Hydrogen: Key in European Stimulus Plan

European policy makers are betting big on hydrogen. What makes this element interesting is that it can be produced in a variety of ways and has many applications. Splitting hydrogen atoms generates a large amount of heat, for instance. It is therefore interesting for both industry and heavy transport. Its main benefit, however, is that there are no associated polluting emissions.

Bloomberg News reported that European Commission President Ursula von der Leyen is planning to integrate the EU’s COVID-19 rescue plan around its Green Deal, which aims for climate neutrality by 2050. The Netherlands, Germany and Portugal are pushing the envelope regarding hydrogen as a fuel for the future. They happen to be well-positioned, with strong, existing gas infrastructure. This infrastructure needs barely any adaptation to be able to transport hydrogen, a comparative advantage Mexico could make use of as well. What is more, hydrogen can be generated using renewable energy such as solar and wind. It would therefore be feasible to create a 100 percent clean-energy chain, using hydrogen to fill any gaps left by the intermittent nature of renewables. This could prove to be the key to unlocking EU’s ambitious reactivation plan, which still needs to be approved by the 27 member states.

There is one major issue that keeps hydrogen sidelined as a niche in the EU, where it accounts for only 1 percent of energy consumption: its high cost. Furthermore, it is mostly produced by splitting off molecules from natural gas, which uses a lot of energy and produces emissions. But this is rapidly changing. Bloomberg News reports the development of a technique called electrolysis, which pushes electric currents through water and splits hydrogen atoms from oxygen. Here, renewable energy would be the ultimate sustainable basis. Major companies such as Air Liquide SA, ThyssenKrupp AG and Shell have created important demonstration projects.

Noé van Hulst, the Hydrogen Envoy at the Ministry of Economic Affairs & Climate Policy of the Netherlands, explains that there are different types of hydrogen that can be created: “Where the hydrogen comes from is important. At the moment, it is mainly produced industrially from natural gas, which generates significant carbon emissions. That type is known as ‘grey’ hydrogen. A cleaner version is ‘blue’ hydrogen, for which the carbon emissions are captured and stored or reused. The cleanest one of all is ‘green’ hydrogen, which is generated by renewable energy sources without producing carbon emissions in the first place,” he wrote in a commentary for IEA.

Grey hydrogen at the moment is the cheapest at around US$1.65/kg. Natural gas prices factor into this price. As Mexico currently has access to cheap gas through imports from the US, this is an attractive prospect for the country. What is more, the less-polluting but slightly more costly blue hydrogen is generated through natural gas as well. If Mexico creates adequate infrastructure, hydrogen could play an important role toward a greener future in the country as well.

The technology remains in its earliest stages. It is therefore hard to predict where prices for hydrogen will go, as technologies advance. Nonetheless, European confidence in this fuel provides an interesting prospect, one that Mexican companies could seek to develop further as well.