The high cost of hydrogen hubs and the ‘small and shrinking’ market for hydrogen FCEVs means the US DOE faces ‘hard questions’ when it comes to blue hydrogen development, according to the Institute for Energy Economics and Financial Analysis (IEEFA).
In its Bad News for Blue Hydrogen report, IEEFA says the DOE is under pressure ‘to put the cart before the horse – to build hydrogen projects based on unproven technologies and undemonstrated markets’.
It warns that by the time DOE’s selected applications are processed and the surviving projects are built, EV market trends will have expanded the already strong role of BEVs substantially, weighing against most vehicular uses of hydrogen.
Moreover blue hydrogen, derived from the methane in natural gas, a fossil fuel, will not meet the federal definition of clean hydrogen, and would worsen greenhouse gas (GHG) emissions, it adds. “Producing hydrogen from fossil fuels does not make sense as a climate strategy,” it notes.
The report also dampened enthusiasm for hydrogen’s potential in trucking, saying battery power no longer appears to be an insurmountable barrier to regional duty heavy-duty BEVs.
Although DOE still expects broad use of hydrogen in medium-duty trucks, “that is not likely to happen. Even the heavy-duty truck market is likely to be substantially smaller than expected,” it adds.
DOE expresses hope for hydrogen use in buses with long driving ranges, but the agency acknowledged this year that the total fuel costs for hydrogen produced, delivered, compressed and dispensed, including infrastructure, must reach about $4/kg to achieve the 10% to 14% market share for medium- to heavy-duty vehicles.
The report also addresses the ongoing challenges relating to converting projects to final investment decision (FID).
Of the 12 MMT [million metric tonnes]/year of clean hydrogen production capacity announced in the US to date, only 10% has achieved FID, largely due to this lack of long-term offtake.
“Federal funding commitments and incentives are not enough to move hydrogen projects forward if private lenders are not on board. The dearth in investment calls into question when – or whether – the hydrogen facilities selected by DOE will be completed. Investor reluctance, in turn, is based on when or whether such projects will generate reliable profits.”
Concluding, the report states hydrogen has very little future in the vehicular transportation sector.
“DOE should use the current project negotiation period to scrutinise the applicants’ marketing assumptions, including assumptions about uses in the vehicular sector, and require changes in project scale where assumptions are unrealistic.
“If DOE fails to exercise its discretion diligently in reviewing and finalising the hydrogen project proposals currently before it, the result is likely to be a substantial waste of taxpayer dollars for an outsized hydrogen-based economy that will never arrive.”
