Green Hydrogen Re-Emerges

For many of us, 2020 is the year when hydrogen re-emerged as the possible missing link for renewables and climate change containment. Back in a kinder and gentler time, hydrogen was conceived as “the” fuel of the future.  We all thought natural gas was a whole lot cheaper, and unless more nuclear plants were built at reasonable cost, hydrogen’s prospects did not look economically viable.  Enter the decade of renewables, and hydrogen maybe the “bridge” fuel needed to keep emission low.

As penetration rates of solar and wind continue to grow and as costs go down dramatically for these sources, the grid still needs to be balanced and loads accommodated when intermittent resources are not available. Just as important, intermittent resources can grow significantly more, if frequency response, spinning reserve, ramp rates and other balancing services can be better managed and non-intermittent resources are available to satisfy load requirements.  Enter green hydrogen to fill the gap with existing generation capacity.  As a fuel that produces water vapor when burned without CO2, it has natural promise.  Green hydrogen produced by electrolysis has the capability of providing balancing services as electrolyzers are digitally turned on and off[1], as well as materially fueling combined cycle generators[2] that can meet grid demand requirements.

Recently, the EU announced a 55% reduction in pollutants by 2030, the UK announced a 68% reduction, China announced carbon net zero by 2060 and the US President-Elect announced that he was rejoining the Paris accord as one of his first acts.  The world seems to be waking up to the climate challenge more so at this point than at past times. In Europe, some have said green hydrogen is in the same space as offshore wind was a decade or so ago, and Europe has begun a large development program to support green hydrogen.  Europe has announced a 2030 goal of 40 GW of electrolyzers which would convert renewable/nuclear energy into green hydrogen.   Japan and Australia are working on a $36 billion export terminal for green hydrogen and other infrastructure. Origin Energy and Kawasaki announced a 300 MW electrolyzer project to produce green hydrogen from solar. Air Liquide and the Saudis announced a $5 billion ammonia and green hydrogen production facility using 4 GW of renewable energy.

In the US, Cummins announced a 5 MW electrolyser project in Douglas County PUD, Washington State among other activities it has planned.  NextEra announced a 20 MW Florida electrolyzer project, after regulatory approvals, that would convert solar energy to green hydrogen and then use it to generate electricity in a combined cycle plant. LADWP announced that they would use 30% green hydrogen in the massive Intermountain Power Project in Utah as early as 2025 and 100% by 2045. Apex and Brookfield announced demonstration projects with Plug Power, a major fuel cell producer.    Dominion Energy, Southern Natural Gas, Southern Company, and NW Natural asked the National Association of Regulatory Utility Commissioners (“NARUC”) in Nov 2020 to provide policy guidance for the emerging industry as they are advancing pilot projects use of hydrogen, or hydrogen produced syngas, that can be used in pipelines. NREL and GTI showed that concentrations of 5-15% hydrogen could be managed in existing interstate pipelines.  

Still, green hydrogen (hydrogen produced by renewable energy methods) is not in-expensive at current $3-6/kg levels (roughly 2kg=$17.6 mmbtu but its effective efficiency in use depends on applications and should be considered in economic comparisons), transporting it is not easy, liquification can cost 30% of its value and limits applications.   So, there are many challenges to overcome but the potential is exciting.  BloombergNEF has forecasted as much as a $11 trillion cumulative investment in hydrogen by 2050, if the challenges can be overcome and government incentives line up correctly. BloombergNEF also indicated in 2020 that hydrogen has the potential to meet 24% of the World’s 2050 energy demand and reduce CO2 emissions by 34%.

Key suppliers have shown strong growth.  ITM Power of the UK announced a new factory to build 1 GW of electrolyzers per year and is now producing 10 MW electrolyzers for Shell and Scottish Power refineries.  Plug Power has seen a large increase in its 2020 stock price and recently raised capital for its hydrogen PEM fuel cells and electrolyzers.  Bloom Energy, Cummins, Ballard Power Systems, Nel ASA of Norway, to mention a few, have also all reported significant new activities and growth.  Some industry experts predict a $500/kw capital cost for new electrolyzers in 2030 and a 20% learning curve from today.  With 50% electrolyzers capacity factors, $500/kw capex, and $25/MWh for renewable energy input costs, green hydrogen pricing is expected to be in the $2/kg range, which is expected to lead to substantial growth.

2020 marks the re-emergence of green hydrogen in mainstream thinking. Even Airbus, announced plans to develop planes fueled on hydrogen in the next 15 years.  They are not saying any of this will be easy.

[1] NREL in 2020 demonstrated that digital control of electrolyzers can help balance the grid.

[2] A blend of natural gas and hydrogen is likely still required.