Is Natural Hydrogen the Future of Clean Energy?

Carmen Font, with a diverse background in corporate banking and government, currently leads natural hydrogen investments and is part of the International Energy Agency's hydrogen experts. She explains that professionals in this field come from various backgrounds, and her finance expertise helps accelerate natural hydrogen development.

Financing natural hydrogen projects requires close cooperation between public and private sectors. Public support from entities like the European Commission and national governments is crucial for de-risking projects and attracting private investors. Startups often form joint ventures to cover high capital costs.

Existing public funding schemes for green hydrogen, like the Innovation Fund and European Investment Bank, need to be widened to include natural hydrogen projects. International examples, such as Bill Gates' investment in Koloma and significant US government funding for research, demonstrate the importance of government backing and favorable legislation.

Natural hydrogen projects offer significantly lower operating costs compared to green hydrogen, which is heavily impacted by energy prices. A project in Spain, for example, has a capex of 500 million euros, with 220 million for equipment and the rest for well development. These projects can yield an impressive 60% internal rate of return (IRR).

The main operational cost (Opex) difference is the lower energy consumption in natural hydrogen, making it highly profitable. The levelized cost of natural hydrogen production is remarkably low, averaging $1 or 1 euro, which could revolutionize the global energy mix and significantly contribute to decarbonization without competing with green hydrogen.

Key revenue streams include natural hydrogen itself and associated gases like helium, which is a rare and valuable material. The co-production of helium significantly enhances project profitability and contributes to energy sovereignty, as demonstrated by the Spanish project's substantial investment to include helium extraction.

A stable and predictable regulatory framework is the primary bottleneck. Countries like Australia, the US, France, and Poland have enacted legislation, but a unified European framework is needed. Collaboration among the European Commission, regulators, and national governments is critical to accelerate commercialization.

Natural hydrogen offers energy sovereignty and can accelerate global decarbonization at competitive prices. It provides a new energy resource for industries to decarbonize faster and supports green mobility, such as transitioning heavy transport fleets from fossil fuels to hydrogen, leading to significant economic and environmental benefits.

Key indicators include measuring hydrogen volumes and confirming geological reservoirs. For instance, a Spanish project, with historical data from 1963, plans drilling in Q1 2025 and aims for production by the end of 2029. This follows a standard decision-making process for hydrogen projects.

One Spanish reservoir alone could yield 1.1 million tons of hydrogen over 20 years. Mali is a well-known production site, active for over five years. Australia (Gold Hydrogen) and France (458 Energy) show promising prospects. Europe has vast potential, with identified reservoirs in Spain, France, Hungary, Germany, Albania, and Finland.

Europe needs to attract foreign direct investment and deep tech to scale up natural hydrogen production. Carmen emphasizes the importance of developing a pipeline of projects, not just isolated ones, and nurturing them with investors and public support. She is involved with Helios, a leading company in Europe, with projects also in Oman and the Philippines.

The International Energy Agency's TCP Task 49 team focuses on research, regulatory frameworks, infrastructure, and understanding hydrogen production mechanisms. This global effort aims to accelerate natural hydrogen's commercialization and integrate it as a recognized energy resource, involving academia, private, public sectors, and society.

Existing data from old oil and gas fields is valuable. Geological conditions vary globally; in Spain, thick salt layers seal hydrogen, while in Mali, shallow reservoirs regenerate. The potential for regeneration of natural hydrogen reservoirs is a key area of study, meaning a long-term, stable energy source. These reservoirs could also be used for storing green hydrogen.

Hydrogen valleys are crucial for local impact and creating interconnected ecosystems. Natural hydrogen can provide competitive, local, and exportable hydrogen, especially in regions with rich geological resources. These valleys enhance cohesion and inter-regional investments, supporting production hubs across Europe and globally.

The US, Colombia (Ecopetrol), Brazil (Petrobras), and Australia are actively exploring natural hydrogen. Spain, France, Poland, Hungary, Albania, Finland, Russia, China, and the Philippines also show significant potential. Recent investments by large companies like Fortescue in HyTerra demonstrate growing interest from major players.

Natural hydrogen projects offer high profitability (e.g., 60% IRR). The main challenge is the lack of clear regulation. Establishing regulatory frameworks, particularly at national and European levels, is key to de-risking projects. The technology, derived from decades of oil and gas experience, is already proven.

Beyond regulation, specific public funding schemes are vital to support high-capital investments. Public support, even if not substantial in monetary terms, brings credibility and attracts private investors, enabling the scale-up of projects and fostering pipeline development.

The value chain is evolving rapidly, but bottlenecks like the lack of hydrogen refueling stations persist. Competitive natural hydrogen can ease pressure on green hydrogen projects and contribute to the entire supply chain, from production to end-use. Addressing these bottlenecks will accelerate decarbonization.

Homogeneous certification schemes are essential for commercializing natural hydrogen. The focus should be on carbon footprint rather than 'colors' (green, blue, pink). International collaborations, like the IEA TCP 49, are working on robust certification schemes to ensure quality, sustainability, and facilitate commercial projects.

Natural hydrogen has very high potential. Commercial projects are expected in Australia, the US, and Europe (e.g., Spain) within this decade, which will be a significant milestone. These projects will encourage major players to transition and leverage existing oil and gas skills, offering a sustainable path for decarbonization without leaving anyone behind.

Expected milestones include large-scale commercial natural hydrogen projects, improved understanding of generation mechanisms, and clearer identification of high-potential reservoirs. Significant progress in legislation and de-risking projects in more countries will open doors for private investors.

The key message is the necessity of strong collaboration between public and private sectors. This collaboration is crucial for de-risking projects, accelerating development, and integrating natural hydrogen as a vital energy source to help industries decarbonize and meet ambitious global targets. Carmen is optimistic about its future.