By Christopher M. Matthews and Katherine Blunt
Can a multibillion-dollar project in the Saudi desert jump-start
the demand for green hydrogen, an elusive energy source that could
help eliminate carbon emissions from vehicles, power plants and
heavy industry?
The allure of hydrogen is undeniable. Unlike oil and natural
gas, it doesn't emit carbon dioxide and other greenhouse gases when
burned. It's more easily stored than electricity generated by wind
turbines and solar farms, and it can be transported by ship or
pipeline. Green hydrogen, which is produced using renewable energy
sources, is especially attractive as a fuel. It's made from water
rather than methane or other hydrocarbons.
But those who foresee a green hydrogen future face a quandary:
The high cost of producing the odorless, colorless, flammable gas
can be mitigated only by large-scale projects, which in turn make
economic sense only if there is a widespread market for green
hydrogen. That doesn't yet exist.
In Neom, a planned megacity of the future now taking shape in
northwestern Saudi Arabia, the investors behind the green hydrogen
project think they can deliver the chicken and the egg.
The initiative -- a joint venture of Neom, U.S. chemical company
Air Products & Chemicals Inc., and Saudi Arabia's ACWA Power --
will invest $5 billion to build what will be the world's largest
green hydrogen production facility. Another $2 billion will be
invested in distribution infrastructure in consumer markets around
the world, primarily to fuel industrial vehicles and public
buses.
Plans call for the sprawling facility, which isn't yet under
construction, to produce 650 tons of green hydrogen a day starting
in 2025. The facility's output will dwarf that of a green hydrogen
plant in Québec that produces about nine tons a day, making it the
largest such facility in the world. The Neom project exemplifies
the Kingdom's ambitious plan to diversify away from oil and natural
gas and showcase Neom as a global hub for technology and green
energy.
One of Neom's main advantages in what could become a global race
to develop green hydrogen is that the city's location along the Red
Sea possesses world-class solar and wind power, according to Peter
Terium, head of Neom's energy sector. Solar will power the plant
during the day, wind at night, he says.
It isn't easy to find a site with strong enough wind and sun, as
well as proximity to a port, Mr. Terium says. "Otherwise, we
wouldn't be the first to announce an investment of this size," he
says.
Other countries are following suit. Australia, for example, has
expedited the approval of a $36 billion project in the Outback in
the western part of the country that will generate 26,000 megawatts
of renewable electricity to be used to power the green hydrogen
production.
Most hydrogen made for commercial use is so-called gray
hydrogen, which is produced by splitting the hydrocarbon molecules
in coal or natural gas. This process emits carbon. Green hydrogen,
on the other hand, emits no carbon because it relies upon a process
called electrolysis, in which electricity is used to strip hydrogen
atoms from water molecules.
Air Products is the world's largest producer of hydrogen, most
of which now is derived from fossil fuels. But through its
involvement with Neom, the Allentown, Pa.-based corporation is
betting big that many countries will pay a premium for green
hydrogen to meet carbon reduction targets, according to chief
executive Seifi Ghasemi.
The Neom project aims to produce enough hydrogen to fuel about
20,000 buses a day. But rather than being piped or shipped to end
users as gaseous or liquid hydrogen, the hydrogen will first be
converted into ammonia, which is denser and therefore more
economical to ship. After being sent by boat to Asia, the U.S. and
Europe, the ammonia will be converted back into hydrogen before
being sent to filling stations built by Air Products.
"The only thing [the customer] has to do is buy fuel cell
vehicles to use the hydrogen," Mr. Ghasemi says. "Hydrogen will
become, 30 years from now, like oil is today."
It's a bold prediction that would require significant changes to
the way we use fuel and electric power. Not all experts see that
happening because of the sheer cost and magnitude of redesigning
energy infrastructure around the world. That would require changing
everything from vehicles to household applications.
Such a world would look markedly different. Filling stations
would dispense hydrogen instead of gasoline. Hydrogen could be
piped into homes to feed heaters and gas stoves. And unlike wind or
solar, it could provide a steady supply of electricity for large
power users, such as data centers and manufacturing hubs, when the
wind doesn't blow and the sun doesn't shine.
If it can be scaled, green hydrogen could also help solve
several big challenges in a lower-carbon economy: powering
heavy-duty trucks and ships without reliance on giant batteries,
providing round-the-clock electricity to supplement intermittent
supplies from wind and solar and decarbonizing heavy industrial
processes including steel and concrete manufacturing.
Julio Friedmann, a senior research scholar at Columbia
University, says green hydrogen's diverse applications could help
it become the "Swiss Army knife" of the green energy economy, as
states and countries pledge to reach net-zero carbon emissions in
the coming decades.
Among energy nerds, hydrogen has long been the butt of a joke:
It's the fuel of the future, and probably always will be. The most
abundant element in the universe, hydrogen has seen rounds of hype
before, most recently in the early 2000s, when it was promoted as a
transportation fuel amid fears about declining reserves of fossil
fuels.
Some investors remain deeply skeptical of hydrogen, citing its
high cost and the inevitable challenges of building infrastructure
necessary to deploy it at scale. Kerrisdale Capital, a New
York-based investment firm, is shorting shares in a fuel-cell maker
whose share price has skyrocketed this year alongside other
fuel-cell and alternative-energy stocks in the hope that the
companies will be big players in a "hydrogen economy." Fuel cells
use chemical reactions to produce electricity from hydrogen and
oxygen.
"The 'hydrogen economy' will never happen," the firm wrote in a
research note. "Hydrogen energy will have only very niche use
cases."
Increased regulation of greenhouse gases, growing investor
pressure on companies to reduce carbon emissions and technological
advances have many thinking the hydrogen hype is real this time.
Management consulting firm McKinsey & Co. estimates that
hydrogen could account for 14% of power used in the U.S. by 2050,
from next to nothing today.
Another factor in the heightened interest in green hydrogen is
the steep decline in the price of renewable energy, which Mr.
Friedmann says now accounts for 50% to 70% of the cost of green
hydrogen. The cost of building wind and solar farms has fallen in
recent years as technology costs have declined and more projects
are built at scale. Wind and solar now rival natural gas as the
lowest-cost means of power generation.
"You are going to see a lot of countries and states going after
hydrogen, " Mr. Friedmann says.
Along with the Neom partners, other investors big and small are
betting that green hydrogen is finally positioned to realize its
full potential. Global expenditures on hydrogen projects are
projected to top $400 billion between now and 2030, followed by
more than $2 trillion in spending from 2030 to 2050, investment
bank Evercore ISI estimates.
Some auto makers, including Toyota Motor Corp. and Honda Motor
Co., are developing vehicles with hydrogen fuel cells, which
convert the fuel into electricity.
Several major utility companies, meanwhile, are looking into
running power plants on hydrogen instead of natural gas, which is
now the nation's primary fuel for electricity generation. Unlike
wind and solar farms, gas plants can run all the time, or fire up
quickly to meet peak demand.
The Los Angeles Department of Water and Power, the nation's
largest municipal utility, is spearheading a $1.9-billion effort to
convert a coal-fired power plant in Utah to run on natural gas and
hydrogen produced with wind and solar power.
In northwestern New Mexico, developers are planning to spend up
to $2 billion on a hydrogen-fueled power plant to serve electricity
customers throughout the West starting in 2024. The Libertad Power
Project, as the plant initiative is known, will use so-called blue
hydrogen, which is produced by carbon-capture technology, before
transitioning to green hydrogen as it becomes cheaper and more
widely available. Carbon capture involves catching the carbon atoms
upon production and storing them so they can't enter the
atmosphere.
For all its promise, green hydrogen faces many hurdles. These
include the intermittence of solar and wind power and the high cost
of electrolyzers, complex systems that traditionally have required
large capital investments but which are now falling in price.
Despite declines in the cost of renewable energy, green hydrogen
production plants will need high utilization rates, or almost
round-the-clock power, to make them profitable.
Hydrogen is hard to store in gaseous form and is expensive to
liquefy, which is why the Neom project plans to convert it to
ammonia for transport. It can also weaken metal on contact, making
it difficult to transport via pipeline unless it is blended with
natural gas or other substances.
Columbia's Mr. Friedmann says the barriers to widespread use of
green hydrogen are related not to technology but to infrastructure.
Governments and companies will need to invest heavily in power
grids, ports, pipelines and fueling stations that can accommodate
hydrogen. The costs of doing that will be borne across the global
economy if governments implement sound public policy to drive
market investment, he says.
(END) Dow Jones Newswires
February 08, 2021 13:15 ET (18:15 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
Air Products and Chemicals (NYSE:APD)
Historical Stock Chart
From Mar 2024 to Apr 2024
Air Products and Chemicals (NYSE:APD)
Historical Stock Chart
From Apr 2023 to Apr 2024