Truth and fiction about an energy transition
Experts of the RUSSTRAT Institute have already analysed the topic of switching to hydrogen fuel several times, in particular, in the article "Plans and prospects for the EU’s transition to hydrogen energy" dated January 3, 2021, but the development of this topic requires constant analysis of the current situation and a forecast of its possible changes in the future.
Recently, the media headlines have been full of the phrase "energy transition". Anatoly Chubais made a loud statement - that new technologies in the energy sector will produce a revolution that will form a new world elite of the 21st century. Let's try to figure out where the truth is and where the fiction is.
With the advent of renewable energy sources (RES), where electricity is obtained from wind power via special wind turbines and sunlight on photovoltaic converters, we are talking about the fourth energy transition of human civilisation. Conventionally, the first is the transition from biomass to coal as the main source of energy, the second is the transition to oil, and the third is natural gas.
In reality, as a purposeful course of development, the fourth energy transition took shape with the European "green deal" approved by the European Union in 2019, which is aimed at achieving carbon neutrality by 2050. The new US President Joe Biden in 2021 also announced the "green course" of America.
The EU plans to almost completely abandon the use of coal after 2030, reduce the use of oil and gas by 79% and 67%, respectively, compared with 2015. The main goal is to reduce CO2 emissions to zero by 2050. In December 2020, the UN stated that "carbon neutrality by 2050 is the most urgent mission in the world."
In May 2021, the International Energy Agency (IEA) presented a plan to achieve carbon neutrality by 2050 on a global scale. The IEA is already proposing to reduce the volume of investments in new projects for the extraction of fossil fuels to zero. Investments should be made in renewable energy and in the period up to 2030 they should increase from the current $2 trillion to $5 trillion per year.
According to the IEA forecast, by 2050, about half of the contribution to achieving carbon neutrality will come from new technologies, such as batteries with higher efficiency and hydrogen produced by electrolysis, which does not emit CO2 during combustion. Hydrogen is a key element in this scheme, since renewable energy sources are an intermittent source of energy, the burning of hydrogen can compensate for failures in the energy system. Blackouts due to "green energy" were very indicative both in the heat of 2020, like in the US state of California, and in the cold, like recently in New Zealand.
At the same time, it is with hydrogen that difficulties arise.
Now so-called "grey hydrogen" is extracted on an industrial scale from natural gas and this is the cheapest way to produce hydrogen, but with a large release of CO2. Then there is "blue hydrogen", also produced from natural gas, but with the use of CO2 capture technologies, of course it costs more. According to the idea of the IEA, "green hydrogen" released by electrolysis of water will be obtained from renewable energy sources, but this is the most expensive method. At the moment, only 0.1-0.2% of the world's hydrogen is produced in this way. According to the calculations of the same IEA, to produce the current annual volume of hydrogen by electrolysis of 70-72 million tons, you need more electricity than the entire European Union produces in a year (3,600 tons TW/h).
In today's conditions, the cost of "green hydrogen" is about $6 per kg. According to calculations announced by TOSHIBA, "green hydrogen" can become a competitor to natural gas only if it costs less than $1 per kg. However, the company does not explain how to achieve such a result. Even according to the forecast of the International Hydrogen Council, at a price of $1.8 kg, hydrogen will be able to cover up to 15% of global energy demand by 2030, and by 2050 - 18%. Naturally, it is not necessary to expect that everything else will be covered by "carbon-neutral" RES.
In addition, the climate is changing, a group of German researchers of climate and weather factors at the Troposphere Research department of the Institute of Meteorology and Climate Research, together with experts from the University of Cologne, analysed climate changes in wind speed and wind energy potential in Europe. The authors of the study concluded that climate change threatens to reduce the production of wind energy in central Europe.
These are not prospects for the distant future at all. The Danish Orsted AS group, the world's largest developer of offshore wind energy, said that the second quarter of 2021 was the third worst quarter in terms of wind strength in the North Sea, over the past 22 years. Several other European companies operating in the renewable energy sector, including SSE in Britain and RWE in Germany, are suffering financial losses. Orsted shares fell by more than a quarter. This is also why the development of hydrogen energy is becoming more and more relevant.
In the matter of hydrogen, it is immediately worth rejecting the option of its use in everyday life, since the burning of hydrogen happens at 2000 degrees celsius, and in a home burner natural gas burns at 400 degrees. Today's crockery will simply melt. In Britain, by state order, the consulting company Arup prepared a detailed report assessing the safety of using hydrogen in everyday life and found out that the number of gas explosions in British homes will increase more than four times.
So is it worth considering the above estimates if the technology of using hydrogen has not yet been fully developed?
Yes, there are hydrogen fuel cells used in motor vehicles. On an industrial scale, just emissions of toxic nitrogen oxide gases after burning hydrogen can pose a danger to others, they will have to be captured somehow.
In addition, there are difficulties with the transportation and storage of hydrogen. Ordinary old pipelines are not suitable for this, since hydrogen "embrittles" iron during prolonged interaction. Based on the amount of energy per unit volume, seven times more hydrogen than gasoline is needed, or three times more than natural gas. TOSHIBA assumes that hydrogen will be liquefied for transportation, and 25-35% of the mass of hydrogen will be used for cooling, or it will be mixed with ammonia having a high density. Naturally, all of this will require additional costs.
For long-term storage of hydrogen, it is supposed to be pumped into salt caves, where it is almost not polluted with impurities, but there are few such caves. The second natural reservoir for hydrogen is depleted layers of natural gas or oil deposits and aquifers, but the hydrogen in them is more polluted. Hydrogen is not pumped into such caves yet, so it is too early to "count the economy", according to TOSHIBA.
Against the background of such difficulties, the Norwegian oil and gas concern Equinor and the British energy company SSE Thermal are planning to build the first power plant in Britain that will run on 100% hydrogen only by 2030, but the details of the technology have not yet been disclosed.
In my opinion, this is increasingly becoming the main reason for the development of the situation on the gas market, and not only the natural anomalies of the cold European winter and hot summer. The demand for natural gas will only grow against the background of a reduction in electricity generation for the sake of "decarbonisation". The economic engine of the EU-Germany has already closed 11 nuclear power plants, and the remaining six are planned to be stopped by 2022. Only gas-fired power plants, which are called a "bridge to green energy” there, can make up for the lost capacity without the risk of a blackout.
In another part of the world, 10 coal-fired power plants have been closed in South Korea and another 30 will be closed by 2034. Southeast Asia is becoming the most promising market for natural gas, given that there are no pipelines directly from a supplier providing long-term supplies at a fixed price, as in Europe.
The stagnation of oil field projects will lead to the fact that gas production itself will have to prove its profitability. Now we are in a phase when the commissioning of new capacities has ended, and investments have sunk. Therefore, a seller's market is expected in the next 2-3 years, says Aleksey Grivach, deputy director of the National Energy Security Fund.
Obvious prospects for natural gas began to open up in the West as well.
Bloomberg published an article "The Era of Cheap Natural Gas Ends as Prices Surge by 1,000%". The demand for natural gas will grow by 3.4% per year until 2035, the article says. Despite several isolated factors that have pushed up gas prices, there is a growing consensus in the expert community that the world is facing a structural shift due to the transition in the energy sector. Most countries have chosen gas as the fastest way to reduce carbon emissions, and alternatives to non-fossil fuels, such as wind and solar energy, are at a relatively early stage of development, Bloomberg quotes one of the experts as saying.
Even as prices are poised to be higher over the next decade, they won’t be high enough to drastically reduce demand for the fuel, another expert told Bloomberg. Mark Gyetvay, Deputy General Director of the Russian LNG exporter PJSC Novatek, warns about the danger of a"green transition". "The lack of capital investments in future natural gas projects does not lead us to an energy transition, but instead leads us down an inevitable path toward an energy crisis,” Gyetvay said.
The Financial Times reports that along with the price of gas, everything has risen in price - from heating houses to electricity. In Britain, the price of electricity will increase by 10% by the end of the year. LNG gas imports to Asia are growing rapidly, and this cannot but affect the volume of supplies to Europe. As a result, something like a global gas crisis is looming on the horizon, and only Russia can increase gas supplies in the shortest possible time.
The article further points out that in a number of countries like Spain and Germany, the rapid increase in electricity prices has become one of the leading topics on the political agenda. If you go a little deeper into the essence of this issue, you can find out that, although the cost of electricity in Germany is one of the lowest in Europe, the price for consumers is one of the highest. This is due to the fact that 50% of the tariff is made up of various taxes and fees, including for "green energy".
Against the background of an 18% increase in the cost of heating and electricity, people are demanding that the German government reduce the tax on "green energy" and some politicians support these demands. At the same time, the Green Party demands to increase these fees, which puts them under the criticism of the SPD, accusing the Greens of not caring about the needs of citizens.
The Bloomberg article "Europe Faces an Energy Shock After Gas and Power Prices Rocket" says that European governments are experiencing difficulties as increased utility bills increase the reluctance of voters to pay for the energy transition. This year, Swiss voters rejected an ambitious climate law that raised taxes on jet fuel and gasoline. Thierry Bros, professor of energy at the Paris Institute of Political Studies, said: "You will not be re-elected if you drive so many people into energy poverty."
Thus, the issue of "green energy" has gone from an abstract idea at the international level to a purposeful course of economic development in Western countries, but when it came to the pocket of the voter, the situation began to change. Turning into a question of internal political struggle, no idealistic goals of "green energy" can outweigh the issue of falling living standards of voters, who the political prospects of local elites directly depend on. In Norway, a candidate for prime minister explicitly stated that as a country exporting electricity and gas, Norway should seek to take away the EU's powers in the issue of energy regulation.
So why is an energy transition being discussed right now?
10 years ago, the IEA claimed that the world has entered the "golden age of gas", and now predicts its replacement with renewable energy and hydrogen. If to not go into conspiracy theory, but be guided by economic expediency, then the answer lies on the surface. The shale revolution in the United States, which was then shouted about in the media on every corner, is now over. The forecasts of the IEA and various consulting firms about the constant growth of shale gas production until 2030, including in Europe, turned out to be, to put it mildly, overstated. Now the number of drilling rigs in the United States is more than twice less than the peak of 2018 and a "second shale revolution" is not expected, Joe Biden himself put an end to such a possibility.
Naturally, the conditional West does not want to become dependent on energy exporting countries. That is why there was such a turn in the "green energy", where the assessment is based on carbon emissions and the corresponding taxes on them, which are supposed to be levied on suppliers of goods and resources. The UN openly says that the recovery after the pandemic is a good reason to reengineer the economy and rethink the future.
However, the rapid growth of energy consumption in Asia brought its own surprises to the planned scenario and, as described above, the prospects of "green energy" directly collide with the pocket of voters, delaying the "fourth energy transition" into an uncertain future.
Some may point out that even the domestic government in August began preparing for a future with low demand for hydrocarbons. However, if you look not only at the "flashy" media headlines, it becomes clear that we are talking only about evaluating energy transition scenarios.
Another argument in the discussion for an energy transition may be the "Concept for the development of hydrogen energy in the Russian Federation", recently approved by the Russian government. Again, if you read the text of the document, it says directly that there is no widespread demand for hydrogen now, there is a high degree of uncertainty about the prospects for the development of hydrogen energy in the world and the formation of a global hydrogen market. The concept was developed for the implementation of pilot projects for the production of low-carbon hydrogen and the development of domestic technological competencies in the field of hydrogen energy. Thus, the Russian government is only going to develop technologies for the production and use of hydrogen.
Summarising all of the above, we can say that the prospect of the "fourth energy transition" is too vague, due to the lack of specific technological solutions for the use of hydrogen on an industrial scale. The media and odious personalities are only trying to preserve the picture of the inevitability of the "energy transition" at the very moment when it began to disintegrate.
If we get out of this information noise, then, in terms of achieving carbon neutrality by 2050, even at the very same International Energy Agency one can find several more scenarios, in addition to the main ones, for the development of events, when gas consumption by 2050 will increase by 10%, 30% and 50% depending on various conditions. At the moment, Russia has enough time to prepare for any scenario and not only maintain its current position in the energy sector, but also take a leading position in the world.