Although 100Mt/year of hydrogen is produced globally and at scale, it’s overwhelmingly for the chemical industry. So there’s a long way to go for it to play a role in the energy transition. It’s not even clear whether hydrogen will be best used directly as a power source or through further conversion into other powerfuels. That’s why Dolf Gielen and Emanuele Taibi at IRENA are scoping out the challenges of reducing production costs and finding markets. The cost of the clean electricity used to power hydrogen manufacture (making it emission-free, as producing it from coal plants would be pointless without CCUS) is crucial. The cost and efficiency of the electrolysers used to create it, too. The cost of liquefying this highly volatile gas for transportation and storage adds substantially to the lifecycle efficiency losses. Although costs will come down, the authors predict a high carbon price will still be needed, even in 2050, to make it competitive with gas. Those costs are indeed falling which explains why, along with the urgency of climate change, clean hydrogen is gaining political and business momentum, explain the authors. And with lower costs will come the markets: vehicle fuel cells, conversion to powerfuels, utilising the spare capacity of renewables, and replacing gas.
Hydrogen is high on the agenda of the new European Commission. Frans Timmermans (EC Executive Vice-President for the European Green Deal) spoke at a stakeholder forum of the Fuel Cell and Hydrogen Joint Undertaking on 21st November.
He stated that Europe should extend its lead in clean hydrogen through quick successes. Hydrogen in existing gas infrastructure can go hand-in-hand with increasing the share of electricity in Europe’s energy system, allowing storage of renewable electricity surpluses.
The hydrogen appeal is global. Countries such as Australia, Germany, France, Korea and Japan have issued a roadmap or are in the process of issuing one. The growing and significant number of hydrogen conferences is an indicator for the widespread interest. Stocks of OEMs with a hydrogen link ride high. There are various reasons for this positive attention:
- The widespread recognition that energy transformation towards zero carbon emissions is needed, much faster than anticipated at the time of the adoption of the Paris agreement.
- Electrification of half of all final energy use leaves us with the problem of the other half. Hydrogen can play a key role there. This includes freight transportation but also energy intensive industries and building heating.
- Whereas hydrogen can be used directly, there is also increasing attention for hydrogen derivatives such as ammonia and synthetic hydrocarbons, so-called e-fuels or powerfuels. Such solutions circumvent hydrogen logistic issues.
- Hydrogen can develop into an internationally traded commodity. This offers an opportunity for today’s fossil fuel exporting countries. The first green hydrogen was delivered from Australia (a major fossil fuel consumer, producer and exporter) to Japan in 2019. Far offshore wind or pipeline imports from the Middle East and North Africa (MENA) region are a possibility for Europe. For example, the latest Italian Roadmap considers this option.
- It can be transported in pipelines, possibly by retrofitting existing natural gas pipeline systems. Pipeline transportation is comparatively cheap. It may be easier to build a pipeline than an electricity transmission line, a consideration for hydrogen plans in connection with North Sea offshore wind.
- Hydrogen production units can help to increase the flexibility of power systems and may create a new opportunity to utilise the seasonal availability of excess renewable power, as hydrogen can be stored seasonally, similar to natural gas.
Hydrogen production is already “at scale”, though not yet clean
Although hydrogen is not a primary energy source it can be produced from fossil fuels without CCS (grey hydrogen), with CCS (blue hydrogen) or from renewable power through electrolysis (green hydrogen). Both fossil fuel and renewables industries see hydrogen as an opportunity. Hydrogen is not inherently low carbon: today 99% of all hydrogen is produced from fossil fuels or from electricity that is generated from fossil fuels, and the CO2 footprint is substantial.
Hydrogen is already an industrial commodity today. More than 100Mt per year of hydrogen is produced and consumed. Dedicated hydrogen pipelines have been in operation for decades.
In a European context Norwegian hydrogen produced from natural gas with offshore CO2 storage is a noteworthy option. Although the production of green hydrogen is small today it is growing rapidly. About 4% of hydrogen is a by-product from electrolysis for chlorine and soda production. New dedicated hydrogen electrolysers are a more recent development. Today less than 0.2 GW capacity exists. However the scale of electrolysers is increasing rapidly from MW to 100 MW or even GW scale, as highlighted by the recent 40 GW Hydrogen Alliance, which aims at deploying 40 GW of electrolysers to produce green hydrogen in Europe by 2030, and the 5 GW Murchison green hydrogen project in Western Australia, which combine some of the best solar and wind resources with electrolysis to produce green hydrogen.
As it stands Alkaline and Proton Exchange Membrane electrolysers dominate the market but other designs are being pursued that can reduce cost and increase electric efficiency further.
Capacity and cost targets
The IRENA REmap scenario suggests 8% of electricity production in 2050 would go to hydrogen production in a scenario compatible with the climate agreement. Two thirds of all hydrogen produced would be green. That would imply around 1,700 GW hydrogen electrolysers by 2050, an annual growth rate of 35% over the next 3 decades. The modularity of electrolysers is reminiscent of that of PV modules and the spectacular cost reduction seen there may be repeated.
Hydrogen production cost challenges
Green hydrogen is today more expensive than the conventional production from fossil fuels. However, the cost of green hydrogen is falling rapidly to the point where it can compete with blue hydrogen.
The cost of renewable power (used to make the green hydrogen) and the cost and efficiency of electrolysers determine the green hydrogen production cost. Efficiency is a key aspect for the economics. Electrolyser systems operate at 65-67% efficiency for hydrogen production (Lower Heating Value based). 75% is the theoretical maximum electrical efficiency. Higher values could be achieved if DC electricity can be used directly and AC/DC conversion can be avoided. The fact that hydrogen is a highly volatile gas that needs to be compressed for liquefied transportation and storage adds substantially to the lifecycle efficiency losses.
Hydrogen v gas? A higher carbon price will be needed
Production costs of around 3 USD/kg for green hydrogen seem feasible in the coming decade in the best locations. The cost could halve again by 2040-2050. Even at that price hydrogen will be more expensive than natural gas. Today’s carbon price of 25 EUR/t CO2 makes only a 5% difference and cannot close the gap. A higher carbon price would be needed to make it competitive.
For economic reasons there is a need to find applications where there is an efficiency gain over a competing technology, for example fuel cell vehicles.
…fuel cell vehicles
Whereas European manufacturers are largely focused on battery electric cars, in East Asia work continues on hydrogen fuel cell vehicles. Korean and Japanese manufacturers are focusing on passenger cars using hydrogen, and Chinese manufacturers are eyeing the bus and heavy truck market. The US is also showing interest in hydrogen for transport.
…remotely located renewables
Alternatively, lower cost can be achieved at remote locations with good renewable energy resources. As a consequence, certain energy intensive industries may in the future be located at sites that meet such criteria. The boom of renewables and green hydrogen in Australia is an example. The first plant producing ammonia from green hydrogen will open there in 2020. Iron making may follow suit later.
Hydrogen can be processed further into hydrocarbons or ammonia. In the case of hydrocarbons, a CO2 source is needed. That source can come from Direct Air Capture or biomass combustion processes that yield carbon neutrality by capturing and reusing carbon. Capturing CO2 from fossil fuel combustion processes only halves emissions. In an earlier brief we have outlined the efforts in the shipping sector to use fuels produced from hydrogen. The aviation sector is also looking into powerfuels.
…greening the gas system
The gas industry is looking at hydrogen as a promising solution for greening the gas system, extending the life of existing infrastructure and ultimately staying in business. In the Netherlands and the UK, large scale projects are being developed. However, more work needs to be done, and barriers related to economics and standards must be overcome.
The missing link or more hype?
The current drive towards the hydrogen economy has a remarkable momentum and wide scope. It is likely that we will see a shift from grey to a mix of blue and, more importantly, green hydrogen. The successful applications will depend on the economic performance and competing low-carbon solutions, with a global divergence of interests. Today’s role of clean hydrogen is modest, but the growth potential is significant.
Clean hydrogen growth will depend on the global commitment to meet climate objectives. Both electrification and hydrogen will be needed for achieving our 2050 decarbonisation target. Whether hydrogen is used directly or through further conversion remains to be seen. Any hydrogen industry strategy must look beyond technology, into the supply, economic and financing aspects. The European Investment Bank (EIB) recently announced strategic financial advice and support to companies preparing to deploy large-scale hydrogen projects through the InnovFin Advisory program.
However, the promise of hydrogen is not yet fully part of national energy and climate plans. Countries must mandate and enable clean hydrogen use and green hydrogen from renewable power deserves special attention as an emerging supply option.
A ministerial roundtable on Hydrogen for Decarbonisation will take place during the IRENA Assembly in Abu Dhabi, on 11 January 2020.
- Around 8 kg of hydrogen has the same energy content as a GJ of gas (around 30 m3). The target cost per unit of delivered clean hydrogen energy (15-25 USD/GJ) is 2-3 times that of pipeline natural gas (at 5-10 USD/GJ). ↑