Europe's Latest Dimwitted Energy Project (or, Hydrogen Bombs part 2)

Germany decides to buy green hydrogen from power-starved Egypt...

The much hyped, unrealized green hydrogen industry is a Rube Goldberg machine, an overly complicated and expensive solution meant to replace an incumbent source of energy that is more easily utilized and cheaper. Yet governments and investors continue to throw billions of dollars at it. It’s all flash and not real. It is a fantasy.

I’ve written about the challenges with green and low carbon hydrogen before. In short, western government’s (primarily the European Commission) have set unrealistic ambitions and have committed billions of dollars (and euros) which will result in little of the supposed positive impacts we are promised. The complicated set of rules to define and certify green hydrogen are part of the problem. This includes the idea of additionality, meaning the electrolysis process (how water is split and converted to hydrogen via electrolyzers) must be powered by additional renewable electricity so as not to reduce the current renewable power supplied to the grid. But physics and economics are also major challenges. A recent European Court of Auditors report sums it up well when they said:

…the use of renewable hydrogen comes with its own set of challenges.

• Current efficiency issues (i.e. energy losses) linked to electrolysis.

• The cost of production, which is not yet competitive because the production through electrolysis is still in its infancy.

• The need for renewable electricity and water.

• The infrastructure needs: ramping up the use of hydrogen requires transport and distribution infrastructure (which either has to be built or results from repurposing gas pipelines), and storage infrastructure.

In addition to the challenges above, hydrogen is more efficiently transported long distances (especially maritime) as ammonia and then cracked (refined) into hydrogen at its destination. Here is how major industrial player ThyssenKrupp explains it;

Firstly, it (ammonia) is more energy-efficient to transport than hydrogen. Secondly, ammonia can be used to transport larger amounts of energy over long distances in less space. Thirdly, we already have a globally established infrastructure for transporting ammonia that is safe and efficient.

But this cracking of ammonia also requires advances in technology and significant infrastructure build out. And more energy.

The round trip efficiency — making hydrogen from electricity, then converting hydrogen back into electricity for industrial or power generation — is around 50%. Meaning you lose about 50% of the energy used in making renewable hydrogen. And that is not including additional steps such as the aforementioned ammonia-to-hydrogen process. Sub optimal, indeed.

As noted earlier, the European Union has set very ambitious targets for green hydrogen by 2030. It aims to produces 10 million tons domestically and import another 10 million tons. Current hydrogen production in the EU today is around 8.5 million tons, nearly all of it coming from steam methane reforming from natural gas.

To give you an idea of the high electricity demand required to produce renewable/green hydrogen, the 10 million tons of domestic production will require roughly 18% of Europe’s total power demand (500 terawatt hours). So the EU will need to add about 20% of new, renewable power generation to the current grid (remember the additionality principle)? That also seems sub optimal. And unachievable.

As for potential sources of imports of renewable hydrogen, one would think the Europeans would look to the United States given the vast public incentives provided for low carbon and renewable hydrogen. Well, you’d be wrong.

Under the U.S. BIL/IRA legislation, more than $8 billion has been allocated for the announced seven hydrogen hubs across the U.S. and associated efforts to grow industry demand. The public incentives are expected to make U.S. renewable and low carbon hydrogen some of the cheapest in the world (but still expensive when compared to hydrogen from natural gas). Those announced projects in the U.S., which have yet to reach final investment decision, are expected to produce 3 million tons of renewable and low carbon hydrogen by the early 2030s. But no, the Europeans will instead look to their southern neighbors in politically and economically stable North Africa for the latest major investment in renewable hydrogen. Wait, what?

The latest dimwitted European energy decision comes to us from none other than Germany. The Germans have already established themselves as incompetent energy policymakers — something numerous substack writers have covered ad nauseum. This one, however, is really unbelievable.

On July 11, the German government announced a €397 million agreement with UAE-based Fertiglobe to buy 259,000 tons of green ammonia from its Egyptian operations between 2027 and 2033 to help it reduce emissions from hard-to-abate domestic industries such as steel and chemicals. This Reuters article noted the green ammonia production will be connected to at least 273 megawatts (MW) of under construction renewable power generation in Egypt. The contract is supported by German government funds under its €900 million H2Global initiative.

So what’s the problem with buying green ammonia from Egypt? Well, lets turn to Reuters’ June 24 story on Egypt’s power sector woes:

Egypt's government has extended daily power cuts to three hours, one hour longer than usual, in response to a surge in domestic electricity consumption because of a heat wave, a cabinet statement said.

The three-hour power cut was originally scheduled for Sunday and Monday, but they have now been extended until the end of the week…

Since July last year, load shedding linked to falling gas production, rising demand and a shortage of foreign currency has led to scheduled two-hour daily power cuts in most areas.

The Germans just announced a tender selection to buy 259,000 tons of green ammonia from Egypt, a country that can’t meet its own domestic electricity demand and has to institute rolling blackouts for the past year. The green ammonia production must use renewable power generation for its electrolysis to crack the water into hydrogen. So the 273 MW of renewable power being built in Egypt will not go primarily to the power grid for citizens, but will mostly supply electricity for green ammonia to be produced and shipped to Germany so it can use it in its dying steel and chemicals sector. Unbelievable.

Announcements like these leave you shaking your head in wonderment at how these decisions can actually be made at the highest levels of government. What will your average Egyptian think who has to sit through rolling blackouts for two to three hours per day in mid-summer (assuming he/she is not working at the new green ammonia plant)? How will this be viewed by the developing world at climate conferences and international forums? Not only do Europeans tell the developing world to stop investing in fossil fuels — well, unless its 2022/2023 and the Europeans really need natural gas due to an energy crisis in Europe — they then come to Africa and pull future (intermittent) electricity away from a struggling power grid to produce green ammonia for European industry. Green colonialism is alive and well.

And if you are German, are you thrilled that your government has decided to spend nearly €360 million on a single project to subsidize renewable hydrogen production outside of Germany? The result of which will be your domestic industry paying significantly higher prices for an inefficient imported fuel so it can meet arbitrary government-set renewable energy targets? Isn’t German industry already struggling to compete due to the recent energy crisis and high regulatory environment in Europe, and the answer is to pay even higher prices? What?!

This is an outcome of the virtue signaling policies set in place by a disconnected ruling class that trickles down through the bureaucracy and the next thing you know hundreds of millions of euros (or dollars) are wasted. And no one will be held to account. The only hope in this situation is the project never comes to fruition and the money isn’t spent. Even with all the silly public incentives, physics and economics tends to have a say in what projects are actually built.