Transitions to Sustainability: Oil to Hydrogen

Golden Gate Bridge in San Francisco from footage, September 2020

This article is the second in a series of articles about ‘big picture’ transitions necessary to combat climate change and create a sustainable future for humanity and the planet.

In September 2020, as I write this, the reality of climate change arrived more fully than ever before for a great many people. Where I live in southern California, our normally bright blue summer skies were replaced by a dirty gray for an entire week. Sunsets took on an eerie yellow. While nothing like the apocalyptic skies in San Francisco, for a place that usually has over 300 sunny days a year, it was near unthinkable. The only comparisons I personally have are photos of Los Angeles in the 1950s, where smog regularly made it one of the most polluted cities in the world, and Tokyo in the early 1990s, where I lived for six months yet only saw blue skies and distant mount Fuji just once in that time.

The 2020 fire season in northern California, Oregon, and Washington states is catastrophic, with more than three million acres burned by mid-September, which is only the middle of the fire season. Hundreds of thousands had to evacuate. The town of Talent, which I knew from vacations in Oregon, was largely burned to the ground along with several other small Oregon towns.

We are Finally Waking up to the Nightmare: Climate Change is Happening, Right Now, Right Here

This is happening not in Bangladesh, or India, or some other third-world country. It’s right here in one of the wealthiest and most successful countries in the world. These fires finally seem to be waking people up to the fact that climate change is real, and the consequences are not in the future, they are happening right now, and we really must do something. Whether it is temperatures that go from 100 degrees to snow within a day in Colorado or losing your home to fires in California or to hurricane flooding or storm surge in Louisiana, becoming a victim of climate change driven catastrophes might just be the new normal.

In a nutshell, climate change is due to humanity burning coal, oil, and gas to fuel the process of industrialization around the world. Solving the problems of climate change are not easy. It will require a new type of thinking, where cooperation and systemic thinking takes over from exploitation and a 'growth at any cost' business mentality of entrepreneurial capitalism. This article is one of a series where I outline major global transitions that humanity must make in order in order to successfully combat climate change and redefine global growth around the concept of a sustainable future.

Conserve and Protect is not Enough

Most of us are aware of the traditional environmental conservation movement that has for decades focused on protecting wildlife, the oceans, and engaged species around the world. I like to call this phase of the environmental movement the 'conserve and protect' phase. Conserve and protect seemed to be enough for a while, before the reality of global warming was widely understood. Environmental groups made huge progress in changing laws to reduce industrial pollution, protect millions of acres of natural habitats, and clean up air and water.

We must keep doing all those amazing actions that thousands of environmental organizations are doing to conserve and protect wildlife, oceans, rivers, and land. But conserving and protecting what we have from further destruction and loss is no longer enough to meet the goals to stop global temperature increases. Recently proposals to plant billions of trees (or even a trillion trees as in some proposals) in order to absorb CO2 from the atmosphere have become popular. These new proposals go beyond the concept of 'conserve and protect' to the concept of 'regeneration and reforestation'.

Windmills, Solar and Personal Recycling are not Enough Either

You might live in a place where there are windmills visible or homes are have solar panels installed to take advantage of renewable energy as their location and sunshine hours allow. In your home and daily life, you might diligently try to recycle paper and plastics, or have even purchased an electric car.

But these personal actions will not be enough to halt or even slow down global temperature increases either. Few of us truly comprehend the enormity of the changes that will be required to reduce carbon emissions globally enough to prevent temperature increases around the world leading to catastrophic wildfires, melting ice shelves, and declining water tables. Windmills and solar will simply not produce enough energy to stop carbon emissions from fossil fuels, especially in countries still in the midst of their industrial development.

The changes required to create a sustainable, carbon-neutral world are so much bigger, with multiple massive, transformative shifts required in the energy industry, each with the technological impact similar to past major technological transformations caused by the invention of electricity, antibiotics, or computers.

To execute these massive global transitions, we’ll need to bring the best minds of the environment, biology, physics, politics, social responsibility, and public policy together in ways that may never have been done before. We must dream bigger than ever before in human history, and then execute on those dreams faster than ever before because the stakes are higher than ever before. For this to occur, as many people as possible need to understand the big picture behind these transitions in technology and energy.

These coming global sustainability transitions are not prescriptive one-size-fits-all solutions. Rather they are broad concepts that allow each of us to grasp the potential possibilities that new technologies can serve and how we can use those technologies to innovate our way to future sustainable living on planet earth.

We now know that we need to get to zero net greenhouse gas emissions in every sector of the economy within 50 years if we’re going to avoid a climate disaster, with hundreds of millions or even billions of people becoming climate refugees, many of the world's major cities invaded by the sea, and millions of acres of farmland becoming useless. Climate refugees are likely to become the largest mass movement of humanity around the world. This is a daunting challenge, made more so by nations being at differing stages of development and wealth, so needing different mixtures of technologies to continue to develop their nations while simultaneously reducing their carbon emissions and managing mass population migrations.

In the article about the first sustainability transition, Coal to Thorium, I presented a radical ‘moonshot’ technological approach to reducing the largest source of carbon emissions that contribute to climate change. With the first transition to sustainability, coal to thorium, humanity shifts dramatically away from the largest source of CO2 emissions globally, which is the burning of coal for electricity, by designing and rapidly deploying what I believe is currently the most exciting form of carbon-neutral electricity, which is a new nuclear technology based on mass-produced, relatively small scale liquid salt thorium nuclear reactors.

The Second Sustainability Transition: Oil to Hydrogen

The second global transition to sustainability is the subject of this article. In the Oil to Hydrogen global energy transition, we look at the second-largest source of CO2 globally: fossil fuels. This is a massive global transition that occurs from the industries of oil and gas extraction, transport, storage, and consumption, to hydrogen production, transport, storage, and consumption.

For decades since the 1970s oil shocks, humanity had such a reliance on oil that the predominant fear was that oil would run out. This situation, called ‘Peak Oil’, described the idea that oil was becoming more and more difficult to obtain. Yet increased production in Russia, and the development of fracking in the USA, caused the opposite to happen. In 2020, due to a dramatic reduction in global demand during the covid-19 pandemic, and a price war between Saudi Arabia and Russia, oil prices recently went below zero. There were simply not enough buyers for the oil that was being produced. It was an almost incomprehensible opposite of 'peak oil'.

Oil really was a remarkable fuel. Because it is relatively easy to transport around the world and store long term, it served both as an energy source and an energy storage mechanism. This remarkable form of energy played a crucial role as a transportation, industrial fuel and chemical raw material for the last 150 years because of its energy density, relative ease of production, and ease of transportation. To replace oil, for many, is unthinkable. Yet it is precisely that sort of ambitious, imaginative, and creative thinking that we must do, in order to make the previously unthinkable become something that we can actually imagine occurring. This is not just an enormous industrial, political and financial challenge, its an imagination challenge.

The Remarkable Growth of Wind and Solar

The growth of renewable energy from wind and solar in the last few decades has been remarkable. Solar cells have dramatically lowered in price, and wind farms have been built rapidly in many parts of the world. Wind and solar have reduced in cost so much that they are in many markets cost-competitive with energy from fossil fuels, a remarkable achievement.

While wind and solar are amazing sources of clean energy, but both have a growing problem, which is that they do not produce energy when it is most often needed, and they do not provide a mechanism of storing the energy they produce. Both produce the most electricity during the day, which means that the peak energy hours during the early evening, when consumers head home and turn on energy-intensive home appliances for cooking, heating, and cooling, are when production is dropping for the day.

Current electricity grids were largely built based on large fossil fuel (and sometimes nuclear) powerplants in a few strategic locations. These grids are seldom optimized to cope with intermittent energy from many different locations. Thus the renewables industry is in the midst of a pivot, where the storage of the excess electricity being produced has become a new focus, and there is much discussion on how to quickly add storage to the grid, and upgrade the grid to operate more effectively to reflect the new reality of intermittent production from wind and solar. If new mechanisms cannot be deployed to store wind and solar energy when it is being produced in excess of demand, this may severely limit the growth path of those renewable energy sources.

Introducing Hydrogen

Hydrogen is the most abundant element in the universe. It’s literally everywhere in some form. At standard temperature and pressure, hydrogen is a colorless, odorless, tasteless, non-toxic, nonmetallic, highly combustible gas. Most of the hydrogen on earth exists in molecular forms such as water or organic compounds.

As an energy source, unlike coal, oil, or gas, hydrogen does not occur naturally. Hydrogen gas production occurs when water is stripped of its oxygen atoms and compressed and cooled into a storable liquid or pressurized gas. This liquid or pressurized hydrogen can be stored for later use, or transported large distances in specially designed ships, or transported in gas pipelines similar to those that are already in place in all industrialized countries. Hydrogen gas already serves many industrial uses. The problem is that currently most industrial hydrogen is produced from natural gas, meaning it cannot be considered a carbon-neutral fuel. This is often referred to as 'gray' hydrogen.

The challenge for the hydrogen industry is to produce carbon-neutral 'green' hydrogen by electrolysis using electricity from renewable energy sources, rather than extracting it from natural gas. Essentially, the production of hydrogen converts one energy source into another, with some energy lost during the conversion process. However once produced, green hydrogen can be stored indefinitely, or transported by pipeline or bulk carriers to its final destination, acting as both an energy source and energy storage, just like oil.

It's this flexibility that makes hydrogen the ideal replacement for oil. Much of the traditional oil-based transportation infrastructure is still more or less relevant when building a green hydrogen economy, as are many of the industrial and mechanical engineering skills.

Once produced, hydrogen can be used as a feedstock for diverse industrial processes, as fuel for fuel-cell vehicles such as city buses, injected into engines to make existing diesel vehicles cleaner, blended with existing natural gas pipelines for consumer use in homes, or added to the fuel mix for gas-turbines for on-demand electricity production. When green hydrogen is used as a fuel for transportation using fuel-cell vehicle (FEV), the hydrogen fuel-cell produces electricity while releasing only pure water vapor.

The Creation of the Green Hydrogen Economy

For decades, the promise of a completely green ‘hydrogen economy’ has been the stuff of futurists and extreme environmental thinkers. In recent years, awareness of the need to reduce carbon emissions to combat climate change and innovations that reduce the cost of hydrogen production has revitalized the idea. After decades of false starts, in Europe and Asia, the idea of a green hydrogen economy is finally taking serious shape. Some recent projections even indicate that the transition to hydrogen could occur much faster than many currently think.

The green hydrogen economy is highly systemic because to produce hydrogen for use as an energy source, large quantities of carbon-neutral electricity will be required. While hydrogen is the most abundant element, you cannot drill in the ground and find hydrogen gas or pump liquid hydrogen like you do oil. The key shift that must occur is to shift the production of hydrogen from using natural gas as the source to producing it using carbon-neutral electricity using electrolysis. Producing hydrogen requires lots of electricity, so if electricity is not produced in a carbon-neutral way, there is no real point in moving to a hydrogen economy.

Currently, carbon-neutral electricity comes from nuclear, hydro, wind, and solar. As climate policy expert Michael Shellenberger explains in this TED talk, the growth in renewables as a share of global energy growth is actually decreasing, as it is failing to keep up with overall growing global energy demand. This is due to the vast populations of India, China, South America and Africa going through in the 21st century the same process of industrialization as Europe, Japan, South Korea, and North America did in the 20th century.

Can Hydrogen Really Replace Oil?

Hydrogen is not ideal for personal transportation such as private cars, as the cost and performance is inferior to current lithium battery technologies. But as electric vehicles increase in size, battery size and weight increase. The larger and heavier the vehicle, the more weight in batteries must be carried around all the time, which in turn ends up consuming more of the energy contained in the battery. This makes hydrogen ideal for use in larger transport vehicles such as trucks, ships and trains, as the weight of the hydrogen is less than the equivalent weight in batteries. These vehicles are enormous uses of oil globally, and source of significant emissions.

For small train lines that are not yet electrified with overhead lines, hydrogen is an ideal choice. The amount of batteries required to power even a small yet heavy train is enormous, range is very limited, and recharging times are too long. In contrast, a train can be refueled with hydrogen rapidly in much the same way as the existing diesel engines are, they are as quiet as other electric trains, but without the pollution from diesel.

In the USA, the trucking industry is one of the largest industries and employers in the entire country. Hydrogen fuel cell trucks already have competitive power, range, and fueling time to diesel-powered trucks. Many truck manufacturers around the world are actively working on this technology. They are quieter and smoother than diesel trucks, and because the engines are electric, have enormous instant torque ideal for shifting heavy loads at low speeds. They emit only water as emissions rather than diesel emissions which often endanger the lower-income communities that live near industrial areas and roads. Embracing hydrogen fuel cell trucks would be a huge shift for the trucking industry. In the USA, due to the maturity, size, and economic importance of the trucking industry, rapidly adopting hydrogen trucks could alone create an enormous shift in perception of hydrogen as a fuel.

The recent share debut of hydrogen fuel-cell truck maker Nikola in the USA is an example of both the potential and pitfalls of companies seeking to make their mark on the hydrogen market. While the Nikola share price more than doubled in the first week as many investors saw the huge commercial potential of the hydrogen semi-trucks and other futuristic-looking fuel-cell vehicles, investors soon soured and some even started to accuse the company of fraudulently talking up the value of their product. This perhaps indicates that the hydrogen economy has a bumpy and speculative road ahead.

How will the Oil Industry Respond?

While the immediate threat to the oil industry is not significant, there is likely to be massive resistance from the oil and gas industry due to massive government subsidies oil companies have negotiated over decades and the hundreds of billions in infrastructure that oil companies have invested in almost every corner of the globe.

Oil companies are very big and very entrenched in the global economy, but also in decline. This decline was evident during the June 2020 plunge in oil prices during the covid-19 pandemic. Perhaps the most telling sign of the long-term decline of the oil industry happened just a few months later, as Exxon was dropped from the Dow Jones Index in September 2020, after being there since 1928. While oil companies still represent six of the top ten largest companies by revenue in the world, technology companies such as Apple, Google and Microsoft are gradually overtaking them as the dominant business forces in society.

Oil companies to a large extent are public companies. As political will globally shifts due to the increasingly visible cost of climate crisis induced wildfires, floods and refugee flows from areas that have become unlivable due to climate change or climate-induced disasters, the smartest oil companies will embrace change and execute a massive global business pivot from oil to hydrogen. It could be that this choice may even ensure their survival. They will leverage the similarities to the existing oil industry in terms of engineering expertise, global reach, and vast financial resources.

At the other end of the spectrum, many smaller oil companies will likely fail. They will not have the flexibility or financial resources to shift to the new hydrogen economy as it grows and reaches various tipping points that occur during major technology transitions. A hydrogen economy requires large numbers of mechanical, electrical, and chemical engineers, with significant skills and training. Countries that look ahead and start training these engineers will have a distinct advantage.

Instead of commissioning oil tankers, forward-thinking oil companies should be encouraged to evaluate their oil production lifecycle to determine how to navigate the massive shift to a clean energy economy. The largest and smartest of them may even invest in thorium nuclear power plants of their own, in order to produce green electricity to produce hydrogen that they then ship using modified oil natural gas infrastructure, and existing logistics skills and financing mechanisms. Oil companies also have deep resources and decades of experience in the financial structure of energy markets, which they could use to leverage their past expertise while transitioning to a hydrogen economy.

The countries that are most heavily dependent on oil production such as Saudi Arabia will have the biggest changes to navigate. Continue with being nations with economies based on cheap oil, or pivot and leverage their enormous expanses of empty desert and high sunshine hours to build massive solar farms instead of oil wells? Alternatively, they could locate nuclear plants in critical locations on their coastal shipping routes, in order to produce low-cost clean energy and use it to produce hydrogen for global export, possibly even from repurposed oil facilities.

Significantly, the first new nuclear power plant in the Arab world started up in August 2020 in the United Arab Emirates, showing that there is far-sighted thinking occurring in these small, wealthy, and politically unique countries. The massive Barackah Nuclear Power Plant is located in the Persian Gulf between Qatar and Abu Dhabi. Potentially, this carbon-neutral electricity could be used to kickstart a local hydrogen economy, given that the wealthy cities of the Emirates are transitioning from oil money and real estate driven boom towns to established hubs for innovation and clean energy.

The Sustainability Transitions Start to Merge

Producing green hydrogen using electrolysis for the hydrogen economy requires large amounts of electricity. Perhaps the biggest advantage hydrogen has over oil is that it can be produced wherever electricity and water are available. Production facilities can be scaled to the demand of any particular fueling location. Rather than transporting oil around the world, hydrogen could be produced where needed assuming that renewable electricity is available. But if required, it can also be transported just like oil, in pipelines or large tankers.

To date, the cost of producing hydrogen using electrolysis is uneconomic compared to burning fossil fuels, or to produce the hydrogen from fossil fuels. But that is largely because our economic system does not price carbon emissions from fossil fuels realistically. If carbon pricing continues to not reflect the impact on the climate of burning oil and gas, and solar, wind and hydro cannot produce a critical mass of excess electricity that is converted to green hydrogen, and there are not enough hydrogen fuel cell trains, buses, trucks to justify building out the infrastructure needed for a hydrogen economy, then hydrogen will likely not reach the critical mass it needs to start to truly displace oil.

A hydrogen economy will look very different from the oil one. Regions with large amounts of solar, wind and hydro-power will become key hydrogen producers, as they utilize their natural resources to create green hydrogen. But green hydrogen produced from excess solar and wind will not be alone enough to displace oil. This is where the first and second transitions to sustainability interlock. Creating new nuclear power plants based on safe thorium technology could produce large, constant amounts of carbon-neutral electricity, assuming the political, economic, and technical problems can be solved. This electricity can be moved through existing and upgraded electricity networks to where green hydrogen production is needed. The hydrogen can be produced wherever hydrogen-powered trains, trucks, or city buses need to be fueled using relatively small electrolysis plants, for instance inside a highway truck stop.

Introducing the Third Sustainability Transition

As solar and wind continue to ramp up due to growing environmental awareness and public demand, existing electricity grids will more often not be able to cope with the volume of production due to renewables producing electricity at times when demand is not highest. This means electricity storage is required, or the renewables must be switched off.

In the coming third global energy transition and article in this series, Electrify Everything, I'll explain how all three global energy sustainability transitions fit together to create a new global green economy based around clean energy and electricity. In the first transition, we reestablish nuclear energy as a major future clean energy source, gradually replacing the dependency of many nations on coal, the largest form of carbon pollution. In the second global transition to sustainability, expensive and clean energy from nuclear, solar, and the wind is used to create green hydrogen that can be stored and used in a new green hydrogen economy, gradually replacing oil and natural gas as both energy source and energy storage. In the third transition, we electrify everything possible, upgrade the electricity grid using smart grids and multiple types of energy storage.

By understanding all three global energy transitions to sustainability, we can start to see how they fit together, why all the pieces are important parts of the bigger clean energy puzzle and why all three transitions must happen simultaneously. Production, storage, transport, population growth, energy use, politics, geography, public opinion, technology, and capital all come into play in an almost unfathomably complex mix.

This complexity makes these global sustainability challenges daunting indeed. But as we have seen, the problems, if we do not rise to this challenge, may be far, far worse than the efforts required to transform the global energy system.

Peter J Hill is a founding investor of the environment startup OurWorldToo.