Timera Take a Look at Hydrogen Investment Support (AKA Subsidies)

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By Paul Homewood

Timera take a look at the subsidy mechanisms for hydrogen:

I have not bothered to copy the whole thing, as it’s a bit technical. But the intro really sums the whole nonsense up:

Yes, as I have been inconveniently pointing out for years, hydrogen is very expensive to produce, and nobody wants to buy the stuff at cost prices except for dedicated hydrogen users.

Subsidies drop into two basic categories:

The first is to be funded via general taxation, currently to the tune of £240 million. But it is the second mechanism which will carry significant costs.

Once hydrogen production is up and running, the HBM will be funded in the same way as CfDs are, in other added onto consumers’ energy bills. This subsidy will not only cover the difference between the market price for and hydrogen and the guaranteed contract price, but also to offset potential losses arising if hydrogen producers cannot sell enough hydrogen to cover their fixed costs.

In other words, heads they win, tails you lose!

The long-term goal of course is to produce hydrogen by electrolysis using renewable energy. Simply steam reforming gas achieves nothing, as the process still produces lots of CO2, is extremely energy inefficient and costs much more than the natural gas which the hydrogen replaces. Worse still, if gas prices go up, so too does hydrogen.

But here’s the snag! Where will the electricity required for electrolysis come from?

For the foreseeable future, by which I mean the next couple of decades at least, there simply will not be the surpluses of wind and solar power to produce more than a tiny fraction of the hydrogen needed to replace natural gas in our energy mix, both for heating and electricity generation.

Even with the planned 40 GW of offshore wind and extra onshore and solar power capacity, surplus power will still be infrequent.

In reality if demand for electricity increases for electrolysis, this extra will have to come from a marginal source, one which can be readily switched on and off. In practicable terms this means gas power generation.

If international gas prices remain high, the cost of hydrogen will be higher still. And, of course, those darned emissions will still be sent up into the atmosphere.

Maybe there will come a day when we have so many windmills around the coast that all of the hydrogen we need can be produced (extremely intermittently) by offshore wind power. But by then, if the climate conmen are to be believed, we will all have fried to a crisp long before anyway!


November 28, 2022

Timera Take A Look At Hydrogen Investment Support (AKA Subsidies) — NOT A LOT OF PEOPLE KNOW THAT