21 MAY 2022 - 11:02CEST
The hydrogen (H2) economy consists of using hydrogen - an element abundant in nature, in water for example (H2O) - as a source of clean energy to replace fossil fuels, such as oil or gas, which are pollutants by producing CO2 emissions in the combustion process
Although hydrogen is abundant in nature, it is very rare to find it as a separate element. In this state, it is found, for example, in the atmosphere in its highest layers -due to its low density-, or in some volcanic emanations. In other cases, it always appears in combination with other elements (BBVA Research, 2022).
Hydrogen (H2) can be extracted by various processes, for example, from methane (CH4) -the so-called gray hydrogen-, from carbon (C4H8) -black or brown hydrogen- or from water (H2O) -green hydrogen-. Although, as we can see, carbon is more abundant, the extraction process - as with methane - does involve CO2 emissions and would therefore be polluting. On the other hand, hydrogen obtained from water by a process called electrolysis, which separates hydrogen from oxygen, is not polluting. Therefore, the latter procedure, being non-polluting, allows us to obtain what is known as green hydrogen. Sometimes we also speak of blue hydrogen when we use the technology to extract hydrogen (BBVA Research, 2022).
As we can see, the outlook is optimistic, so where does the problem lie? Why are we not already using hydrogen as the main energy source throughout our economy? The first is because it is a costly energy source and is very expensive to produce, store and transport. Due to its low density, its corrosive and flammable nature, as well as its storage at very low temperatures, make it very difficult to transport and store (IEA, 2019). And the second because we are not yet able to produce it in the quantities needed to replace fossil energies, since for this we would need to produce 4.5 billion tons per year of hydrogen. We currently produce about 830 tons of hydrogen, but from a polluting source, not a clean one (BBVA Research, 2022).
In the European context, a European Clean Hydrogen Strategy has been launched in 2020 and there is a European Clean Hydrogen Alliance that has been developed between 2019 and 2021. Under the former, the European Commission plans to invest 400 billion euros between now and 2030 in the development of green hydrogen and the technologies needed for it.
For its part, the International Energy Agency (IEA) has identified the following applications of this energy source for the future in its report The Future of Hydrogen: 1) making industrial ports the hub for hydrogen energy distribution, 2) leveraging other existing infrastructure to carry out hydrogen distribution, such as gas pipelines for example, 3) extending hydrogen energy to fleets, freight and international trade corridors, 4) launching the first hydrogen transport routes by sea, 5) promoting investments, research and development and legislation favoring the transition to hydrogen energy, and 6) promoting international cooperation to advance the development of this energy source (IEA, 2019).
Proof of the growing importance of this energy source is the importance it is being given for stock price purposes on American stock exchanges. Although the years 2020 and 2021 have not been very strong in terms of asset prices of companies in the sector -due to low investments in the context of the pandemic-, in 2022 they are rebounding considerably, to such an extent that Morgan Stanley considers that it will be a rising market in the coming years, as it is expected that countries will considerably boost investments in hydrogen energy. This rising stock market will be verified not only in the United States, but also in the world's main stock exchanges, trading as oil and gas companies do today. Morgan Stanley estimates that the hydrogen market will represent 2,500 billion dollars in annual terms on a global scale by 2050.
An example of the importance of this energy source and the growing interest it arouses is the recent opening of a green hydrogen plant by the company Iberdrola in Puertollano (Ciudad Real), with a production capacity of 800 MW, a project that involves investments worth 1,800 million euros until 2027. This model will be expanded, with the possibility of multiplying its production capacity by 40 times, through the expansion of Fertiberia's green hydrogen projects in Puertollano (Ciudad Real) and Palos de la Frontera (Huelva) (Iberdrola, 2022).
The European Hydrogen Congress 2022 is currently being held in Madrid. Our country is at the forefront in the development of these technologies and at the forefront of the capacity to attract investment, since according to Bank of America, almost 40% of the MW capacity of hydrogen projects developed in Europe will be located in Spain in 2021. Hydrogen is, therefore, the energy of the future.
Begoña Casas Sierra
is Professor of Economics and Business at the European University.