Michael Barnard is an observer and strategist on the board of directors of Agora Energy Technology (a startup based on carbon dioxide redox flow), a member of the advisory committee of ELECTRON Aviation (an electric aviation startup), the chief strategist of TFIE Strategy and the co-founder of distnc Technology. He took the time to predict the decarbonization plan in the next 40-80 years, and helped senior executives, the board of directors and investors make wise choices today. His work is based on the basic principles of physics, economics and human nature, and is based on decarburization requirements and innovation in many fields, whether it is aviation refueling, power grid storage, Internet of Vehicles or hydrogen demand. His leadership positions in North America, Asia and Latin America have enhanced his global vision. He regularly publishes articles on innovation, business, technology and policy in multiple channels. He can participate in the board of directors, strategic advisers and speech activities. The following are his comments on the U.S. hydrogen strategy;
The U.S. hydrogen strategy is positioned in the wrong federal sector. It is handed over to those who deal with fossil fuels all day long. Their mode is to burn fossil fuels to obtain energy, not to use electricity as energy. It did not pass Remelt's first test of a good strategy, so its principles and actions will also fail.
The US Department of Energy (DOE) is in an interesting position in the process of transition to a low-carbon economy. 55% of its budget is for nuclear power, but most of the 100 or so nuclear reactors in the United States are aging. Except for a few, all reactors will be off the grid by 2035. Of course, the United States does not have any plans to build 100 new nuclear reactors, because the country does not have the conditions to successfully promote nuclear power, and the current hopes for SMR may not be realized.
Although more than half of the Department of Energy's budget is focused on nuclear power, the United States will actually replace most nuclear power with renewable energy, additional transmission -- especially high-voltage DC -- and storage, just like almost all other countries in the world. All these technologies are also within the purview of the Ministry of Energy. So far it has been good, although the bureaucracy and internal barriers will no doubt slowly accept this.
But DOE also deals with fossil fuels as a minority of its portfolio. It has a large part of its budget and staff dealing with coal, oil and gas. This may be part of the problem of its recently released draft hydrogen strategy.
Given that Biden's Inflation Reduction Act (IRA) has had a negative impact on the additionality rules of green hydrogen electrolysis in the European continent, it is interesting to note that the hydrogen strategy is still wet. The model of the United States is to provide subsidies for the production of green hydrogen, making its price close to black and gray hydrogen, and the money is negotiable. The main participants in Europe clearly said that they would go to the United States. Therefore, there is no requirement to establish PPA for sufficient wind and solar energy to meet the demand of hydrogen grid power in Europe. Unfortunately.
So let's talk about what a good strategy is. I have read the vast majority of strategic books -- this is the occupational disease of strategists -- of course, except for Clausewitz's On War, I have read all books that are often cited or considered important. In fact, there are only two good books on strategy. One is Sun Tzu on military issues, and the other is Rumelt's Good Strategy and Bad Strategy on non military issues. Differences and why they are important. Other books either focus heavily on military technology capabilities and alliances in specific periods, or they are fashion business books that read extremely badly a few years later, because the examples of great companies have now become the list of most failed companies (Blue Ocean Strategy is very prominent in this regard). Then, several books related to strategy were strongly recommended, such as Walker's Grey Rhino (much more useful than Black Swan), Christensen and Renault's Innovator's Solution, and Malhotra and Bazeman's Negotiation Genius.
However, this assessment obviously belongs to the non military strategic camp, so I will use the core of Rumelt's good strategy to build my ideas on the Department of Energy's hydrogen strategy.
Strategy is to design a way to meet challenges. Therefore, a good strategy must identify the challenges to overcome and devise a way to overcome them. To achieve this, the core of a good strategy consists of three elements: diagnosis, guiding policies and coherent actions.
Diagnosis is the key here. What is happening must be clearly understood. Empirical realities are critical to good strategy.
This is my prediction of hydrogen demand before 2100, which has been repeated several times. I use it to assist major institutional investors, venture capital companies and renewable energy deployment organizations to put their investment, resource allocation and action plan strategies in place for the next decade.
What is the most obvious point of this prediction? Hydrogen demand is shrinking and will not grow for most of the next few decades. Why? Because hydrogen is not a decarbonization solution, it is a global warming problem.
Black hydrogen and gray hydrogen are a carbon dioxide problem in all the global aviation industries. One of the jobs is to stop digging, and today's hydrogen production is a big shovel. Today, all of this comes from fossil fuels. The carbon dioxide emissions from upstream natural and coalbed methane leakage and from steam reforming or coal gasification are more than 12 to 35 times the quality of carbon dioxide used to produce hydrogen.
The largest part of it is used for refining fossil fuels, specifically oil refineries, where it is mainly used for the desulfurization of heavy crude oil such as the products of Alberta, Canada, and for the hydrotreating of stable and ideal aromatic hydrocarbons. This is a much smaller market with high value. Of the 120 million tons of pure hydrogen and syngas hydrogen we consume today, about 50 million, or 42%, are mixed hydrogen. The second block is used for ammonia based fertilizer, about 33 million tons, or about 28%. If we want to seriously address global warming, the use of refineries must largely disappear. The use of amino fertilizers must also be fundamentally reduced through the four trends or strategies of transferring self-sufficient farmers to urban employment, precision agriculture, low tillage agriculture and agricultural genetic solutions (such as the enhanced nitrogen fixing microorganisms of Pivot Bio).
Hydrogen is not used for energy today. It is used in the industrial process of refining energy carrier, and it is used in the industrial process of making fertilizer. Other uses include hydrogenation of vegetable oils to produce edible oil products and a host of other products.
But now it is not the carrier of energy. This raises a question.
Why is the US Department of Energy tasked with drafting a hydrogen strategy?
The arrangement of responsibilities foreshadows the answer that hydrogen will be used as an energy carrier in the future. There is no reason to believe that this is true.
This makes the Ministry of Energy a problematic place to position the hydrogen strategy. By definition, they cannot but regard it as an energy carrier. This is their whole paradigm.
Thermal energy is important in the economy as a whole, but industrial thermal energy will almost always be better provided by power driven solutions in the future. There are several industrial processes, such as cement clinker kiln, where I know there is a specific value of flame spraying, but these are exceptions, not rules. Industrial policies from DOC are more likely to start with the demand for heat than with false assumptions about the requirements for liquid or gaseous fuels.
As Paul Martin, a chemical process engineer who has been designing modular chemical treatment plans for global customers for 30 years, told me on several occasions, everything he did used electricity until cost-benefit analysis showed that fossil fuels were cheaper when the atmosphere was allowed to be used as an open sewer.
Then there is hydrogen for long-term storage. In my discussion with Jigar Shah, the director of the loan project office of the Ministry of Energy, one of the headaches was to provide a $504 million loan for a hydrogen salt cavern storage and power generation facility on the site of an old coal plant in Utah. The conclusion at that time was that it had reused the power transmission to Los Angeles, so it was good. However, they put natural gas power generation in this place to replace coal, which will require a bunch of new natural gas pipelines to supply natural gas. There is no branch line to transmit to this place, and renewable energy is brought here to produce green hydrogen, and the round-trip efficiency of green hydrogen is very low. Utah did not want the coal city to disappear, so it was approved. However, after the disappearance of the main economic purpose, maintaining the vitality of a rural town with thousands of people is not a strategic and reasonable energy or decarbonization solution.
Like other major countries in the world, the United States today has a large number of pumped storage power grids. This technology is by far the largest grid storage form in the world, and also the largest grid storage form under construction so far. The single water pump facility put into use in 2022 will dwarf all battery storage on the global grid. This is the scale and technology suitable for grid storage. By contrast, hydrogen is just a bad technology.
Then there are hydrogen and synthetic fuels for trucks and buses, which are also touted in the US Department of Energy's strategy. In the world, there are 500000 battery electric buses on the roads of China, and the number of electric trucks is roughly the same. Today, many manufacturers are delivering new battery electric semi-finished products. The test plan for each hydrogen powered bus and truck has proved that compared with battery electric, they are not economical and may be connected to the power grid on the way or inductively charged in some places.
You must look at the world through diesel powered glasses to assume that burning gas or liquid in trucks and buses is a suitable choice when battery power is an option. Synthetic fuels have higher CO2 emissions and higher costs. This is mainly an economic problem. The fuel cost accounts for about 21% of the truck transportation cost. I conducted an end-to-end assessment of Carbon Engineering's direct air capture air combustion plan in 2018 and 2019. Since then, the economy and technology have not changed.
Maritime transportation has different stories, which is another goal of hydrogen in DOE strategy. If the strategy originated from the Ministry of Transport responsible for shipping, there may be some reasonable materials here. However, many people, such as Maersk, are trying to break the circle of synthetic fuels made of green hydrogen, so they may not.
DOE authors may not know some key points. First, 40% of all deep-water shipping is used for bulk oil, gas and coal transportation between continents. All this will pass. The second is that 15% of all deep-water shipping is used for pig iron ore, which goes to the same port as many coal to make steel. This will be greatly reduced. Grain and other bulk commodities have begun to be containerized. The target is container transport, in other words, it is smaller.
Next, as always, the question is how much shipping can be electrified. The answer is that all inland shipping and about two-thirds of offshore shipping can operate with batteries, either permanently installed on the ship and charged as Corvus Energy has been doing for more than ten years, or put the batteries in standard containers (TEU) and replace them at the port. This solution is also applicable to the train I will take. A few months ago, as I discussed with Andy Tang, the global vice president of energy storage and optimization of the latter company, Tesla and Wartsila have delivered TEUs with batteries for grid storage worldwide.
This only leaves the declining deep-water shipping sector in need of solutions, and is highly unlikely to be hydrogen or synthetic fuels. In my assessment of alternative fuels for maritime transport, I have the highest probability of choosing biofuels as the leading solution. My prediction of the marine energy demand in this space by 2100 clearly shows that the carrying capacity of global straw cellulose biofuel is more than enough for the long haul segment of aviation and shipping that is actually difficult to refuel.
Therefore, for aviation, another area considered by the US Department of Energy is the goal of green hydrogen demand. From the same carbon engineering assessment cited above and my assessment of refueling options for this transportation part, it is clear that hydrogen is not suitable for direct use, and synthetic fuel will be much more expensive than SAF biofuel.
Those that cannot be electrified by continuously improving batteries will use SAF biofuels. They have existed since 2011, and most aerospace OEMs are certifying their aircraft, and today they use mixed or separate SAF biofuels with real cargo and passengers on test routes. But as shown in the table, as long as Jet A-1 is cheap, this is what aviation will use. Fortunately, with the end of the strange duty-free conditions for aviation fuel, changes are taking place in many regions of the world, which I explored a few months ago.
Then there is the railway, which is another goal that the US Department of Energy believes has high value. In the past 15 years, China has built 25000 miles of high-speed, grid connected, electrified freight and passenger railways, covering 93% of domestic cities, and connecting neighboring countries to the network. Germany has just announced that it will not build any hydrogen railway after the 50 mile test route, because economic research shows that its cost is three times that of grid connected/battery hybrid, and it is almost more expensive than battery electric. All freight train engines in the United States are already diesel electric hybrid power, and it is a universal practice to connect them with overhead lines.
Once again, these battery filled TEUs are the perfect components of the battery electric train system, which can be charged at the existing transfer points, and the crane is also fully motorized. Ten years ago, CN Rail, as a customer, studied the global container transport and container port management software, so that TEU could be filled with batteries to charge in the container transfer facilities and then put into the waiting train carriage or cargo hold. This is a relatively insignificant container ship.
Finally, the strategy targets residential and commercial heating as hydrogen. I have explored this (see the heating quadrant above). There are dozens of others. Hydrogen heating is much more expensive than natural gas heating, and its safety is much lower. When air, ground and water source heat pumps have been used to refuel very large commercial and residential buildings, the performance factor is 3 to 5, which is built in a super factory in Texas, and there is no hydrogen furnace or furnace for residential or commercial purposes that can be purchased or certified for use. You really must burn something to consider using hydrogen as a substitute.
I may return to this point to solve the wrong assumption about the need to transport hydrogen through pipelines, railways and ships, which is another set of paradigm errors made by DOE strategy. It can be said that almost all hydrogen is produced at today's demand point, because it is very difficult and expensive to transport, and its low energy density and small molecular size mean that it is very expensive to transport more than a few hundred meters. I have assessed the cost of pipelines and hydrogen transportation, which is meaningless compared with putting renewable electricity into high-voltage direct current (HVDC) lines. This is a global universal technology. The third submarine HVDC interconnector enters the UK, tens of thousands of kilometers of HVDC in China, HVDC construction under the HVDC from Morocco to the UK, and the high-voltage DC transmission proposal from Australia to Singapore.
The future of energy transmission is the flow of electricity along high-voltage DC and AC lines, rather than moving molecules.
If the strategy of the US Department of Energy continues in this form, it will bring such a big problem to the US, because it first distracts attention from hydrogen as a decarburization problem, so it will not be solved immediately. Second, this will lead many organizations to waste a lot of time and money in building infrastructure where there is no demand to produce hydrogen. In some cases, hydrogen will be able to be reused for high-value uses, such as amino fertilizers. But in many cases, it is just an expensive white elephant, which is transferred to a more useful place at a huge cost.
So why did the United States make this obviously bad choice? Why is hydrogen in DOE instead of DOC? Why are all these obvious dead end use cases considered as "strategic, high impact uses of hydrogen" as claimed by the DOE strategy?
Well, the fossil fuel industry and the government, which have a large amount of tax and royalty income, are trying to lobby hydrogen to become a "substitute" for fossil fuels. They know that unless hydrogen bears the heavy burden, the economic value of their fossil fuel reserves will be zero. As Michael Liebreich likes to point out, the fossil fuel industry will not fail because it promotes hydrogen. They can either delay real climate action or obtain substantial government funding to make blue hydrogen from their fossil fuel reserves.
Oh, did I mention that the US Department of Energy's hydrogen strategy is also to produce hydrogen from fossil fuels, with carbon capture and storage attached? Are you surprised?
Because of the wrong framework, the U.S. hydrogen strategy is positioned in the wrong federal sector. It is handed over to those who deal with fossil fuels all day long. They have a paradigm of burning fossil fuels instead of using electricity for energy. It failed to pass Rumelt's test, that is, the first thing to formulate a good strategy and accept the reality of experience, so its principles and actions will also fail.
The United States should return to the drawing board as soon as possible, and I would be happy to help them.
