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MARCH 30, 2022

Good morning, I’m headed to Boston Thursday to moderate a panel at the MIT energy conference. Will you be there?

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Send your energy photos, ideas and more to news@ciphernews.com or to me directly at amy@ciphernews.com.

LATEST NEWS
Geopolitics lurk in EU’s bet on  green hydrogen in energy transition
BY: ANCA GURZU

The European Union is working hard to rid itself of Russian natural gas, and in the process the 27-member bloc is betting on a different gas as a clean alternative: green hydrogen.

Where it will come from is emerging as a top question—and concern.

In prior editions, Cipher tackled the geopolitics of transitioning away from natural gas. This week, we dive deep into the race for green hydrogen, which creates new geopolitical dynamics that are sure to change the global energy landscape.

Green hydrogen can help decarbonize some of the trickiest sectors of the economy, like the carbon-intensive steel and cement industries. But it’s currently too expensive to produce, takes time to scale up and wind and solar installations behind it need a lot of space to operate.

Those needs are compelling the EU to partner with other countries. The key challenge will be avoid trading Russian gas dependency for another type of dependency, EU lawmakers say.

The Russian war in Ukraine has shown how important it is for Europe to be strategic in its energy choices and boost its energy independence when meeting climate goals, Jerzy Buzek, a Polish member of the European Parliament (MEP) from the center-right European People’s Party group, told Cipher.

“We have to be very careful not to exchange our vulnerability in terms of external coal, gas or oil supplies with overdependence on hydrogen imports from third countries,” said Buzek, who is also the lead negotiator on one of two key legislative proposals meant to decarbonize the European gas market. “We must therefore rely on ourselves as much as possible and develop a regulatory and investment framework to boost the EU’s indigenous clean hydrogen production as soon as possible.”

Currently, most hydrogen is made with fossil fuels, which generate carbon dioxide as a byproduct. Hydrogen made from natural gas with captured CO2 is called blue hydrogen. The cleanest version is green hydrogen, made by using renewable energy-powered electricity to break apart water into hydrogen and oxygen, a process called electrolysis.

The EU has identified hydrogen as “essential” to support the EU’s ambition to reach carbon neutrality by 2050.

T
he bloc’s current climate goals envision the use of 5.6 million tons of green hydrogen by 2030, but the European Commission recently revised these numbers considering the urgent need to shed Russian natural gas.

The new numbers show the potential to reach 20 million tons through increased domestic production and by importing 10 million additional tons by 2030. That's compared to essentially zero green hydrogen in the EU today.

Saudi Arabia, Oman, Qatar and the United Arab Emirates, which enjoy year-round sunshine, are preparing themselves to be key green hydrogen producers. German Vice Chancellor Robert Habeck, who is also the economic and climate minister, visited the latter two earlier in March, eyeing future partnerships.

It would also be a “very wise” geopolitical idea to develop hydrogen partnerships with countries in North Africa, such as Morocco or Algeria, which the EU already has energy ties with, said Jens Geier, a German MEP from the center-left Socialists and Democrats group. He is also the Parliament’s lead policymaker on a legislative proposal to create a hydrogen market.

“I don’t believe Europe will ever become autonomous in terms of energy provision,” he told Cipher. “It will always be necessary to import some sort of energy, somehow, from somewhere.”

Foreshadowing this dilemma, EU energy ministers clashed last summer during a public debate over how to balance the need for imports with domestic hydrogen production.

Europe, the Middle East and Africa are projected to account for half the manufacturing capacity of electrolyzers—systems that enable the production of green hydrogen—in the coming years, based on investment plans analyzed in a recent report by the International Renewable Energy Agency.

“Hydrogen trade and investment flows will spawn new patterns of interdependence and bring shifts in bilateral relations,” states the report. (See today’s Data Dive for more.)

Geier said imports of green hydrogen are different from those of fossil fuels.

“We have ample wind and ample sun in different parts of the world, so we are not necessarily bound to countries which are exporting gas or oil,” he said. “That makes it possible to spread the sources from which we import very widely, and that means we can avoid a situation where we depend on only one source.”

On top of that, setting up global hydrogen markets is also a signal to fossil fuel exporters, said Matthias Deutsch, program lead on hydrogen at the Berlin-based think tank Agora Energiewende. “If they want to stay in business in the long run, they need to embrace the greening of molecules needed for reaching climate neutrality.

These new trade dynamics could create unintended consequences for exporting countries’ own decarbonization goals.

“Hydrogen imports to the EU might mean exporting countries have to face a dilemma between selling renewable hydrogen to Europe at a high price or continue their decarbonization efforts,” said Raphael Hanoteaux, senior policy adviser at environmental think tank E3G.

African countries and the EU must get it right "otherwise, exporting renewable hydrogen will divert much needed resources for decarbonization and local electrification," he added.

MEP Buzek said “risk of certain decarbonization illusion” exists if sending green hydrogen to the EU “will turn out to be more profitable [for the export country] than using the same renewable energy for domestic decarbonization needs.”

“After all,” he said, “we want to tackle global warming challenges globally, not in the EU only.”

Lunchtime Reads and Hot Takes
Misinformation is derailing renewable energy projects across the United StatesNPR
Amy’s take: Facebook says misinformation on one particular renewable energy project doesn’t rise to the level of censorship because it wasn’t shared very much, but to a small, rural community, a little could go a long way. Multiply this by many, and the result is a lot less clean energy right at the time we need it most.

Lower energy bills for people near wind turbines consideredBBC News
Amy’s take: A novel concept that could help counteract the aforementioned misinformation!

China sets green hydrogen target for 2025, eyes widespread use Reuters
Anca’s take: This is significant news from the world’s largest greenhouse gas emitter, which is seeking new ways to meet climate goals and boost energy security. It also fits in with the wider global projections for green hydrogen, as countries with solid renewable energy potential aim to establish clean hydrogen markets.

Bill Gates and Blackrock are backing the start-up behind hydropanels that make water out of thin airCNBC
Amy’s take: This sounds like much-needed magic to this non-scientist. The scarcity of water is becoming one of the starkest ways a warming world manifests itself, so innovation in this space is essential.

Nations Should Conserve Fuel as Global Energy Crisis Looms, Agency WarnsThe New York Times (paywall)
Amy’s take: As much as some in the climate community may want us to, we as humans will never sacrifice our way to climate action. That leaves innovation. To wit: We’ll drive electric cars because they’re better—not (just) cleaner—than their gasoline counterparts.

Span raises $90M to make smart panels the gateway to home electrificationCanary Media
Amy’s take: Companies like this should (if they don’t already) create a mockup system that experts (and, ahem, journalists!) can tour to get a real sense of how this all works.

Why reining in electricity prices is a lot tougher than it looksPolitico
Anca’s take: The article goes behind the scenes to explain why exactly Europeans’ power bills have exploded over the last months. In essence, it’s because the EU’s liberalized electricity market is pegged to the price of natural gas, leaving some Western countries keen to intervene in the market and put on price caps. Spain and Portugal, meanwhile, got the green light to do so.

What else we’re reading:
  • Fortescue and E.ON sign deal to replace Russian gas with Australian green hydrogen — Financial Times
  • G-20 Climate Action Falls Short Despite a Raft of Bold Promises — Bloomberg
  • Mining firm backed by Bezos and Gates to begin Greenland drilling — Reuters
  • China’s Green Hydrogen Message Spells Bad News For Russia — CleanTechnica
  • Cities need to be redesigned for the climate crisis. Can they make us happy, too? — The Guardian
DATA DIVE
Africa, Middle East set to lead green hydrogen race
Source: International Renewable Energy Agency • Units are in exajoules (EJ). Potential is calculated based on land availability. Water availability is not considered.


Africa, the Americas, the Middle East and Oceania are the regions with the highest technical potential to produce green hydrogen, while Europe is likely to become a key import market, according to a recent report from the International Renewable Energy Agency (IRENA).

“Green hydrogen could be most economical in locations that have the optimal combination of abundant renewable resources, space for solar or wind farms, and access to water, along with the capability to export to large demand centres,” the IRENA report states.

The map above outlines the global potential for producing green hydrogen for less than $1.50 per kilogram by 2050.

Renewable hydrogen is currently priced at €2.50-€5.50 ($2.70-$7.60) per kilogram, according to the EU’s Hydrogen Strategy, which is four times more expensive than hydrogen made from fossil fuels.

Costs for renewable hydrogen are going down quickly. Costs for electrolyzers dropped 60% in the last decade and are expected to halve by 2030, the EU strategy states. In regions where renewable energy is cheap, green hydrogen is expected to compete with fossil fuel-based hydrogen by the end of this decade.

Water is an important resource in green hydrogen production, but IRENA’s analysis didn’t factor in water availability when assessing potential.

Countries across Africa, for example, that are surrounded by desert don’t have abundant water access. Green hydrogen production in those areas would require desalinizing ocean and sea water, which is also set to drive up energy use, said Claude Mourey, director for hydrogen and new energies for the Middle East and North Africa at Wood Mackenzie.

“Whether the technical potential can be realised will also depend on soft factors like government support, the investment climate and political stability,” the IRENA report states.
AND FINALLY...
Capital charging
Cipher reader Victor Sauntry of Ottawa, Canada, took this photo of an electric vehicle charging on Parliament Hill overlooking the West Block. More new electric vehicles hit the road in Canada last year than ever before, but the trend is not picking up as quickly as in Europe. The main reason? Not enough cars available to meet the soaring demand.

Each week, we feature a photo that is somehow related to energy, the thing we all need but don’t notice until it’s expensive or gone. Email your ideas and photos to news@ciphernews.com.

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