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Hydrogen power: hype or hope?

By Geoff Carmody - posted Wednesday, 7 November 2018


Clean energy of the future. Take some hydrogen, burn it or chemically transform it. What do you get? Energy plus water. Keep the lights on, power transport, cut emissions, and produce some steam. All good?

The Hydrogen Strategy Group (HSG) produced a briefing report in August 2018 for the COAG Energy Council titled Hydrogen for Australia's Future (referred to here as the HAF report).

There's lots of very interesting stuff in the report. But there are many questions, too. For those interested, it's available on the web at coagenergycouncil.gov.au/publications/hydrogen-australias-future.

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The report says Japan and South Korea plan to bebig importers and users of hydrogen-based energy. The report proposes Australian-produced hydrogen be developed to supply them. Is this hype? The HAF report itself recognises that these potential hydrogen importers are not committed to Australian exports per se. Of course, they want cost-competitive hydrogen from wherever. The report notes we have lots of potential competitors, such as Norway, Saudi Arabia, Brunei, the USA, countries in the Middle East, and Africa.

Is hydrogen cost-competitive? Not now, the report agrees. The report accepts costs need to be reduced and that will require a massive effort. It says more R&D, and, importantly, getting the market activated to generate experience with production processes, will be needed to do that. Technology probably will improve hydrogen's competitiveness. How quickly and how much isn't clear. Technical change is like that. Cost-competitiveness is a hope for the future, not a current hydrogen export foundation for Australia.

How would HAF's proposed hydrogen strategy affect individual nations' 'green' records under production-based hydrogen emissions accounting? How are traded energy emissions recorded? How does this affect incentives to export and import energy?

International trade in energy, and the embodied or resultant greenhouse gas emissions from it, highlight how stupid the emissions accounting system in use globally since 1992 really is. The mooted trade between Australia and Japan in hydrogen, or, alternatively, trade between them in fossil fuels, illustrates this.

Each energy source has greenhouse gas emissions embodied in its production for export, and then emissions in its use as an energy source by importers. Global emissions accounting from the full production cycle must cover both. Compare emissions accounting incentives for trade in hydrogen and fossil fuels.

Australian hydrogen exports have emissions embodied in production (eg, from electrolysis). These add to Australian emissions. Japanese imports of hydrogen, used as energy in its production instead of fossil fuels, give it 100% of the credit for any cuts in emissions from hydrogen use. Production-based emissions accounting punishes exporters and rewards importers. Hydrogen costs will decide the matter, anyway.

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Trade in coal or gas has 'fugitive emissions', etc, associated with extraction and production in Australia. These are debited to Australia. They're small relative to emissions from importers' energy use. Incentives are switched. Australia's export emissions are small. Japan's emissions debits from using these imports in production are much larger. Australia's emissions disincentive to export fossil fuels is much smaller than Japan's emissions incentive not to import them. Emissions incentives aside, costs again decide the matter.

Neither exporters nor importers are likely to opt for much international trade in expensive hydrogen over cheaper fossil fuels. But the present production-based emissions accounting framework means inconsistent incentives to exporters and importers for trading in energy if hydrogen becomes cost-competitive.

If cutting emissions globally really is the goal, shouldn't emissions accounting send consistent, trade-neutral, signals and encourage, not impede, a global policy response? Today's model clearly fails that test.

Under my national consumption accounting for emissions, hydrogen made in Australia, exported to Japan, would record production emissions as Japanese imports. All Japanese exports would then be exempted. That's how our GST works. There'd be no emissions 'price' on national exports, but full 'price' on national imports. The same applies to Australian fossil fuel exports and imports. Globally, all exports are some country's imports. All traded goods emissions are accounted for via imports. None are double-counted.

International trade emissions incentives would be trade-competitiveness neutral across all energy and its emissions. That removes a fatal policy design flaw – national production-based measurement – inherent in current emissions accounting. This flaw impedes a global response to an assumed global problem – human caused global warming. The current accounting incentives haven't, don't, and won't cut global emissions.

What about the science and cost implications? The HAF report says using hydrogen produces only water, and no CO2, 'or any other greenhouse gas', plus energy. The chemical reaction for use is:

2H2 + O2 Þ2H2O + energy

This is only half the full hydrogen cycle story. There's almost no free hydrogen on earth. For the full cycle, we need two equations, one for producing hydrogen (eg, electrolysis), plus one for using it (oxidisation). A simplified 'full cycle' version of extracting as well as using hydrogen might be expressed as follows:

2H2O + energyelectrolysis Þ2H2 + O2 (1)

2H2 + O2 Þ 2H2O + energyusinghydrogen (2)

Substituting (2) into (1), and assuming perfectly efficient electrolysis and hydrogen use:

energyelectrolysis = energyusinghydrogen (3)

Perfectly efficient machines or processes are physics pipe-dreams. Efficiency losses always apply. So:

energyelectrolysis > energyburninghydrogen (4)

Converting water to hydrogen and then using hydrogen to produce water again loses energy – maybe a lot.

Why use more electrical energy to produce less hydrogen fuel energy? I can see a portability reason for transport, where fuel cell hydrogen might be lower-emissions (total cycle) than diesel or petrol. There might be cost savings via less need for new transmission and distribution systems ('poles and wires'). There may be a case for production for export (eg, to Japan), but efficiency and cost-competitiveness will be crucial.

In all such cases, we need to know emissions involved in the electrolysis phase of the full cycle. Otherwise we're hiding some emissions in the electrolysis phase and hyping use of hydrogen in the second phase as low- or no-emissions. That's just the sleight of hand greens use with wind, solar and hydro-power already.

Fossil fuels for electrolysis require carbon capture and storage of CO2, etc, to cut emissions. Is that cost-effective at scale? Using, say, wind or solar for electrolysis may reduce, but not eliminate, emissions (net). Intermittency, etc, might be less of a problem. Hydrogen is produced when the wind is blowing or the sun is shining and then stored. Storage requires energy-using processes: liquefaction, under pressure, or chemical conversion. Storage becomes a hydrogen battery or fuel cell or hydrogen storage tank. That might lower emissions. But it is likely to require more 'poles and wires' to connect new renewables generation. Aren't energy losses between electrolysis and hydrogen use very large? Isn't the energy efficiency of the full process very low (20% maybe)? So isn't the full hydrogen cycle very costly and uncompetitive at present?

If Australia exports hydrogen, and Japan imports and uses the hydrogen to produce energy, the water 'lost' in the hydrogen production phase in Australia effectively is exported to Japan, where the hydrogen is used and recombines with oxygen to form water again. Is this an issue for water-scarce Australia? The report says 1kg of H2 requires 9kg of H2O. The HAF strategy would require huge amounts of Australian (liquid?) water for production. Moreover, the water must be 'high purity'. Isn't pure water very costly to electrolyse? That means lots of water is needed (maybe from desalinated seawater), purification, and more costs.

For transparency, I assume policy makers – and punters – will be told the answers to all of these questions.

I'm all for research and pilot studies on all alternative energy sources, free of political hang-ups. For affordable, reliable, low-emissions energy, how about nuclear power in Australia? It seems to work well in countries like France. Australia could start – quite quickly – with small modular reactors (SMRs). How do they compare today on flexibility, cost, reliability, emissions, and safety, with hydrogen or renewables? Put political phobias and ideology aside. Do some more independent, objective research, like that in the HAF report. Let's find out.

When it comes to energy sources, I'm happy with whatever mix of them best satisfies policy criteria like affordability, reliability and (possibly) lower emissions. Unlike the Holy See, I'm catholic with a small 'c'. I'd like to think politicians would set stable policy criteria, establishing a solid environment for long-term investment expectations, and then ensure markets are allowed to deliver against them. Hopes dashed so far. That's where my small 'c' catholicism lapses into agnosticism, or even atheism, from recent experience.

Speaking of religion, what about reducing greenhouse gas emissions?

If rational, and you don't believe in anthropogenic global warming, you'll conclude all of this is irrelevant. You'll conclude Australia should do nothing to reduce its own emissions.

If rational, and you do believe in global warming, or are agnostic but risk averse, you'll look at the actions of the world's major emitters and the global arithmetic. If the rest of the world is allowing emissions to rise, even shutting Australia down completely is futile. At 1.3% of global emissions, and falling, acting alone, we won't make a difference. We might even make things worse if, as is likely, economic activity shifts to higher-emissions countries as a result.

Rationally, if you believe in global warming, your main objective should be to advocate an effective global policy response. Above all, that means eliminating current policy design flaws, especially the focus on national emissions production, thereby improving prospects of getting a global response. Unless we switch to national emissions consumption accounting, based on history's lessons of failure so far, you'll also conclude Australia should do nothing to reduce its emissions production. It's futile without a global response.

This arithmetic aside, polling suggests a lot of voters feel Australia should do something about global warming by reducing local emissions. Many believe equally reliable renewables are cheaper than fossil fuels because politicians and others assert they are. Like hydrogen, they're not. Alternatively, they expect others to pay higher power costs. They want theirs reduced. That's irrational. You can't have it all ways.

Unless the world's major emitters act to cut their emissions as well, Australia doing nothing is a rational policy unity ticket across Australian holders of all views about anthropogenic global warming.

Will Australians accept that obvious arithmetical logic today?

How will they decide? Will they use reason, or go with their feelings? Ditto their political 'leaders'?

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About the Author

Geoff Carmody is Director, Geoff Carmody & Associates, a former co-founder of Access Economics, and before that was a senior officer in the Commonwealth Treasury. He favours a national consumption-based climate policy, preferably using a carbon tax to put a price on carbon. He has prepared papers entitled Effective climate change policy: the seven Cs. Paper #1: Some design principles for evaluating greenhouse gas abatement policies. Paper #2: Implementing design principles for effective climate change policy. Paper #3: ETS or carbon tax?

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