“The art of simplicity is a puzzle of complexity.” – Douglas Horton
In August, German Chancellor Olaf Scholz led a delegation of senior political and business leaders on a trip to Canada. Desperate for every joule of primary energy he could get his hands on, Scholz’s primary mission was to beg Canadian Prime Minister Justin Trudeau to consider fast-tracking the approval of new liquefied natural gas (LNG) export facilities along Canada’s Atlantic Coast, something Trudeau has consistently been loath to consider.
Despite historic spreads between the price of natural gas in North America and the rest of the world, the drama-teacher-turned-cosplay-Prime-Minister professed to be unable to find a compelling business case for the proposal (although he did leave the door open for further consideration). In Trudeau’s fossil fuel-free vision of the future, such multi-billion-dollar investments will be obsolete before they could generate an economic return. How embarrassing it must have been for members of the European elite to submit themselves to the whims of the ultimate “legacy” admission to the political arena.
Instead, the two countries entered into a bizarre agreement to develop a “transatlantic hydrogen supply chain” (emphasis added throughout):
“Canada and Germany say a new hydrogen pact will kick-start a transatlantic hydrogen supply chain, with the first deliveries expected in just three years. Natural Resources Minister Jonathan Wilkinson and German Vice-Chancellor Robert Habeck signed the deal on Tuesday in the port town of Stephenville, N.L., where they attended a hydrogen trade show along with Prime Minister Justin Trudeau and Chancellor Olaf Scholz.
The five-page agreement is a ‘declaration of intent’ to create a hydrogen alliance between the two countries. ‘The world is going to need energy in the coming decades,’ Trudeau said. ‘It also is going to need to make sure that that energy is net-zero.’”
We were a little dumbfounded when saw these headlines. Surely, this must be a joke? Alas, like much of what emanates from the current slate of Western leaders, the two countries appear to be as serious in intent as they are unserious in understanding. While we could write an entire piece demonstrating why this effort is destined to be just another multi-billion-dollar boondoggle, we’ll dispatch with those particulars rather quickly and, instead, propose a practical yet superior alternative for Germany. Let’s dig in.
To understand why the hydrogen alliance between Canada and Germany is all but guaranteed to be an epic flop that incinerates any and all subsidies lavished onto the initiative, we must first understand what is actually being proposed. While many important details are left murky, information in the public domain reveals four stages envisioned for this centrally planned green energy utopia.
First, the plan calls for a massive deployment of new wind farms along the Island of Newfoundland’s western coast. The area is ideal for capturing energy from intense west-to-east winds coming off the Atlantic Ocean – Newfoundland is the windiest region in Canada, and the jet stream passes right over the island. Second, the electricity thus generated is to be transmitted to centralized hubs, which will require significant investment in new infrastructure. Once the wind farms are up and running and their electricity can be harvested, the third step is to produce hydrogen on a massive scale via electrolysis. Here, Germany contributes significant technological expertise. Engineering giants like Siemens AG have been investing large sums to perfect the technology, and they are undoubtedly at the cutting edge.
But now comes the hard part.
Even assuming the above scheme produces hydrogen at a globally competitive price (color us skeptical), by what means are large volumes of hydrogen supposed to be transported from Newfoundland to Europe? Certainly not directly, although many reports and press releases imply as much, falsely assuming that shipping hydrogen will be as “simple” as shipping LNG –itself no easy task. According to a report out of Australia, the inherent differences between hydrogen and natural gas make direct shipping of the former extremely challenging, and one should only “expect that the transport of hydrogen in bulk by sea will be commercially viable sometime in the 2030s.”
Hydrogen vs Natural Gas | Allens
Others are even more pessimistic. Bloomberg New Energy Finance founder Michael Liebreich sees no scenario where it makes economic sense for hydrogen-laden vessels to float across the seas:
“’If we transport hydrogen long-distance, it will be by pipeline. And if we cannot do it by pipeline, we aren’t going to do it.’
Hydrogen’s lower volumetric energy density compared to liquid hydrocarbon fuels means three times as many vessels would be needed to ship the same amount of energy as LNG, and energy loss from cooling and liquefying it would push that up to four.
It can be done technically, but economically there is no point in producing hydrogen at a cost of $1 to $2 per kg and transporting it round the world at a cost of $3 to $5 per kg, Liebreich said.”
We concur.
With no realistic ability to ship hydrogen directly anytime soon, aspiring grifters green hydrogen proponents intend to transform hydrogen to ammonia and ship that, a concept we’ve had fun ridiculing in a prior piece. While the notion of using carbon-free energy to produce hydrogen to produce ammonia is indeed seductive – and one we wholeheartedly endorse in the right setting – making ammonia using hydrogen derived from wind energy in Newfoundland, where no Haber-Bosch plants exist, for ultimate use in Germany, is insane. There is a better way.
Let’s consider that Germany is interested in being a global leader in the new, “carbon-free” hydrogen economy. Ammonia is easily one of the most important industrial chemicals manufactured today. Its production currently relies on either coal or natural gas to make hydrogen, which is then combined with nitrogen from the air to produce the fertilizer. Roughly 2% of total global carbon emissions can be traced to the direct production of ammonia, which vastly understates its importance when you consider that nearly all our food production depends on it.
While Germany has finally relented, agreeing to keep its three remaining nuclear power plants running, it is still in possession of three others it foolishly shut down last year. The country also has several ammonia production plants that have been made globally uncompetitive because of elevated natural gas prices. If the goal is to land “carbon-free” ammonia in Germany, simply turn back on the retired nuclear power plants and dedicate them to the production of ammonia!
Compare the capital costs and technology risks associated with the Canada-Germany deal to the elegant simplicity of what we propose here:
This is an intelligence test.
The benefits are plentiful. First and most importantly, the project would serve as a useful demonstration that green ammonia can be produced at industrial scale. It would de-risk the buildout of massive hydrogen production plants and their associated infrastructure – assets that could easily be repurposed if and when the nuclear plants were again retired.