Hydrogen blues: The cost opportunity of a green pathway

CU Awards - Essay Competition 2021

 

FIRST PRIZE :  By - Wadah Rafie (MSc RENE Y1, UPC)

 Introduction

The hydrogen hype of recent years has been seen many times before, but this new wave of technological optimism holds unprecedented momentum within the current environmental context. Today, hydrogen is globally recognized as a key pillar to decarbonize our economy, with 17 governments having released hydrogen strategies, and more than 20 others with strategies in development, up from three countries in 2019 [1].

 

Presently, hydrogen is used predominantly in oil refining and in the chemical industry as a feedstock in the production of ammonia and methanol, for a global supply totalling 87 million tonnes (Mt) in 2020. As merely 9 Mt were produced from low-carbon paths and the rest from fossil fuels, hydrogen production in 2020 has resulted in just about 900 Mt of CO2 emissions, equivalent to the CO2 emissions of the United Kingdom and Indonesia combined [2].

 

In the energy industry’s vernacular, a complete colour wheel has emerged to better communicate hydrogen sourcing and its corresponding environmental footprint. Green for climate-neutral hydrogen produced via electrolysis, shades of blue for hydrogen from differing fossil fuels in conjunction with carbon capture and storage (CCS), grey where greenhouse gases are not captured, turquoise, pink, and the list goes on.

 

However, instead of facilitating scientific communication, this colourful nomenclature has only served to shift focus from the primary goal that is to evaluate carbon intensity for different production routes and engendered a prejudiced, over-simplified debate of ‘green’ versus ‘blue’ hydrogen. In the current situation, however, the discussion should be about ‘green’ and ‘blue’ hydrogen technology given its importance in the energy transition and the shortfalls in its development.

A dire need for hydrogen

 

Both as an energy carrier and as a fuel, hydrogen boasts desirable features for our future energy systems. Besides being a very common element and its capacity to be produced from nearly all energy resources, its thermal and energy density make it a prime zero-emission candidate to substitute fossil fuels and tackle hard-to-abate emissions in a range of sectors such as the steel and cement industries and long-haul transport.

 

With renewable sources forecasted to cover nearly 90% of electricity demand in the International Energy Agency’s (IEA) Net Zero by 2050 pathway (NZE), including 70% from variable wind and solar, the real opportunity of hydrogen lies in the intermittence issues that arise with high renewables penetration [2].

 

Beyond the obvious creation of greater electricity demand, end-use electrification across all sectors is further exacerbating the challenge of intermittency by giving rise to changes in demand timings and increased peak loads. The load duration curves in Figure 1 show this projected effect on the load profiles for Germany and Britain, which see peak loads rise by 15% and 50%, respectively [3]. This is particularly significant in Britain, where a higher power requirement for heating in winter, coinciding with low wind and sun, highlights the need for greater system flexibility to respond to demand and supply fluctuations.

Figure 1 - Load duration curves for Germany and Great Britain in 2010 (historic) and 2050 (projected).
Figure 1 - Load duration curves for Germany and Great Britain in 2010 (historic) and 2050 (projected).

Among the solutions to increase system flexibility, hydrogen stands out as an advantageous candidate with its long-duration storage capabilities. It is one of the few options for storing electricity over periods spanning days, weeks, even months, and can also enable seasonal storage and overall improve system resilience and energy security, in the most economical way possible. As shown in Figure 2, while lithium-ion technology becomes in time more ubiquitous for shorter-duration, high-discharge rate applications, hydrogen is the overwhelmingly sound technology for long-duration storage [4].

 

This feature will also eventually allow hydrogen to displace current natural gas capacity in the power grid as the go-to partner to VREs. While the cost gap between low-carbon hydrogen and natural gas remains significant, comparing the costs of gas and hydrogen directly might be overlooking hydrogen’s veritable value to energy systems. Instead, its value in the power grid is better measured in the avoided cost of standby electricity generation capacity [5].

Figure 2 - Most cost-efficient energy storage technologies relative to discharge duration and annual cycle requirements
Figure 2 - Most cost-efficient energy storage technologies relative to discharge duration and annual cycle requirements

Blue and green

 

At present, the Levelized cost of hydrogen production from natural gas with CCS is around USD 1 to USD 2 per kg, compared to USD 3 to USD 8 per kg from renewable electricity. In the NZE, the cost of hydrogen production from renewables drops to around USD 1.5‐3.5/kg in 2030 and USD 1‐2.5/kg in 2050, matching the cost of production with natural gas and CCS [2]. Although these production cost estimates seem to curtail the case for blue hydrogen a priori, geographical localities may dictate the viability of one route over the other, such as the cost of natural gas and electricity. As the transport of hydrogen entails significant costs, the proximity to the demand and the availability of CO2 sequestration sites are important factors to consider as well.

 

Despite recognition of hydrogen’s importance in future energy systems, current global efforts fail to align with the requirements outlined in the NZE. The total final consumption of energy in the IEA’s Announced Pledges Case (APC), shown in Figure 3, highlights this stark discrepancy, especially in the transport and industrial sector where hydrogen could play the biggest role in reducing fossil fuels.

Figure 3 - Total final consumption in the IEA’s APC
Figure 3 - Total final consumption in the IEA’s APC

At the root, it is really the current commitments for the adoption of hydrogen that fall short. According to the IEA, if all the announced industrial plans are realised, by 2030, low-carbon hydrogen production could reach 17 Mt – one-eighth of the level required in the NZE Scenario – and electrolysis capacity could reach 90 GW – compared to nearly 850 GW in the NZE Scenario [1]. Without the development of either green or blue hydrogen, entire sectors that depend on prevailing hydrogen technology risk failing to decarbonize in time. In other words, without the development of hydrogen, the entire energy transition is at risk.

 

These supply chain bottlenecks stem partly from concerns about ‘locking-in’ a technology with high emissions. This concern rests on the assumption that companies would avoid the problem of stranding their assets by continuing to produce low-carbon hydrogen but ignores the impact of pressure in a competitive hydrogen market and the potential of government action, such as guarantees of origin and the use of carbon pricing to favour renewable hydrogen [5].

 

Undeniably, dynamic government policy will be necessary to ensure that low-carbon hydrogen does not pose a risk to climate goals. The priority, however, is to enable the start of the transition from fossil fuels by stimulating the required investments in hydrogen infrastructure, as there will be delays for the industrial and transport sector to convert from fossil fuels to hydrogen, which could ultimately result in exacerbated cumulative carbon emissions.

Conclusion

 

In the end, the pathway to net-zero emissions faces significant challenges and diverse national hydrogen strategies across countries and regions point out the need to enable various technologies to be explored. It is not a matter of ‘blue’ or ‘green’ hydrogen anymore, but rather a matter of understanding how the hydrogen market needs to develop to allow us to reach our climate ambitions. Whether it is blue or green, the early adoption of hydrogen technology is essential to enable cascading transformations in all sectors of our economy.

REFERENCES

 

  1. International Energy Agency. Global Hydrogen Review 2021. 2021.
  2. International Energy Agency. Net Zero by 2050 – A Roadmap for the Global Energy Sector. 2021.
  3. Boßmann, Tobias & Staffell, Iain. (2015). The shape of future electricity demand: Exploring load curves in 2050s Germany and Britain. Energy. 90. 10.1016/j.energy.2015.06.082.
  4. Schmidt et al. (2019), ‘Projecting the future Levelized cost of electricity storage technologies’, Joule 3(1), 81–100.
  5. Lambert, Martin, et al. (2021). The role of hydrogen in the energy transition. Oxford Energy Forum. no. 127, p. 61. 

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