Hydrogen's role in our energy future

Part 1: A chaotic energy transition

Our current energy system is based on repeatedly-patched infrastructure built for wood, coal, oil and gas, with inevitable incumbents, vested interests, sunk costs and legacy regulatory and market frameworks. Where once nations owned and ran the systems, enabling at least some semblance of optimisation, now we face a mix of markets: more- or less-regulated, partially integrated, with technology and needs evolving faster than the support structures can keep up. And we face a climate crisis, of our own making, which will require massive system change if we are to come close to solving it.

We need to move as fast to a clean energy system as we feasibly can: upgrading or replacing old technology and infrastructure, training people to build, install and maintain it, and replacing the fuels we use in it. We need to change lifestyle patterns and expectations, and strive to make energy accessible, secure, affordable and clean.

Evidence suggests that in a long-term ‘optimised’ world, we can achieve a low-emissions, low-impact, affordable energy system based primarily on electricity and hydrogen. What we don’t know is how to get there.

It appears that change will be slow, cost money, and risk energy security. It will certainly shake up major incumbent industries and geopolitics.

We have been through hydrogen ‘hype cycles’ in the past. My 30 years in the industry has exposed me to two major ones – one built on the late 90s/early ‘noughties’ tech boom, and a smaller one that fizzled with the 2008 financial crisis. Some commentators claim we are seeing another one right now. What I believe we are seeing is the seeds of a new energy system starting to germinate. Unfortunately, it’s hard to know if we are sowing the seeds in the right places, or giving them enough fertiliser. Will they thrive or shrivel in the presence of other seedlings of different types?

We can – and do – run myriad models to uncover the optimum structure of the future energy system. But unfortunately the boundary conditions change faster than we can run the models. No outcome is stable under all conditions. How do we build in system shocks – a war in Ukraine; a pandemic; a retrenchment on critical materials supply chains, the dreadful events in Israel and Palestine? How do we account for market forces where the markets are not clearly bounded? How do we account for technology innovation in a world of AI?

We don’t – and in fact we can’t. We must do things that are suboptimal, either now or in the future as the system evolves. But we must do them soon.

Incumbents are often mainly and understandably concerned with not moving too fast from their current main revenue sources. New companies lack strong balance sheets and service infrastructure. The new technologies still need to grow up. The supply chain either has to be built, or is creaking. Not enough people know enough about how to build or operate the new systems.

But since we have reached the point where we have to move fast, we need to take calculated risks. If we wait for the intricacies of the Inflation Reduction Act to be perfectly decoded, if we wait for the ‘best’ technology, if we wait for the existing assets to be fully sweated, then we will fail in our need for speed.

So what can we do?

Not only – but especially – in hydrogen, we must build projects that are big enough to learn from in different sectors and local contexts. Accept that some things will break, that future technology will be better. Use some of the profits from existing but dying business to build its replacement – knowing that the near-term returns will be lower, but buying the long-term licence to continue to operate. Don’t make the perfect the enemy of the ‘better’ or the ‘good enough to start with’. Move faster than is comfortable, in the knowledge that an upstart business with a clever business model and no incumbency to weight it down might just overtake. We must also focus on the total system – arguing about single-point optima pretty much guarantees we will not be able to optimise overall.

Just don’t compromise on safety. And accept that the transition will be chaotic for some time to come.