Where does Hydrogen sit in future pathways to Net-Zero?
Nearly 30 years ago hydrogen was ushered in as an emerging clean energy source. Despite a series of high expectations, its spread as an alternative fuel was dismissed mainly due to technology immaturity and its associated high cost. Nonetheless, after suffering a decade of silence, hydrogen is beginning to sound strong again, and recent cost and performance improvements are pointing toward its economic viability. Now a growing body of evidence is advocating that hydrogen is here to stay, saying it has the potential to decarbonise the whole energy value chain as a zero-carbon fuel and a reliable energy carrier which can be easily stored and transported.
One would rightly wonder what changed to allow hydrogen to make such a spectacular come back?
In addition to positive changes in the hydrogen production cost trajectory, three major contributors are in play here:
- The reduction in the cost of renewable energy (wind and solar PV) that makes hydrogen economy viable;
- Other decarbonisation approaches are showing their level and limit of applications, for instance battery storage and carbon capture and storage (CCS) would play their roles but could not decarbonise the entire energy landscape;
- It is now more feasible to repurpose and make use of existing assets such as upgrading gas turbines to operate with hydrogen fuel or utilising existing gas networks for hydrogen storage.
However, widespread deployment of hydrogen across all sectors and assuming it is the central driver for decarbonisation is an unrealistic optimism. To leverage its benefits, governments and businesses need to be strategic. Hydrogen investments need to be on areas where zero-carbon hydrogen could be deployed at scale using existing infrastructure, and there are no cheaper feasible technologies available.
Hydrogen as an energy carrier has advantages and disadvantages. It is a versatile fuel, it can operate across various industries to produce heat (combustion with oxygen), to generate zero-carbon electricity (using fuel cells) or could be used directly in chemical reactions. On the downside, hydrogen is a colourless, odourless, tasteless and highly flammable gas at standard temperature, so we still need to find a suitable odorant that could be used to detect leaks. Moreover, once combusted, there is no visible flame, so there needs to be a way of detecting whether it is lit. On the downside, although water vapour is the by-product when using hydrogen, it erodes and corrodes equipment in use (e.g. compression, storage, transporting equipment, etc.).
For hydrogen to play its role in the zero-carbon future, it is important to differentiate how it is produced. Currently, more than 95% of hydrogen used in heavy and process industries is produced from fossil fuels (methane CH4) using steam-methane reforming (SMR) process which ultimately produces CO2 (gray hydrogen). To be sustainable, this process would need to be incorporated with CCS (blue hydrogen), which is itself expensive and in need for further development. Electrolysis produces zero-carbon hydrogen (green hydrogen). The amount of hydrogen that can be produced using this method depends on cost of electrolyser (both CAPEX and OPEX) and availability of electricity from renewable sources.
For zero-carbon hydrogen (blue or green) to be financially attractive, it must be deployed in applications whose hydrogen demand would justify the investment required to build large-scale production facilities and associated infrastructures. Thus, deployment of hydrogen must be avoided in applications where zero-carbon hydrogen is unlikely to be cost competitive. For light vehicle applications, electric cars are several years ahead of hydrogen in terms of maturity due to their lower costs and readily available infrastructure. Efforts need to be made to make fuel cell cars cost competitive compared to electric vehicles. Moreover, benefits of hydrogen for aviation has been questioned as it produces more than double the water vapour emissions of jet fuel, causing radiative forcing and contributing to net warming.
Large-scale use of zero-carbon hydrogen appears to be attractive in applications labelled “hard-to-decarbonise” where technology and infrastructure barriers are justifiable, such as process industries and long-distance transport (e.g. marine applications).
Currently, steel and process industries rely on fossil fuels for three-quarters of their fuel mix, and account for more than 20% of direct global greenhouse gases emissions, and to-date have shown very limited progress on decarbonisation, if any. In addition to using zero-carbon hydrogen, options for decarbonisation include electrification, using biofuel, carbon capture usage/storage (CCUS), industrial clustering, energy efficiency improvement and heat recovery where possible. For hydrogen to replace natural gas as a fuel, burners and furnaces would need retrofit or replacement, and there is a likelihood of fundamental re-design of the plant which would require substantial investments. Commercialisation is not expected before 2030 due to cost uncertainty, and relatively low maturity of the hydrogen technology. In addition, long equipment lifetime and investment cycles in such industries would further hinder the transition. To accelerate process industries decarbonisation and solve the climate issues in line with the Paris objectives a global and clear carbon price policy would be the right catalysts here.
For zero-carbon hydrogen, potentials in process industries are massive. It could be used both as fuel and feedstock (e.g. in oil refinery and ammonia production). So, in addition to the potential use as fuel, there is already solid demand for hydrogen as feedstock. To-date gray hydrogen is used for feedstock, hence decarbonising feedstock and switching to zero-carbon hydrogen would be relatively straightforward, requiring only advancement in the production of hydrogen itself. According to a study conducted by Boston Consultancy Group, if all current grey hydrogen consumption globally were replaced with green hydrogen, the amount of required renewable power would be roughly equivalent to the total amount of power currently generate in the European Union annually (nearly 3500 TWh).
It is therefore essential to promote large-scale and cost-effective production of zero-carbon hydrogen. For green hydrogen to be cost-effective, electrolyser technology needs to mature, production efficiency needs to improve (over 70%), and unit sizes need to scale up to 100-300 MW compared to current capacity of 5-10 MW that would result in electrolysers cost reduction of more than 50%. According to the Energy Transition Commission, targeting capital casts of $250/kW need to be considered for electrolysers to scale. To meet 50% of future hydrogen demand by electrolysis, the total volume of electrolysis facilities would need to increase 100 times from current level creating significant potential for cost reduction through economies of scale and learning curve effect.
For blue hydrogen to really be nearly zero-carbon, the carbon leakage in capture processes as well as methane leakage throughout the gas value chain would have to be brought down to minimum. Likewise, to meet 50% of future hydrogen demand using SMR-CCS, the related carbon storage/utilisation need would amount to 2-3 Giga tonne. For blue hydrogen to be viable, financial feasibility of using CCS and the public resistance to the development of CO2 storage facilities need to be addressed. There are companies investing in technologies to utilise captured CO2 (e.g. plastic manufacturing) which would minimise or potentially eliminate the need for CO2 storage facilities. Reaching economies of scale for blue hydrogen is more difficult than green hydrogen as it includes more infrastructure for CCS and depends on the capture rate. Producing hydrogen using biomethane reforming could also be considered zero-carbon but it is unlikely to play a major role, given other higher priority demands on limited sustainable biomass resources.
Successful scale up of zero-carbon hydrogen production and full utilisation of its potentials require reductions in technology costs which demands government and regulatory support in addition to consistent and smart energy policies. Unclear or frequently changing policies undermine the business and industry confidence to make long-term investments. Countries need to work together and jointly develop a system of policy support for long-term hydrogen production, transport, and utilisation. Currently, Europe is the global leader in developing electrolysers for green hydrogen production. There have been nearly 250 hydrogen demonstration projects benefited from EU funding and 80% of which accounts for electrolyser development. It is believed that with the right support and right policies including global policy related to carbon price, hydrogen technologies can reach a cost and performance trajectory like those of renewables (e.g. wind and solar PV) and in medium term provide a crucial and complementary zero-carbon option across energy landscape.