The Hydrogen Hype: Balancing the Equation – Part 3

Hydrogen in general is uncertain as a significant fuel source of the future.

Large-scale infrastructure may well be a white elephant.

Should hydrogen somehow find large-scale adoption, green hydrogen is highly uncertain to be the hydrogen of the future.

PINK WINS

If I had to bet, I would put my money on pink hydrogen from nuclear power.

Consumers are also likely to be price sensitive, even those in Europe, meaning that lower-cost hydrogen would be preferred – once again, pink hydrogen is likely to win.

Hydrogen produced closer to the market, where infrastructure already exists, will trump hydrogen produced in far-flung places, and hydrogen from coal and from nuclear can both be produced closer to the market, without the same space needs as solar and wind energy, and with reduced transport costs.

Given that demand for green hydrogen is largely linked to the north-western sub-hemisphere, and that the sector needs to be subsidised, there is no conceivable reason why Namibia should be providing these subsidies.

RED FLAGS

Indeed, if there is a need for subsidisation, and this is not forthcoming from those who most want the transition, it should raise some red flags as to the actual commitment to this space from the governments of Europe.

Were Namibia to use public funds to fund infrastructure specifically for hydrogen, or to invest in hydrogen projects without an expectation of commercial return, or to tax other forms of energy production, this would clearly constitute a form of subsidy for the production of hydrogen.

Thus, Namibian taxpayers would be on the hook for the greenhouse gas (GHG) targets of western Europe.

This at the very time that the target market, driven by its populus, seems to be shifting away from ‘green’ in its current form.

Moreover, given the relative sizes of the economies of western Europe and Namibia, the relative risk for Namibia of undertaking such subsidies is disproportionally large – a dangerous gamble at a time when northern governments are doing little more than contributing relative pocket change for what is in effect an option to remain involved should the sector develop.

Thus, the risk is not insignificant that Namibia will be left with the bill after the party comes to a close.

‘GREEN’ CONCERN

There is one further Namibian ‘green’ hydrogen concern that should not be ignored.

Because the local green hydrogen push was never established with a long-term strategy and robust process, its soft underbelly has been left open to obvious criticism – the megaprojects that underpin the general green hydrogen drive involve turning large segments of a national park into a solar farm.

This raises a very clear contradiction once again: Turning national parks into solar farms to assuage Europe’s GHG emission guilt might meet a vague definition of ‘green’ in that it is (directly) low-GHG emitting, but it is certainly not ‘green’ in a more holistic environmentally friendly sense, particularly as it pertains to the prevention of loss of biodiversity and ecosystems.

Should they proceed, Namibia’s hydrogen plans, particularly the megaprojects, may well produce hydrogen using solar and wind power that cannot truly be classified as ‘green’.

Thus, the market for Namibia’s green hydrogen, produced well above the alternative production process costs for the same molecule, may suddenly vanish, as the classification crumbles under the weight of its own contradictions.

Indeed, genuine well-meaning ‘green’ individuals in target markets would likely only be comfortable with this hydrogen from Namibia if they are ill-informed of its true environmental impacts.

The ‘green’ coating is fickle at present, and yet another great risk. Large-scale Namibian hydrogen may therefore fail the ‘green’ test.

ALL FOR JOBS?

Certainly, a counter-argument couldbe that Namibia needs jobs and industrialisation, and that this industry will provide the same.

It may be argued that putting some public funds into the mix could thus enable the unlocking of great long-term benefit.

Unfortunately, this argument holds up poorly when exposed to light. Firstly, the employment figures touted by relevant public officials are effectively impossible to replicate.

We have tried and don’t get close. Generous modelling suggests that these are an order of magnitude too ambitious, so hardly worth spending time on, and certainly not worth basing policy on.

From a gross domestic product perspective, taking taxpayer funds and ploughing them into a loss-making space that needs perpetual subsidies is not good for an economy.

Namibia has learnt this lesson the hard way with Air Namibia.

That said, there may be justification in a handful of instances where the loss-making activity drives material macromultiplier effects through the economy.

However, the reality is that hydrogen production in Namibia is unlikely to have this impact.

The space is low employment, with limited Namibian input, limited Namibian uses for the output product (yes, we will be told about green steel, green tomatoes and green fertilisers, but these face their own sets of challenges, including price competitiveness) and similarly making multiplier arguments tenuous.
PUBLIC FUNDS

The bottom line here is that while Namibia and its policymakers should never get in the way of private endeavours, extraordinary caution should be exercised when using public funds to enable specific endeavours – especially where there are so many obvious risks of failure.

Frankly, any sane Namibian should hope that the hydrogen hype delivers, and that solutions are found to all the aforementioned problems.

Certainly, it is possible that, much like large-scale solar and wind energy projects, the hydrogen revolution, despite its shortcomings, could enjoy support that drives funding into the space long beyond its sell-by date.

However, using Namibian public funds for this dream is nothing short of reckless, especially given the ample and very real demands on the public purse.

Using Namibian taxpayers’ money, whether from the revenue of today, or through borrowing from the future, should be an absolute red line.

Of course, having a contrarian view about hydrogen, and green hydrogen specifically, is somewhat like walking into a place of worship and questioning the gospel of the day.

Sacrilege.

However, before we borrow from future generations, perhaps we should assess if there is any technical veracity to these green hydrogen claims.

Perhaps it is time for more people to assess this space through a ‘true or false’ filter, and set aside, at least for a moment, the safety of the consensus.

• Rowland Brown is the co-founder of Cirrus Capital.