Green hydrogen, grids and the perils of big government

The Ibero-American Energy Traders Association (AICE), founded last August, is promoting a thriving free energy market to advance the development of renewables. 

In this, the second part of an interview with BNamericas, AICE vice president Emili Rousaud, who is also the CEO and co-founder of Barcelona-based energy provider Factor Energía, talks about green hydrogen and the consequences of government intervention in Latin America's energy sector.

The first part of the interview can be seen here

BNamericas: How do you see the outlook for green and blue hydrogen in Latin America and the Caribbean? What are the challenges, not only on the supply side but also the need to stimulate demand?

Rousaud: To make sense from the point of view of climate change, hydrogen has to be green hydrogen. Then there are many expectations. For example, for the issue of bunkering green hydrogen makes a lot of sense. But we still have many ships that use diesel and a conversion is being made from diesel to natural gas.

The problem with hydrogen is that it’s a very small molecule. The current gas pipelines don’t have the technical conditions to transport it and the ships have to be adapted. Surely the use of hydrogen will also make a lot of sense at the aviation level, but we are still a little far away for all these projects that are being considered to have a future.

Now I’ll turn for a moment to the Spanish case. The European Union is going to invest in a hydrogen gas pipeline that will go from Barcelona to Marseille, which will eventually reach Germany. They are projects that actually require a lot of investment and are long term. We have to carry on working because without a doubt hydrogen is going to be an important energy driver. But in the short term I believe that hydrogen will end up being converted into other products. Green methane and ammonia are also being produced, that is, the hydrogen economy is missing.

BNamericas: In reality, green hydrogen has many challenges…

Rousaud: Hydrogen has a clear problem in that it’s a very small molecule. It’s very difficult to transport in its pure state and then what is not going to make sense is to use hydrogen to make electrical energy, because if you use renewables to make hydrogen and then convert the hydrogen back into electrical energy by the third law of the second law, sorry, of thermodynamics, the loss of net energy is very important and you can end up losing 60% of the energy.

Therefore, if this conversion is exclusively, for example, for the supply of electrical energy, let’s say through the network, it would not make much sense from that point of view.

BNamericas: Colombia is planning an auction for offshore wind energy projects. One of the proposals for this energy is the production of green hydrogen for export. Would it be prudent to dedicate that offtake to the export of hydrogen when they are talking about a possible electrical energy deficit in the country in the coming years?

Rousaud: There is a topic that you have raised that’s very important and that is that in Colombia or Mexico there’s an energy deficit and therefore thinking about exports doesn’t make much sense. We know that in Colombia some investment has been made in renewables and now they have a certain problem in evacuating that energy through networks because there is a community issue.

But for the energy transition to be a reality, we must have a good electrical system. So you need not only to produce the energy but also for that energy to go from the place where it’s produced to the place where it’s consumed, and that requires transmission networks. They are important investments. 

That’s why we see distributed energy as positive, those local installations that you can do to help improve the quality of supply.

BNamericas: Historically, the investment climate in the energy sector – throughout Latin America – has been negatively impacted by political influence. In Colombia, for example, electricity marketing companies are in debt due to an obligation to reduce their rates for end users. Is this a concern for AICE?

Rousaud: The problem with not liberalizing the market is that the price of energy ends up depending not on the reality of the world, but on the desire of the politician in power. If the politician believes that at a time of rising energy prices he does not want this to be passed on to the population, and what he does is set a rate that implies losses, it leads to a situation that we have experienced in Spain for many years. And then the energy company needs a public subsidy to survive, and in the end the public subsidy is also paid by the citizens.

In the end, the country's income is always generated by the citizens, and the citizens with their taxes raise it for the state, so in the end it’s always the same people who pay. AICE's vision is that the fairest thing is to liberalize the market because it also has a positive effect when energy prices rise, and both companies and families receive a price signal that makes them save.

Of course, if all energy products in the world grow and you’re paying a subsidized price, you don’t have an incentive to save. Companies have no incentive to save. What for, if energy costs the same? It’s very difficult for both companies and families to save if they don’t see a price signal. Therefore, we believe that it’s important that we have an absolutely liberalized energy system.