Hydrogen and Energy security

The Hydrogen Mirage—Why Local Production Beats Imports

The global push for a hydrogen economy is often portrayed as a story of limitless potential, with hydrogen imported from resource-rich regions becoming the backbone of decarbonisation. Europe, in particular, is banking on hydrogen imports to meet its ambitious climate goals, but the reality might be more complex. My recent study suggests that relying on imports for hydrogen comes with significant risks to energy security. Instead, local solutions—like electrolysis powered by renewable energy—offer a more sustainable and secure path forward.

This article explores why hydrogen imports are less reliable than they seem, highlights the complementary roles of electrolysis and storage, and explains why these findings are relevant beyond hydrogen to other energy carriers, such as synthetic fuels or even natural gas substitutes.

The Hydrogen Dream and Its Risks

Hydrogen is touted as the key to decarbonising hard-to-abate sectors like steelmaking, fertilisers, and heavy transport. Europe’s REPowerEU plan aims to produce 10 million tonnes (Mt) of renewable hydrogen domestically by 2030 while importing an additional 10 Mt to bridge the gap. Ports like Rotterdam are being transformed into hydrogen hubs, and bilateral agreements with nations like Namibia, Chile, and Canada promise a steady supply.

But the reliance on imports introduces vulnerabilities eerily reminiscent of Europe’s dependence on Russian gas—a dependence that became painfully clear during the 2022 energy crisis. My study highlights three core risks:

1. Geopolitical Uncertainty: Like natural gas, hydrogen imports could be weaponised during conflicts or trade disputes.

2. Infrastructure Fragility: Pipelines and shipping routes are vulnerable to accidents, sabotage, and natural disasters.

3. Market Volatility: Dependence on global markets exposes Europe to price shocks and supply disruptions.

These risks underscore the need for robust domestic alternatives to hedge against disruptions.

The Electrolysis Advantage: Local and Resilient

Electrolysis, the process of producing hydrogen from water using electricity, is emerging as a cornerstone of energy security. It allows hydrogen production to be decentralised, leveraging local renewable resources like wind and solar. My research shows that investing in electrolysis is a highly effective strategy for mitigating import risks.

Key Findings:

1. Cost-Effective Hedging: Electrolysis accounts for 95% of the strategic investment budget in my model, proving far more effective than underground hydrogen storage (UHS) at reducing system costs during supply disruptions.

2. Dual Benefits: Beyond providing insurance against import shocks, electrolysis supports grid stability by consuming surplus renewable electricity, reducing curtailment.

3. Scalability: Unlike UHS, which requires specific geological conditions, electrolysis can be deployed almost anywhere, making it a more flexible solution.

The model assumes a future Central Western Europe (CWE) energy system, showing that an additional 4 GW of electrolysis capacity would effectively hedge against disruptions.

Storage’s Role: Complementary but Limited

While electrolysis takes centre stage, UHS still plays an important supporting role. It offers a buffer for seasonal fluctuations, storing hydrogen produced during periods of high renewable generation for use during shortages. However, its strategic value is more limited compared to electrolysis.

Findings on UHS:

• Supplementary, Not Primary: UHS investments make up only 5% of the total strategic budget.

• Geological Constraints: UHS is feasible only in regions with suitable salt caverns or aquifers, limiting its scalability.

• Complementarity: UHS and electrolysis work best together, with storage reducing the need for real-time hydrogen production during disruptions.

Why Hydrogen Imports Won’t Save the Day

The study paints a sobering picture of hydrogen imports as an unreliable cornerstone for energy systems. Even under optimistic scenarios, Europe’s import dependency would remain above 50% by 2035, exposing it to the same risks that plagued its natural gas supply. Moreover, hydrogen trade is likely to mirror the patterns of fossil fuel markets, with a few dominant suppliers wielding disproportionate influence.

A Cautionary Note for Other Fuels:

The insights from this study extend beyond hydrogen. Electrofuels (e.g., synthetic methane, ammonia) and other renewable substitutes for fossil fuels share similar characteristics. Like hydrogen, they are energy carriers that can be produced locally or imported. Investing in local production infrastructure for these fuels could provide the same resilience benefits highlighted for hydrogen.

Policy Implications: Securing the Hydrogen Economy

Building a resilient hydrogen economy requires more than ambitious targets—it demands strategic investments that prioritise security and sustainability. Here’s what policymakers should focus on:

1. Shift the Narrative: Move away from over-reliance on imports and recognise the strategic value of local electrolysis.

2. Subsidise Local Production: Offer financial support for electrolysis projects, ensuring they remain competitive with cheaper imports.

3. Incentivise Complementary Storage: Promote UHS in regions where it is geologically viable to enhance seasonal resilience.

4. Invest in Infrastructure: Develop robust electricity grids and hydrogen pipelines to support decentralised production and distribution.

Final Thoughts: From Hydrogen to the Future of Energy Security

Hydrogen imports are often touted as the silver bullet for Europe’s decarbonisation and energy security challenges. But as my study shows, the reality is far more nuanced. Local production through electrolysis not only enhances energy security but also supports the broader energy transition by integrating renewables.

This lesson is a universal one. Whether we’re talking about hydrogen, electrofuels, or other energy carriers, local solutions are often the most resilient. By focusing on domestic production and strategic storage, we can build energy systems that are not only sustainable but also secure against the uncertainties of a changing world.

My original paper is published in Energy policy: https://doi.org/10.1016/j.enpol.2024.114371