It’s Official: Oil Giants Seek New Revenue in Green Hydrogen

The green hydrogen trend has been sparking interest among leading oil and gas stakeholders for the past couple of years, and now it looks like the floodgates are open. The baby-step phase is coming to an end. Serious money is in play, at a scale needed to hasten the transition to a more sustainable low-carbon future.

Spotlight on green hydrogen

Bloomberg covered the latest green hydrogen news earlier this week. Under the headline, “Big Oil Bets That Green Hydrogen Is the Future of Energy,” reporters Will Mathis, Laura Hurst and Francois De Beaupuy noted that “major oil companies are finally planning the kind of large-scale investments that would make green hydrogen a serious business.” 

“They’re chasing a very particular vision of a low-carbon future — multibillion dollar developments that generate vast concentrations of renewable electricity and convert it into chemicals or clean fuels that can be shipped around the world to power trucks, ships or even airplanes,” they added.

To be clear, it is important to distinguish green hydrogen from other terms.

Most of the activity in the green hydrogen area involves deploying wind and solar power to generate electricity for electrolysis systems, which push hydrogen gas from water.

Biomass, biogas and organic-rich wastewater are other emerging renewable resources for green hydrogen. 

Harvesting hydrogen from recovered, synthetic resources, such as industrial waste gas or recycled plastic is another emerging area. It does not fit the consensus on “green,” as a term applied to renewable resources. However, recovered resources can be a more sustainable alternative to the conventional means of producing hydrogen, which has long relied on virgin natural gas and, to a lesser extent, coal.

What’s the matter with “clean” hydrogen?

In contrast to the burst of activity around green hydrogen, fossil energy stakeholders have struggled to make “clean” hydrogen happen.

“Clean” hydrogen generally refers to natural gas paired with carbon capture systems. That approach may have passed muster years ago, but it is out of step with the demands of the 21st-century supply chain. 

Hydrogen is widely used throughout the global economy, in agriculture, toiletries and pharmaceuticals as well as manufacturing. Fresh demands are being placed on the hydrogen supply by the transportation sector, as the fuel cell industry grows alongside interest in hydrogen and ammonia fuels.

Leading brands and other manufacturers are scrambling to decarbonize themselves upstream as well as downstream. Steelmakers, for example, are beginning to invest in green hydrogen systems because auto makers are beginning to demand “green” steel, in accord with the growing consumer demand for low-carbon products.

The global supply of green hydrogen is minuscule now, and costs are high relative to conventional hydrogen from fossil sources. However, as economies of scale kick in for green hydrogen, and the supply increases, the appeal of fossil sources — and their heavy environmental baggage — fades away.

The U.S. could be a green hydrogen leader

Much of the shovels-in-the-ground activity is taking place overseas, but the U.S. is poised to catch up and become a green hydrogen leader in the global marketplace.

“Owing to its large refining and chemical sectors, the United States is already one of the largest producers and consumers of hydrogen,” the International Energy Agency pointed out in a recent overview of the global hydrogen market. 

The IEA also noted that, due to its sprawling network of pipelines and other infrastructure, the U.S. has a running start on the green hydrogen trend, compared to parts of the world where renewable resources are abundant, but transportation infrastructure is lacking.

Proposals for the creation of green hydrogen “hubs” have been emerging in a number of U.S. states in recent months, from California and Texas to an ambitious tri-state initiative launched by Connecticut, New York and New Jersey.

Another leading example in the U.S. is the “ACES” Advanced Clean Energy Storage project in Utah, which leverages an unusual underground formation for bulk green H2 storage.

As one sign of growing momentum for the green hydrogen movement in the U.S., last April the Department of Energy (DOE) revived its long-dormant Loan Programs Office to issue a loan guarantee of $504.4 million for ACES, citing its massive scale and innovative use of electrolysis.

“Advanced Clean Energy Storage will capture excess renewable energy when it is most abundant, store it as hydrogen, then deploy it as fuel for the Intermountain Power Agency’s (IPA) IPP Renewed Project — a hydrogen-capable gas turbine combined cycle power plant that intends to incrementally be fueled by 100 percent clean hydrogen by 2045,” the Energy Department explained.

The DOE is also promoting the hydrogen hub trend in other regions of the U.S. with a new $8 billion round of competitive funding through the 2021 Bipartisan Infrastructure Law. The program includes a carveout for natural gas, but it also mandates funding for at least one green hydrogen hub deploying renewables, and another hub deploying electricity from nuclear power plants.

Oil and gas giants to the rescue?

Fossil energy stakeholders have much work to do before they can claim credit for slowing down, let alone reversing, the catastrophic damage wreaked under a high-carbon economy.

Still, green hydrogen is a good place to start. The renewable energy angle makes this source of fuel a logical next step for oil and gas giants that are already investing in wind or solar energy.

Shell and Equinor, for example, are participating in the EU’s sprawling NortH2 project, which leverages offshore wind power in the North Sea. Shell has also been participating in exploratory talks for a green hydrogen hub in Texas.

TotalEnergies is in the mix with a 10-year, $50 billion green hydrogen partnership with Adani Group. In other recent news, BP announced a 40.5 percent stake in the AREH green hydrogen project in Australia, which is billed as one of the largest in the world.

Of course, many outliers still remain. Chevron and ExxonMobil, for example, are leaning on natural gas with carbon capture. Nevertheless, the green hydrogen die has been cast. Corporations that don’t fit the mold risk being left out in the cold as the global supply chain shakes free of the fossil energy burden.

Image credit: Gerd Altmann via Pixabay