Baker Hughes Investment in Hydrogen Highlights Need To Scale Up Faster
In a test of the future of the hydrogen business, Baker Hughes is one of three companies starting a fund whose goal is to raise €1 billion to invest in a clean hydrogen infrastructure.
For Baker Hughes, green hydrogen is an opportunity to turn an oil and gas business into one that could prosper during the energy transition.
The oilfield service company said it will be putting €50 million behind that strategy as one of three companies with a plan to raise a total of €1 billion for a fund that is a down payment on the big challenge of scaling up a clean hydrogen infrastructure.
It is one of the founding investors in the FiveT Hydrogen Fund along with Plug Power, a pioneer in creating a commercial fuel cell market that put up €160 million, and Chart Industries, a company that engineers and maintains gas facilities, which put up €60 million.
The fund will invest in ventures that produce, store, and distribute green hydrogen produced in ways that eliminate or minimize carbon emissions, often in partnerships with innovators.
It is already developing machinery that runs on hydrogen. Last year, Bakers Hughes reported successfully testing a pipeline turbine that can run on a blend of natural gas and up to 10% hydrogen, reducing emissions.
But the size of the green-hydrogen market will require selling new uses for the fuel, such as long-haul trucks powered by fuel cells using liquid hydrogen.
The venture will be led by Pierre Etienne Franc, who, until recently, was the vice president of the hydrogen energy world business line at Air Liquide and is a leader of the Hydrogen Council, which recently put out a report saying scaling up green hydrogen will allow it to become cost competitive.
The findings “debunk the myth that a hydrogen economy is unattainable due to cost,” said Euisun Chung, executive vice chairman of Hyundai Motor Group and co-chair of the Hydrogen Council. Hyundai Motor is identifying opportunities for hydrogen to fuel steel making and heating buildings.
Hydrogen has long been part of Baker Hughes’ product line.
“Baker Hughes has been active in hydrogen technology and solutions since 1962, when we built our first hydrogen compressor,” said Thomas Millas, a vice president for external affairs at Baker Hughes.
It supplied refineries with turbines and compressors using methods such as steam methane reformation, which is low cost but high in carbon dioxide emissions.
Future growth will depend on finding lower-cost ways to create hydrogen with really low or no carbon emissions and new users to buy it. Big investment and new technology are needed for both.
Promises by companies and countries to reduce carbon emissions massively by 2050 are expected to shrink the demand for hydrogen from its biggest buyers—refiners. A lot of hydrogen is required to turn low-quality heavy crude into high-quality gasoline.
If electric and other alternative-fuel cars dominate the roads, demand for hydrogen to refine gasoline could drop 75% by 2050, according to a recent report from Rystad Energy. Staying in the refining business will require switching to hydrogen sources with tiny carbon footprints.
FiveT’s billion-euro goal is a part of the €70 billion the Hydrogen Council estimates will be needed by 2030 to increase the scale of the business to a level where the cleaner sources of hydrogen are cost competitive.
Faster development also matters because fuel cells using hydrogen are competing with alternatives, particularly batteries, which have been growing more powerful and lower cost because of big investments in technology, mass manufacturing, and charging stations.
As a result, the Rystad report said batteries are likely to remain the preferred source of power for cars and light trucks over fuel cells.
While the energy data and consulting firm agrees with the Hydrogen Council that heavy, long-haul trucks could provide a market for hydrogen because the fuel cells and liquid-hydrogen storage weigh less, it said that advantage could be lost if batteries continue to become more efficient and less expensive, eroding hydrogen’s edge.
All of these predictions come with assumptions about the available technology more than decade ahead, which is extremely hard to predict.
Adding hydrogen to natural-gas pipelines looks like a low-cost way to quickly create a distribution network. But that will require dealing with the fact that hydrogen can cause widely used forms of steel in pipeline manufacturing to become brittle and fail; and it can damage plastic pipe, as well, according to an interview with two consultants on the Baker Hughes website.
Alternatives such as lithium-ion batteries, though, require massive amounts of lithium and cobalt, which pose big questions when it comes to the economics and environmental impact of depending on them on a massive scale.
“To drive the energy transition forward requires innovative models for collaboration and investment, and new energy frontiers like hydrogen will progress faster when key players come together,” said Lorenzo Simonelli, chairman and CEO of Baker Hughes. “The FiveT Hydrogen Fund will combine the financial strength as well as the strategic and technical expertise of our companies to help advance hydrogen in new ways.”