LNG

The US-based Institute for Energy Economics and Financial Analysis (IEEFA) has condemned a report in the “Financial Times” newspaper on experimental hydrogen as a fuel to replace LNG and conventional natural gas as an exaggeration that will be paid for by the poorest people in society, will cost tens of billions of dollars and ignores hydrogen’s explosiveness and the difficulties of compressing or transporting the fuel.

The author of the IEEFA article, Arjun Flora, is the director of the body’s energy finance studies in Europe, and he issued a statement opposing the whole tenor of the FT opinion piece signed by Marco Alverà, Chief Executive of the Italian natural gas grid operator Snam.

“Alverà extols the virtues of hydrogen as an energy source,” stated Flora.

Flora explained that people reading Mr. Alverà’s opinion piece should be aware of the existential dependence that gas Transmission System Operators (TSOs), such as Snam, have on the future proliferation of hydrogen infrastructure.

Flora added that people who doubt this should look over a report released last week on the extent of hydrogen lobbying in the European Union.

Flora noted that according to the Paris-based International Energy Agency’s “Net Zero” report, the industry should be ending new natural gas investments to achieve net-zero emissions by 2050.

Problems

“This creates a big problem for many gas transmission system operators, whose business model is largely based around earning regulated revenues from making new investments, to deliver stable and growing dividends to their shareholders,” explained Flora.

Flora’s article added that to counter this trend, natural gas TSOs are looking to build new “hydrogen-ready” infrastructure instead, pushing extensively to have this and other “renewable gases” categorized as “green” by politicians and investors and calculated in their regulatory mandates.

“To be clear, it is energy consumers, taxpayers, and the poorest in society who will pay for all this new investment through rates and tariffs, taxes, and have to suffer the worst of climate change,” according to Flora.

Flora contended that the way to solve this problem is to change the way the gas sector TSOs are incentivized and rewarded.

However, Flora said that in the arguments in favour of hydrogen, such a move would involve changing the status quo and require uncomfortable conversations between familiar faces.

“So instead, governments appear to be giving way, delaying and distorting our decarbonization pathway and using public funds to keep the gas companies profitable, which all comes down to politics,” stated Flora.

“The hydrogen hype has already sucked up billions of euros that could otherwise be funding renewables and real green jobs,” he stated.

“In his post, Mr. Alverà implies favorable economics when he talks about ‘cheap green electricity’ and using ‘existing infrastructure,’ yet he does not mention the inherent difficulties with producing, compressing or transporting hydrogen gas vs. methane, the inefficiencies (and costs) involved, corrosion, leakages and explosiveness,” stated Flora.

“Indeed, the gas lobby group ‘Gas for Climate’ (of which Snam is a member) is itself seeking €43 billion to €81Bln ($50Bln-$96Bln) in investment to create a European hydrogen backbone by 2040, and that’s with 69 percent existing pipelines,” added Flora.

“Yes, hydrogen does have important potential as a fuel in certain hard-to-abate sectors,” explained Flora.

“Contrary to the image shown in the FT article, light vehicles is not one of them. In fact the CEO of Enel, the Italian energy company, recently remarked that using hydrogen for domestic heating and transport is ‘nonsensical’,” he added.

Flora argues that the potential of hydrogen should not distract from the most urgent task of this decade, which is to build out renewables, storage, energy efficiency and interconnections.

“The IEA says we need to quadruple last year’s rate of solar and wind deployment to be on track with net zero by 2050,” said Flora.

“Far from growing ‘hand-in-hand,’ as Mr. Alverà puts it, cheap renewables need to grow rapidly, while a limited number of strategic hydrogen demonstration projects do their job, safely developing the technology until costs and concerns reach competitive levels,” he concluded.

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