Russian ESG - Hydrogen Not (Yet) as Green as It Seems?

Due to efforts to reduce greenhouse gas emissions, recent years have seen yet another burst of interest in hydrogen as an energy source. Although it is non-polluting, it is not found freely in nature and in fact producing it currently requires significant use of energy and often entails greenhouse gas emissions - the very thing that hydrogen-based energy is supposed to reduce. In this report, we shed light on a number of questions related to hydrogen energy.> Hydrogen is energy carrier, not energy source. Though there are many methods for deriving hydrogen, they all use much more energy than can be gained from the resulting hydrogen. Thus, hydrogen cannot be viewed as a primary source of energy, but it can be used to store and transfer energy. > Oil refining and chemicals industry consumes 95% of hydrogen. Most of the current demand for hydrogen (73 mtpa) is attributable to industrial use, while very little is used for energy, such as fuel for hydrogen vehicles.> Natural gas key source of hydrogen. According to the IEA, it accounts for roughly 75% of total hydrogen production, while 23% comes from coal and just 2% from electrolysis. Around 6% of global natural gas demand comes from hydrogen production.> Hydrogen production currently carbon intensive. Based on IEA estimates, carbon emissions from hydrogen production vary from 10 (gas reforming) to 20 (coal reforming) tonnes of CO2 per tonne of hydrogen production. Total CO2 emissions from hydrogen production stand at 830 mln tonnes per year, or 2.3% of global carbon emissions. > Electrolysis from thermal plants even more carbon intensive. Electrolysis itself is carbon free, but the electricity it uses is not. Emissions stand at 17 tonnes of CO2 per tonne of hydrogen with electricity from gas-fired power plants and even more in the case of coal plants. > Technological breakthrough required to turn hydrogen production green. To reduce greenhouse gas emissions from hydrogen production, carbon capture units should be deployed or a new technology developed with carbon deposited in solid form. Electrolysis from renewables (or nuclear) electricity could be an option, but replacing thermal electricity with renewable energy could have a greater impact on GHG reduction.> Russia plans to export 2 mln tonnes of hydrogen by 2035. The government's energy strategy to 2035 envisages the development of hydrogen energy. Pilot projects to produce low-carbon and carbon-free hydrogen are earmarked for launch in 2023-24. The export targets look rather ambitious given the currently very small global hydrogen trade ($167 mln in 2019 according to the World Bank).