Hydrogen, once hailed as a game-changer, a silver bullet for the energy transition, is under scrutiny. Rather than the fuel itself, controversial industry observer Michael Liebreich continues to challenge what he calls “hydrogen futurism.”

The ceo of Liebreich Associates and founder of BloombergNEF has raised eyebrows in recent presentations in London monitored by Kallanish. The expert on clean energy, mobility, technology, climate, sustainability and finance – also an honorary fellow of the Energy Institute and visiting professor at Imperial College London –, has warned that hydrogen development is off track and concepts need to be reset.

Speaking at two different events last month, one primarily addressing hydrogen industry stakeholders and the other academics at Imperial College, Liebreich says “hydrogen has mesmerised a lot of people for a long time.” Yet, despite 150 years into the so-called hydrogen economy, only 0.1% of the hydrogen used around the world comes from electrolysis.

Citing data from the International Energy Agency (IEA), Liebreich notes the current hydrogen economy is based on a demand of 100 million tonnes/year and a market value of $150 billion. Today, 62% of the hydrogen consumption comes from natural gas, 21% from coal and 16% from industrial by-products.

“The idea of a hydrogen economy has really grabbed people’s attention just repeatedly through the years,” says the analyst. “All sorts of people have been captured by the allure of hydrogen… whether it’s driven by climate, whether it’s driven by money, whatever it is driven by, it is not happening. We’re off track.”

The IEA estimates that to reach a net-zero emission scenario by 2050, hydrogen use will surpass 150m t/y by 2030, with nearly 40% coming from new applications. The agency predicts low-emission hydrogen production could reach 38m t/y in 2030 if all announced projects are realised, but only 4% of this potential production has taken a final investment decision.

Liebreich uses the Swiss army knife analogy to describe why clean hydrogen “isn’t happening.” He says that although the knife can be used for many things, it is not used when there’s something cheaper, safer and more convenient as an alternative; that’s also the case with clean hydrogen. Ultimately, the major problem with low-carbon hydrogen is that it is expensive to produce, transport, store, distribute – and in some new cases – to use, he adds.

Though most of the 56 national hydrogen strategies across the globe are targeting the ideal $1/kg-cost mark for green hydrogen by 2050, that goal is far from being achieved, Liebreich suggests. He says the current green H2 cost stands around $6-14/kg. The UK saw an auction price of $10/kg; the Dutch research institute TNO estimates an average of €13/kg based on 20 projects under development; and TotalEnergies reportedly tendered green H2 in Europe at $7.50/kg.

Citing a TNO case study, Liebreich explains that 38% of the average €13.70/kg green hydrogen cost comes from electricity and another 36% from capital costs, of which only 11% relates to electrolyser stack costs. Tax and tariffs account for around 17% of the levelised costs and 9% comes from operations and maintenance. “Electricity won’t get 10x cheaper,” and nor will the costs related to engineering, components, compressors and associated infrastructure, the sceptical analyst adds.  

Beyond production costs, the feasibility of clean hydrogen is stretched thin in other areas of the supply chain, he indicates. Simply mentioning physics, Liebreich rules out the transportation of shipping liquid hydrogen around the world. He only sees “a homeopathic amount of liquid hydrogen being produced,” mainly because of liquefaction losses, volumetric density, infrastructure and, again, costs.

Instead, he says the only viable way to import hydrogen in Europe will be via pipeline, and adds that if the Europeans push for the imports of hydrogen via shipping it would be “catastrophic” and uneconomical. Green ammonia may be a sought solution for that, but Liebreich warns that end-to-end energy efficiency, in this case, is 20%, which “likely means the electricity is 5x more expensive when it arrives; given you’re throwing away 80% of it.”

Moving down the supply chain, he notes small-scale H2 storage is expensive and large-scale is unproven. Distributing the fuel is a sizeable challenge too, due to hydrogen’s volumetric density. He estimates 18 hydrogen tube trailer trucks would be needed to replace 1 diesel tanker to feed refuelling stations.

As an example of the mammoth challenge, Liebreich says if hydrogen were to be used in aviation, the London Heathrow airport could demand 7,167 tonnes/day of green H2. It would need 2.7 gigawatts of 24/7 power supply for liquefaction or 2,300 liquid H2 trucks/day.

With the economics of clean hydrogen also weighing on existing and new uses, the Liebreich Associates ceo indicates subsidies are artificially boosting the hype or hope around hydrogen.

“What we’ve got is not a hydrogen economy, it’s a hydrogen carrot economy. There are 24 different types of subsidies… that exist in various parts of this world or are being lobbied for,” he says. “And if you need 24 different sorts of subsidy to get your technology solution to beat the alternative, whatever it is, generally electrification – not always –, you’ve got a problem.”

“There are lots and lots of projects [planned around the world] all looking for this: the mountain of carrots,” he adds. “Subsidised transport of hydrogen, subsidised distribution, subsidised usage, subsidised overall, lots of money, finance available, policy support.”

While renewable energy also had subsidies and support, they couldn’t be layered like hydrogen can, “so of course it’s attractive; of course, there will be projects and lots of excitement,” he argues.

Liebreich even gives an example of subsidy layering: a comment by Marco Alverà, ceo of TES – a company developing electric natural gas, which is derived from green hydrogen. This fuel can get around $75 of direct subsidies through IRA and EU-ETS incentives for a product that arrives in Europe at $14 per million British unit, he suggests.

“Marco Alverà came in my podcast and I think he was going to persuade me that this was real, that this was a thing, that we should/I should support it. We should be excited. And he even said the quiet part out loud: ‘there’s a lot of money to be made in layering all the different subsidies.’ He’s a carrot farmer,” Liebreich says, referring to a comment made a year ago during the Cleaning Up podcast.

Despite his boldness and public challenges when it comes to hydrogen claims, Liebreich emphasises clean hydrogen will be needed to enable the energy transition. In his famous ‘Hydrogen Ladder,’ he suggests that today there are no “real alternatives” to four use areas: fertiliser, hydrogenation, hydrocracking and desulphurisation.

Other areas in which clean H2 use is likely to be unavoidable by 2035 are methanol, shipping, jet aviation, chemical feedstock, steel and long-duration grid balancing – though some of these have alternative options. However, areas such as long-distance road and maritime mobility, heating, power generation, and industrial heat, among others, are generally considered a distraction.

“There needs to be a reset, because we need clean hydrogen. Rows A and B [in the Hydrogen Ladder 5.0] are not going to decarbonise themselves, but they are being slowed down by all the rest. Slowed down,” he claims. “If you’re working on stuff that’s outside that, you are slowing down climate action and there needs to be accountability.”

“Since we should expect clean hydrogen supply to be limited for many decades, we should focus our efforts and public money on use cases on the top rows of the ladder,” he concludes.