumes nearly 100 million tonnes a year — it is going to be used close to the place it was produced. Many countries might aspire to become the Saudi Arabia of the green hydrogen era, but none will achieve that dream.
David Fickling is a Bloomberg Opinion columnist covering energy and commodities.
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