Economic/ Global Trends

Unleashing The Potential of Green Hydrogen

Noel Nevshehir, Automation Alley
March 28, 2023
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Photo by Who’s Denilo on Unsplash

Photo by Who’s Denilo on Unsplash


If federal dollars are a signal, green hydrogen will be another key tool in the U.S. arsenal to fight climate change. The Inflation Reduction Act contains over $9 billion in funding to develop technology harnessing the power of the periodic table’s simplest atom. Learn more about the potential of green hydrogen and the challenges of its adoption.

(An abridged version of this article first appeared in The World Economic Forum Agenda as “Why we can't ignore green hydrogen in the clean energy mix.” The following is unabridged.)

Historically a dark horse, green hydrogen energy has received renewed attention among global policy makers and energy experts as a potential source of net zero emissions. This is attributed in large part to significant advances in enabling technologies along with government subsidies and industrial policies supporting its research and development. (e.g., more than five billion euros approved by the European Commission and US$9.5 billion tucked in the U.S. Inflation Reduction Act). If the story is a familiar one, chalk it up to the false dawns of the past when hydrogen power was touted as a panacea aimed at weaning the world off its oil addiction and to counter climate change.

Emissions-free green hydrogen, as opposed to its carbonized yet-less-expensive blue and gray varieties (more on this in a moment), uses clean electricity from renewable energy sources including solar, wind, geothermal, and hydropower to separate water from hydrogen in a process known as electrolysis (versus steam reformation). To be sure, it is not a primary source of energy like fossil fuels but an energy carrier like electricity. According to the Economist, “there is no natural source of hydrogen and most of it is bound up in molecules like fossil fuels, biomass, and water.”

Thermodynamics dictates making hydrogen from one of these molecular structures requires more energy inputs than the output of hydrogen power. Hence, its uses are currently limited to chemically altering hydrogen by drawing in other elements on the periodic table to produce steel and cement, fuel for rocket engines, explosives, and to refine ammonia for fertilizers. It is cost effective for these specific manufacturing and industrial processes requiring higher temperatures than conventional electrical power sources. Other niche applications include aviation, trains, ferries, and commercial transportation where batteries have limited range for trucks. Translated, clean hydrogen will require extraordinary breakthroughs in innovative technologies if it is to achieve its stated goal of generating emissions-free electricity to the masses.

This is not to dismiss the progress made since the world last took a stab at hydrogen in the 2000s. For starters, the lower costs of generating solar and wind power today may enable the commercial scaling up of green hydrogen production and its corresponding supply chain. Yet, and it is critical to note here, blue and gray hydrogen, like other sources of renewable energy systems, requires electrical power from polluting fossil fuels such as coal, natural gas, and oil that today provide more than 80% of the world’s energy needs.

The source of energy and its method of production used to make hydrogen determines where it lies on its color palette. As noted above, green hydrogen is created using emissions-free energy sources. Conversely, gray hydrogen, representing 95% of what the world uses today, produces energy using fossil fuels that release carbon dioxide into the atmosphere. Its close cousin blue hydrogen comes from natural gas and its carbon emissions are sequestered  underground using carbon capturing methods rather than being released into the air. Taken together, they are option-like bets complementing the strengths and weaknesses of other energy sources such as the inherently intermittent nature of solar and wind power. Simply stated, there is not an all in one, Swiss army knife approach to protecting our environment. Therefore, we have to be more thoughtful and avoid shifting to paradigms that lack situational awareness or, worse yet, monetize dysfunction. Hydrogen is just one of many arrows in a quiver battling global warming and increasing carbon capture.

Tax credits and industrial policies will prime the pump for research spending and development of cleaner fuels. As with any nascent technology, the last mile to the finish line is the most difficult one to cross. Each renewable energy application has distinct advantages over others. But they have equal parts of kryptonite, too. Ideal industrial policies are designed as a temporary bromide to test proof a concept prior to being driven forward by private equity markets and tapered off taxpayer subsidies. In many cases, however, there is nothing more permanent than a temporary subsidy, especially if politicians are pressed to declare winners and losers by lobbyists representing rent seeking clients. This type of behavior is more often than not at the expense of taxpayers and consumers, many of whom are a broken refrigerator away from foreclosure.

Solyndra’s bankruptcy more than 10 years ago is often cited as a moral hazard rife with market distortions that unwitting taxpayers were left on the hook for more than $500 million. As we have seen, fuel-cell electric cars are no match for battery-powered electric vehicles in terms of performance and energy conversion efficiency.  Unlike EVs,  fuel cells cannot be powered up from home. While industrial policies clearly have a place when economic and national security interests are at stake, they can become heavily politicalized and disrupt free market mechanisms. Many ask why business and industry are allowed to socialize their costs while privatizing their profits. And, if technology is so promising to begin with, why does it require heaps of public sector funding rather than being driven by private equity?

Alluded to earlier, green hydrogen currently faces the immutable laws of chemistry and physics (and, for that matter, Econ 101) that require major technological breakthroughs. Similar to other sources of clean energy, it lacks a transportation infrastructure (pipelines included) and a mature supply chain network to manufacture grid-connected and less expensive electrolyzers. Currently, storage and long-distance shipping are cost prohibitive. Safety and security protocols are critical in preventing methane pipeline leaks, spills, and acts of sabotage of hydrogen-based fuels that can severely degrade the environment and cause injury to local populations. Rapidly scaling up its production presents another challenge. Agreed upon rules, regulations, and standards governing its production, transport, and uses need to be legislated to pave the way towards its development. Green energy’s “clean” credentials have to be clearly defined and classified to ensure tax credits are not self-defeating and indeed carbonless. Regulators have to closely police greenwashing and compel companies to disclose their entire life-cycle emissions (i.e., cradle to cradle).

Unquestionably, chronic and pervasive NIMBYism underscores the incongruities of policy makers mandating what is good for others but may not necessarily apply to the former. Wealthy and well-connected homeowners in the 90210 or 02568 zip codes have vetoed wind farms and solar fields in the name of protecting local whales and migrating birds. Same goes for nuclear power. As for the latter, 10 Americans have been tragically killed by civil nuclear power but none by radiation. Yet thousands die annually from air pollution.

Diversifying our energy portfolio toward clean hydrogen may crowd out investment for more efficient renewable applications. This can result in the proverbial prisoner’s dilemma where the self-interests of, say, a wind and solar company vying for the same pool of limited government funds as a hydrogen company can lead to suboptimal outcomes for all three. Also imagine green hydrogen appropriating from the grid wind and solar power— together accounting for only 11% of total U.S. electricity, according to the Kiplinger Letter dated December 21, 2022— when it is comparably more costly and less efficient for commercial and residential users.    

Despite these criticisms, we cannot ignore the opportunities to explore green hydrogen given its potential to reduce greenhouse-gas from the atmosphere, decrease global temperatures, and improve environmental quality. It has higher energy density than natural gas and when burned in the air it does not produce carbon monoxide or sulphates associated with hydrocarbons. However costly, when used in fuel cells it produces electricity without combustion and its only by-product is water. Using renewables, hydrogen can balance out supply and demand on electrical grids and respond better to seasonal adjustments because of its storage capacity once compressed. Although a high-volume gas, hydrogen is light weight, energy dense, and carbonless. Often overlooked by policy strategists are its geopolitical implications. Namely, it could redraw the energy map, reduce global income inequality, and increase wealth of newly minted hydrogen energy suppliers in developing countries such as Chile, Columbia, Uruguay, India, Indonesia, Morocco, and Namibia. As a hedge, consuming nations require a risk mitigation strategy to circumvent jumping headfirst from a petroleum or lithium cartel to hydrogen-producing ones controlled by nations whose values and foreign policies run counter to those of buyer countries. In this case, history will not only rhyme but eerily repeat itself. That is why the U.S., the EU, and other major economies (Australia, China, Japan and South Korea) are heavily investing in clean hydrogen.

Once science and technology catches up to the aspirations of green hydrogen, the opportunities for a cleaner environment will outweigh the arduous, trial and error process to a decarbonized promise land. Achieving higher energy conversion rates and lower production costs are key to the journey there.  Resiliency, operational reliability, and overcoming supply chain constraints are equally important. Economic history clearly demonstrates how human ingenuity has always found a way to solve what appeared at the time to be insurmountable hurdles to advancing civilization and quality of life. Discoveries that we benefit from today were once locked in our collective imaginations.  As Albert Einstein observed “you can’t solve a problem on the same level that it was created. You have to rise above it to the next level.” This is the hopeful, upward trajectory that we find ourselves in today and will transcend the challenges that lie before us.

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Noel Nevshehir, Automation Alley
Noel Nevshehir, Automation Alley

Noel Nevshehir is director of Automation Alley’s International Business Services and Global Strategic Partnerships. In this role, Nevshehir is responsible for leading Automation Alley’s trade mission program and foreign direct investment efforts. He is also responsible for seeking out global strategic partners that align with Automation Alley’s Industry 4.0 mission.

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