Sunday, February 19, 2023

‘As Biden threw money at hydrogen, Britain blinked’


Howard Mustoe
Sun, February 19, 2023 

US President Joe Biden speaks at International Brotherhood of Electrical Workers 
- Al Drago/Bloomberg

While cars are going electric, heavy industry and long-haul travel are looking in a different direction as the world shifts towards net zero: hydrogen.

For ships travelling thousands of miles, long-haul flights, chemical making and other industries that require vast heat, such as glass and cement making, burning hydrogen could be the answer.

Yet a multi-billion dollar spending spree by US President Joe Biden to boost green industries has sparked fears that jobs and investment in the nascent hydrogen sector will be drawn to the other side of the Atlantic and leave Britain out in the cold.

A failure to establish a hydrogen production industry could have long-term consequences as future businesses choose to invest close to secure sources of fuel.

“We have missed the boat on batteries,” says Clare Jackson, chief executive of industry group Hydrogen UK. “We are in danger of missing the boat on hydrogen.”

Hydrogen is made by splitting the molecules of either water or methane. It can be created cleanly either using green electricity, generated from wind and solar; or by splitting methane and capturing the CO2 emissions.

When US President Joe Biden’s $369bn Inflation Reduction Act took effect last August, it effectively slashed the cost of clean energy in the country. At the time, Britain had a plan of its own.

The Energy Security Bill proposed a financing model for green hydrogen and the carbon capture technology that could help clean up the emissions associated with methane-based production. The proposals helped companies plan their budgets and attract funding, and offered to potentially kickstart a round of hiring and expansion.

However, the Government’s plans have been left in limbo by the political turmoil in Number 10 since last summer.

“When the US was putting a lot of money on the table, it appeared that the UK Government was basically blinking,” says Jackson.

Biden’s spending spree has already lured car makers to build their vehicles in the US with the promise of $7,500 tax credits for customers who buy American. However, the new US policies have wide ranging effects.

Generating green hydrogen using an electrolyser to split water molecules currently costs $5 to $6 a kilogramme, according to estimates from Longspur Capital, depending on the cost of the electricity. Better electrolysers and cheaper wind farms are lowering the price all the time.

Producing hydrogen from methane is much cheaper, at $1 or $1.50 a kilo. However, a lack of effective carbon capture at scale means this method still belches emissions into the atmosphere.

Mr Biden’s plan offers up to $3 per kilogramme in incentives for green hydrogen production, dramatically narrowing the cost gap. The incentives come on top of relief already available.

This means that making green hydrogen in the windiest, sunniest areas of the US, such as Texas, could cost nothing by the middle of the decade when subsidies are factored in, says Andy Walker of Johnson Matthey. The company is one of the UK’s biggest potential beneficiaries of a move into hydrogen.

Johnson Matthey is best known for its catalytic converters for petrol and diesel vehicles. However, it also develops membranes used in electrolysers that turn water into hydrogen and oxygen and makes catalysts for steam reformers, which yield hydrogen from methane.

The Inflation Reduction Act came on the heels of 2021’s Infrastructure Investment and Jobs Act in the US, which itself included $110bn of climate and infrastructure funding. The 2021 act demanded that four hydrogen hubs be set up as part of plans already in motion to get the cost of hydrogen down to $1 a kilograme by 2031.

“And then the Inflation Reduction Act took everything to the next level,” says Walker.

The twin acts will light a rocket under the US’s green economy, cutting the cost to make green steel, cars and other manufactured goods.

Biden’s tax cuts help make a market for Johnson Matthey’s electrolysers and other UK-made equipment. But there is a risk, Walker concedes, that jobs will head to the US rather than here.

Britain faces a choice, says Hydrogen UK’s Jackson. Do we want to seize the jobs that come with a hydrogen economy or allow them to go to the US and Europe?

The industry, which has a few thousands jobs now, could support 100,000 people by 2050 and add £13bn to the economy, according to the Government’s own estimates.

Jobs could be created doing things like making the gas efficiently, storing and moving hydrogen, and burning it efficiently.

“The technology advances that happen elsewhere will benefit the UK, but we know that the UK needs hydrogen – this is ultimately about where value chains are and supply chains developed here are then exported, or whether they're developed in the US and we import that technology,“ Jackson says.

It is not just heavy industry that will require the fuel: the gas is also seen as a useful way of making the UK’s flats and draughty old homes greener through hydrogen-powered boilers.

While heat pumps are the preferred choice, they don't work well unless a home can be made a lot more efficient through insulation. For older houses and flats, this is not always an option. National Grid is drawing up plans to pump hydrogen through gas lines by 2025.

Britain already has some expertise in hydrogen and enjoys some natural advantages, says Walker. The UK is windy and its islands can be surrounded by wind turbines. There are sites where the gas can be stored underground.

Yet the window of opportunity may be closing. Last month, UK green hydrogen fund Hydrogen One Capital told City AM it would shift its focus to the US to take advantage of the sums on offer.

Hydrogen UK estimates that there are £1.1bn worth of hydrogen projects being drawn up in Britain but cautions that they risk going elsewhere without government support. While the science and designing roles are likely to remain, manufacturing jobs are very much on the table.

Britishvolt collapsed into administration at the start of this year in what many observers took as a sign that the UK's dreams of a home-grown battery industry were already on the rocks. Limited government help or direction is said to be driving investment elsewhere.

Westminster should learn from the mistakes made on batteries, says Hydrogen UK’s Jackson, rather than repeating them.

“This was an opportunity that we've identified reasonably early, but we need to move quickly. There's a huge advantage here, a huge opportunity.”

The Government was approached for comment.

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