Source: Environment Journal
Markets are bullish on hydrogen as the next green energy trend going into 2021 and everyone is looking where to invest, from hydrogen stocks to hydrogen funds. In the UK, market sentiment is also aligned with political will, as shown by the ambitious plans for the UK Government to develop 5GW of low carbon hydrogen capacity by 2030.
While the use of hydrogen in industrial processes is not new, 95% of the hydrogen produced in the world today is ‘grey’ hydrogen, manufactured using fossil fuels such as natural gas. The challenge is, therefore, to develop a more environmentally friendly means of producing hydrogen, whether based on ‘blue’, ‘green’ or ‘pink’.
Grey hydrogen is mainly produced by steam reforming natural gas for industrial applications.
This is currently the cheapest source of producing industrial hydrogen, at approximately U.S. $1.00 per kg, and involves two chemical reactions at high temperatures to produce CO2 and hydrogen. For every tonne of hydrogen, 9 to 12 tonnes of CO2 are produced, meaning that this production process in isolation is not environmentally friendly.
To date, the main market demand and use for grey hydrogen comes from the chemical industry, where hydrogen is used for making ammonia and fertiliser, or in oil refining, where hydrogen is used in ‘hydrocracking’ or breaking heavy petroleum chains.
The challenge will be to produce hydrogen in a more environmentally friendly way, competitively and at scale so as to be able to compete on price with grey hydrogen and provide an alternative supply to the main industrial processes.
However, key stakeholders have even more ambitious hydrogen plans.
Hydrogen is also being considered as a means of accelerating electrification, including in the transportation sector. It is also being talked of in the context of targeting other industries that are ripe for conversion, whether ethanol production or steel making.
So how do we make hydrogen more environmentally friendly?
One option is to capture and store, or re-use, the CO2 that would otherwise be released into the atmosphere during the production of grey hydrogen.
This would require existing plants with steam reforming capability to be retrofitted with carbon capture technology and ancillary infrastructure for transportation and storage of CO2 to be developed. On current estimates, this would increase the cost of producing hydrogen to approximately US$1.50 per kg.
Whilst there are high costs and risks associated with carbon capture and storage technology, its application in the production of hydrogen is expected to grow significantly in the coming years – particularly in regions such as the U.S. and Europe that benefit from access to low-cost natural gas, favourable geological conditions for storage of CO2 (e.g. disused oil and gas fields or salt caverns) and existing industrial clusters where economies of scale can be leveraged in order to reduce infrastructure development costs.
Recent examples of this include HyNet in northwest England, Hydrogen to Humber Saltend in northeast England and H-Vision around Rotterdam.
However, critics of blue hydrogen point to the continued reliance on natural gas (and associated price variability and geopolitical risks), the lack of widespread commercial-scale application and the fact that adding this carbon capture and storage to hydrogen production does not completely abate CO2 emissions – both from a technology perspective and due to risk of leakage from pipelines or storage facilities.
So, is blue hydrogen the best we can do?
Thankfully, there is an even more environmentally-friendly method of hydrogen production, one that uses zero-carbon energy sources (wind, solar and hydro) to power electrolysers that split water into its constituent parts – hydrogen and oxygen.
Hydrogen produced by this process is known as green hydrogen and is regarded as the most effective weapon in the environmental battle to decarbonize heavy industry (such as cement, iron, steel, fertilizers, chemicals, refining, glass and ceramics), as well as the transportation and power sectors.
If that’s the case, why is the supply of green hydrogen so limited?
Unfortunately, to date, there has been no meaningful commercial incentive for companies to produce hydrogen from zero-carbon sources. Despite its potential to accelerate decarbonisation, green hydrogen does not command a pricing premium over hydrogen from carbon-based sources – hydrogen is hydrogen, irrespective of its origins.
To reach its climate-restoring potential, green hydrogen must achieve cost competitiveness.
In its early 2020 study (Path to Hydrogen Competitiveness), the Hydrogen Council noted that current pricing for green hydrogen was around U.S. $6.00 per kg and identified U.S. $2.00 per kg as a potential tipping price point that will make green hydrogen and its derivative fuels the energy source of choice across multiple sectors.
Renewable power and electrolyser technology are the most significant cost components of green hydrogen. Renewable power prices have fallen dramatically over the last decade but must fall further to reduce cost of green hydrogen.
Significant reductions in the cost of electrolysis are also necessary if green hydrogen is to become cost competitive.
On 8 December 2020, the world’s biggest green hydrogen project developers launched the ‘Green Hydrogen Catapult Initiative’, aimed at driving down green hydrogen production costs to below US$2.00 per kg, to transform energy across most carbon intensive industries. They aim to achieve this by deploying 25 gigawatts of green hydrogen production by 2026.
It is important to note that nuclear energy could play a role in hydrogen production (referred to as pink hydrogen) as it emits virtually no pollutants. Various factors are relevant to analysis of the economic viability of nuclear hydrogen production, and we expect pink hydrogen will become more visible in the hydrogen supply picture over the coming decade.
The hydrogen rainbow is a symbol of hope for and promise of a zero-carbon future.
Whether as a source of power generation, a vector for energy storage, or fuel for transportation, hydrogen can play a variety of roles to help meet the decarbonisation challenges faced in a global economy powered by fossil fuels.
Over time, the grey and blue hues of the hydrogen rainbow will fade as green and pink reach their full potential. In due course, as fusion technology becomes commercial reality and another source of zero-carbon hydrogen production, the glow of amber hydrogen may add further colour to our hydrogen rainbow.
This article first appeared in Environment Journal on January 7, 2021, see here.