Hydrogen will get cheap

A new study by the Hydrogen Council, with consultants McKinsey, says that hydrogen production and distribution systems at scale will unlock hydrogen’s competitiveness in many applications sooner than previously anticipated. It looks to a 60% cost reduction by 2030 for the end user. It says hydrogen can meet about 15% of transport energy demand cost- competitively by 2030 and make similar incursions into other sectors. For example, in addition to the continued use of hydrogen as an industrial feedstock, it says that hydrogen boilers will be a competitive low-carbon building heating alternative, especially for existing buildings currently served by natural gas networks, while in industrial heating, hydrogen will be the only viable option to decarbonise in some cases. And it claims that hydrogen will play an increasingly systemic role in balancing the power system as hydrogen production costs drop and demand rises.

The case for a shift to the ‘hydrogen economy’ has been made many times before, but this time round it is beginning to look much more credible, given the cost reductions, the development of new technology and the rise in demand for green fuels. The Hydrogen Council focused on 35 representative use cases and shows that in 22 of them, the usage costs will reach parity with other low-carbon alternatives by 2030 - these sectors representing roughly 15 per cent of global energy consumption. It adds ‘this does not imply that hydrogen will satisfy all this energy demand by 2030, but it does showcase that hydrogen will have a significant role to play as a clean energy vector in the future energy mix’.

From Grey to Green via Blue

Just how clean is hydrogen? Clearly burning it is clean- it just produces water. But manufacturing it may be less so.  Hydrogen is quite widely used for industry as a feedstock, but it is relatively high carbon hydrogen. It is mostly made by the high temperature ‘steam reformation’ of a fossil fuel, methane gas. However, the Steam Methane Reformation (SMR) process releases carbon dioxide, so it’s not really a ‘green’ fuel. It’s sometimes called ‘grey hydrogen’. The main alternative approach, producing hydrogen by the electrolysis of water, can be 100% green if the power used comes from a renewable source, but it’s cost have so far been high. Indeed, even higher than the cost of cleaning up grey hydrogen by adding Carbon Capture and Storage at the end of the SMR stage - producing what is sometimes then called ‘blue hydrogen’. The result is that most current proposals for using hydrogen have so far focused on using blue hydrogen, as for example in the H21 project for using it to replace methane in the gas mains in Leeds, the hydrogen being from fossil gas via SMR, with added CCS to make it lower carbon.  

Note that this blue hydrogen is not zero carbon - CCS at best can only effectively deal with some of the emissions, and the SMR and CCS processes use energy. So the whole thing at best might be ‘low carbon’, reducing emissions by perhaps 60%, compared what they would have been if the natural gas was used directly for heating.  By contrast, green hydrogen made from renewable power is zero carbon and it’s now seen as getting cheaper, certainly cheaper than grey hydrogen and perhaps even cheaper in some usages than other fuels. The Hydrogen Council report says low-carbon and renewable hydrogen ‘will become competitive with grey hydrogen used for industry feedstock today as costs fall and carbon prices rise’. It adds ‘In 9 of the 35 use cases we studied, low-carbon or renewable hydrogen solutions will also be competitive with conventional options by 2030. For example, this is the case for heavy-duty trucks, coaches with long range requirements, and forklifts’.

Power to Gas a winner

It’s clear that, given its high emissions, grey hydrogen has no place long term. Blue hydrogen is a bit better in emission terms, although not that much. And although it is cheaper than green hydrogen, that may change. Given that CCS costs and prospects are very uncertain, while renewables are booming, with cost falling, the green hydrogen ‘Power to Gas’ (P2G) electrolytic conversion option ought to win out in time in many sectors. As the Hydrogen Council report shows, likely final energy delivery costs will vary in each sector and with market scale, but it say that ‘ within five to ten years – driven by strong reductions in electrolyser capex of about 70 to 80% and falling renewables’ levelised costs of energy (LCOE) – renewable hydrogen costs could drop
 to about $1 to 1.50 per kg in optimal locations, and roughly $ 2 to 3 per kg under average conditions’. Even if SMR and CCS works at scale, it’s hard to see blue hydrogen competing with that.

Certainly that’s how ITM Power’s Graham Cooley sees it. Based in Sheffield, they have been producing efficient and flexible 5 MW PEM electrolysers.   Cooley told Recharge, ‘I’m worried that governments have been sold a pup with blue hydrogen and CCS,’ adding that ‘as far as I'm concerned, green hydrogen is a net-zero solution and blue hydrogen is not’. It was also the case that with blue hydrogen ‘not only do you need a hydrogen pipeline, but you’ll need a methane pipeline, then you’ll need a CO₂ pipeline’, all adding to the cost.

He also argued that the potential for green hydrogen would be improved as and when more renewables were added to the grid, since that would increase the surplus power available at times for Power to Gas electrolytic conversion, the hydrogen then being available for, amongst other things, balancing lulls in renewable availability. Indeed, he said, expansion of both renewables and P2G was mutually beneficial: without more P2G, adding more renewables would just lead to more curtailment: ‘You have to do these two things in harmony.’

That certainly seems to be a lesson from Germany, which is now installing P2G systems, including units from ITM Power, to use some of the regular surplus outputs from its 110 GW of renewable generation capacity.  As the UK’s renewable capacity builds up (it’s now at around 43GW), it ought to do the same. So it’s good to see that ITM Power has been awarded more funding to develop 20 MW PEM cells for use with power from Orstead’s Hornsea 2 offshore wind farm in an eventual 100 MW package, and is looking longer-term to manufacture up to 1 GW annually. 

Interesting then to see that EDF failed to get funding for its proposed electrolytic hydrogen production test using the Heysham nuclear plant, with a 1MW alkaline and a 1MW PEM cell. A feasibility study by the ‘Hydrogen to Heysham’ consortium, which includes EDF, claimed that, assuming technological progress, by 2035, a possible future electrolyser capacity of about 550 MW across EDFs fleet could have a levelised cost of hydrogen generation of $2.44/kg. Green hydrogen prices seem to likely to fall well below that, and do so well before 2035.