The risks of “hydrogen-ready” LNG infrastructure claims

Last summer, German Chancellor Olaf Scholz announced a “hydrogen alliance” with Canada, with the two countries pledging to eventually see green hydrogen shipped from Canada to Germany. At the same time, the two countries also explored the possibility of new LNG infrastructure in Canada that would ship gas to Germany.

Both concepts face steep odds because their commercial viability remains questionable, but it was far from the only time that Scholz has framed the rush for more gas infrastructure as a short-term detour on the way to a clean hydrogen economy. He has repeatedly said that many new LNG terminals and gas pipelines — rushed forward in response to the war in Ukraine — would be “hydrogen-ready,” and would be quickly switched over to handle green hydrogen in a few years’ time.

Green hydrogen — hydrogen produced from renewable energy instead of fossil fuels — is widely seen as potentially playing an important role in decarbonising a set of difficult-to-abate industrial sectors, such as fertilizers, steel, and cement.

In December, the first floating LNG terminal in Germany opened in Wilhelmshaven. German officials and energy companies involved say the terminal and the associated pipelines are “hydrogen-ready” and will build a bridge to a hydrogen world. Germany is not alone; countries in both Europe and Asia Pacific are promising to import large volumes of green hydrogen, or a related product, such as green ammonia.

But critics warn that due to a variety of technical, financial, and climate challenges, shipping hydrogen around the world is unlikely to ever occur in serious quantities. As a result, the new gas and LNG infrastructure building spree underway risks locking in fossil fuel use for much longer, undermining climate progress.

The technical challenges alone are likely prohibitive. Getting hydrogen onto a ship means chilling it to -253 degrees Celsius in order to transform it into a liquid, requiring temperatures around 100 degrees colder than for LNG. The liquefaction process alone consumes 30 to 40 percent of its energy content, compared to less than 10 percent for LNG.

Hydrogen is also less energy dense, which means a tanker’s worth of liquid hydrogen delivers less than half the amount of energy as a cargo of LNG. Many more tankers would be required to ship an equivalent amount of energy, posing formidable cost obstacles. Hydrogen is also much more prone to leaking than methane, and has added safety hazards over methane gas.

But the problems are even more fundamental. “[L]arge liquefiers for hydrogen do not exist [and] the ship transport technology also do not exist,” Gerd Wuersig, a mechanical engineer and head of Germany-based GMW Consultancy, told Gas Outlook in an email.

Michael Liebreich, CEO of Liebreich Associates, a consultancy, summed up the technical challenges of shipping liquid hydrogen in a February 22 tweet, stating: “Again, to be clear. The issue is not production cost. Learning curves mean green hydrogen will end up cheaper than grey. But nothing will change the physics and thermodynamics of hydrogen: low density; escapey; explodey; embrittley; NOx-producey if burnt; greenhouse gasey.”

One possible way around this problem is to transform hydrogen into an easier-to-ship product, such as liquid ammonia. Ammonia is more energy dense than hydrogen, although still lower than LNG, and a global market for shipping ammonia already exists. Hydrogen can be converted into ammonia before its loaded up on to ships.

“With regard to terminals, the technical challenges and the costs of switching to liquid hydrogen are higher than for ammonia. Therefore, a switch to ammonia with a potential splitting into hydrogen and nitrogen afterwards seems more likely,” Jakob Wachsmuth, a researcher at the Fraunhofer Institute for Systems and Innovation Research ISI in Karlsruhe, Germany, told Gas Outlook in an email.

But a recent analysis from Washington-based environmental NGO NRDC warned that ammonia also has technical and cost challenges. Green ammonia may have applications in fertilizer and possibly as a maritime shipping fuel, but there is little scope beyond those two sectors, NRDC said. For it to be useful in a wide array of sectors, it would need to be converted back into hydrogen in the receiving country. But that results in even more energy loss and requires more investment in “cracking” facilities that make the conversion. After manufacturing the hydrogen, converting it into liquid ammonia, shipping it overseas, and converting it back into hydrogen, the end result is an efficiency of only 30 to 40 percent.

‘Hydrogen-ready’ claims risk fossil fuel lock-in

Green hydrogen still has a very important role to play in decarbonising those parts of the economy where fossil fuel-based grey hydrogen is currently being used. But because shipping hydrogen overseas is unlikely to occur, the production and consumption of green hydrogen will need to take place in close proximity to one another.

“The vast majority of hydrogen that will be used in a clean energy economy will be used locally,” Pete Budden, a hydrogen policy advocate at NRDC, told Gas Outlook.

But that significantly limits the ability of using newly-constructed LNG terminals for hydrogen.

“And that’s what makes these ‘hydrogen-ready’ LNG claims so fishy. It does seem like greenwashing, that you’re just trying to put a positive spin on building more natural gas infrastructure,” Budden said.

Ade Samuel, an LNG analyst at NRDC, said that one thing to watch out for is if hydrogen-ready or ammonia-ready claims are backed up by firm offtake agreements by buyers, such as a big industrial user in the receiving country, and if there are details on how the hydrogen or ammonia will be integrated into existing infrastructure.

“If these facilities really have fleshed out proposals as to how they are either going to move this ammonia to offtakers either in industry in Germany, or potentially co-site with a cracker to convert it to hydrogen,” Samuel said. “There are some dates that are listed in these press releases, but nothing too solid at the moment. I think at this point it is mostly promises.”

The risk is that countries rush to build new pipelines and LNG terminals to handle gas imports, locking in gas infrastructure for years to come.

There is already evidence that Germany is overbuilding and overinvesting in LNG. In the weeks following Russia’s invasion of Ukraine, the European Union recommended that two new LNG terminals would help satisfy the gas supply gap for Germany. However, the German government apparently ignored that recommendation and quickly moved to approve 12 new LNG projects, according to EUobserver. Not all will be built, and half of them will be floating terminals, which can be transported for use elsewhere. Nonetheless, the scramble to build new gas infrastructure that will last decades increases the risk of stranded assets.

Documents show that Germany has plans to establish 70 million tonnes of annual LNG import capacity by 2030, which would make it the fourth largest LNG importer in the world.

Even the rhetoric about “hydrogen-ready” gas infrastructure may be unhelpful. In the UK, a member of the House of Lords recently criticized the gas industry and the UK government for promoting misleading information about “hydrogen-ready” boilers. Hydrogen for home heating is generally not viable at scale, and is not likely to figure into the home heating sector even in the long run. But promotional PR about hydrogen-ready boilers may be slowing the uptake of electric heat pumps, critics say.

The take-home message is that green hydrogen will play an important, but narrow, role in the energy transition. There is very little chance that it will be used in home heating or for transportation. And it won’t be traded on ships over long distances.

“[H]ydrogen will remain a scarce and expensive resource in the foreseeable future. Therefore, hydrogen will need to be focused on applications that cannot be electrified,” Wachsmuth, the German researcher, said. A November 2022 study from the Fraunhofer Institute finds that it is technically possible for LNG terminals to switch over and handle hydrogen in the future, but casts doubt on the economic viability of doing so.

Because it is unlikely that all gas infrastructure will be switched over to handle hydrogen, “building additional ‘hydrogen-ready’ gas infrastructure may indeed prolong the use of natural gas, thereby putting climate targets at risk,” Wachsmuth said.

Other experts put it more bluntly. “In Europe, the scenario of green hydrogen being produced outside the EU and being transported into the EU market for thousands of kilometers is unsustainable,” Elena Gerebizza, an energy and infrastructure campaigner for ReCommon, a Rome-based NGO, told Gas Outlook in an email. “[O]ur reading is that corporations are taking advantage of the emergency situation due to the war in Ukraine to get public funding for an expansion of LNG terminals and gas infrastructure.”

She added that the notion of “hydrogen-ready” LNG infrastructure is a “dangerous distraction” from decarbonization. There is “a clear danger that billions in public funding are diverted into gas infrastructure today, which are described as ‘hydrogen ready’ but may end up into an expansion of the gas market in the next decades.”