As the world moves towards low-carbon pathways, hydrogen is gradually paving the highway. Hydrogen, a clean-burning fuel, is a promising substitute to the pollution-heavy fossil fuels. It is produced by splitting water using an electrolyser. If renewable power from wind,
solar, hydro or geothermal sources is used to produce hydrogen, it is called green hydrogen. Several green hydrogen projects have been cropping up across the world, with large-scale projects being announced at an accelerating rate.
There are mainly two types of electrolysers based on the technology used, proton exchange membrane (PEM) and alkaline electrolysers. While most large-scale producers are currently focused on alkaline electrolysers, PEM electrolysers are more suitable for small- and medium-scale hydrogen plants since they are compact and handle variable power supply from renewable sources more efficiently. As renewable energy continues to grow, it can facilitate the growth of green hydrogen production around the world, especially in Europe, Asia and Australia.
The green hydrogen economy has been picking up pace over the past few months, with numerous projects being proposed primarily across Asia, Europe and Australia. So far, there are only two known operational plants in Asia, both of which are pilot plants with hydrogen production capacities of less than 1,000 tonnes per year. These are Japan’s Fukushima Hydrogen Energy Research Field (FH2R) and Brunei’s Advanced Hydrogen Energy Chain Association for Technology Development (AHEAD).
The European Commission, Germany, the Netherlands, Norway, Portugal and Spain have released detailed hydrogen strategies to scale the hydrogen market. The European Commission unveiled its strategy in July 2020, announcing specific targets for hydrogen. Its plan for the first phase (2020-24) is to set up hydrogen electrolysers of at least 6 GW in the European Union, with production of up to 1 million tonnes (mt) of green hydrogen. The second phase (2025-30) will target electrolyser installations of at least 40 GW, with production of up to 10 mt of green hydrogen. From 2030 onwards, green hydrogen is planned to be deployed on a large scale across all hard-to-decarbonise sectors. Hydrogen Europe estimates that meeting these targets will require a cumulative green hydrogen investment of up to Euro 430 billion in Europe by 2030. The UK has also announced that it will need hydrogen to meet its goal of net-zero greenhouse gas emissions by 2050, according to National Grid’s latest “Future Energy Scenarios (FES)”. The National Grid believes that hydrogen could be the solution to many of the hardest parts of the transition to net zero, particularly in the long distance freight, shipping and heavy industry. While many countries, especially in Asia, are shifting focus towards hydrogen as an energy source in general, Europe has taken the lead in creating a policy environment for green hydrogen.
Recently, Wood Mackenzie released a report on the landscape of the green hydrogen economy. As per its research, the project pipeline has grown from 3.5 GW to 15 GW in just 10 months, since October 2019. Twenty-two green hydrogen projects with capacities exceeding 100 MW have been announced, with targets for 48 GW of electrolyser deployments by 2030.
In a recent report, the Institute for Energy Economics and Financial Analysis (IEEFA) has estimated that 50 viable projects have been announced globally in the past year. These projects are estimated to have a hydrogen production capacity of 4 million tonnes per annum (mtpa), along with a renewable power generation capacity of 50 GW. The total capital expenditure required for these projects is expected to be to the tune of $75 billion. Most of these 50 projects are at an early stage, with just 14 having started construction while 34 are at the study or MoU stage. The large-scale projects are expected to begin functioning by 2022-23 and 2025-26. Despite many projects being announced, the IEEFA suggests that the forecasted supply will likely be insufficient to meet demand projections.
The largest project announced so far has a capacity of 4 GW. In July 2020, Air Products, ACWA Power and NEOM announced a new green hydrogen facility in Saudi Arabia, with an investment of $5 billion. The project is based on a proven technology and will include the integration of over 4 GW of renewable power from solar, wind and storage; production of 650 tonnes per day of hydrogen by electrolysis, using technology from thyssenkrupp; production of nitrogen by air separation using technology from Air Products; and production of 1.2 mtpa of green ammonia using technology from HaldorTopsoe. The project is scheduled to be commissioned by 2025. Further, beyond the solar-, wind-and storage-based project, a large-scale waste-based project was announced this year. In May 2020, energy company SGH2 announced plans to develop a green hydrogen production facility in the city of Lancaster, California, USA. The plant will be based on SGH2’s technology, which uses recycled mixed paper waste to produce green hydrogen that reduces carbon emissions by two to three times more than that produced using electrolysis and renewable energy. It will also be cheaper. The company claims that its green hydrogen is cost-competitive with “grey” hydrogen produced from fossil fuels like natural gas. The SGH2 Lancaster plant will be able to produce up to 11,000 kg per day of green hydrogen and 3.8 million kg per year, and process 42,000 tonnes of recycled waste annually.
High costs are one of the most significant challenges in the production of low-carbon or green hydrogen. Fossil fuels, such as natural gas, are currently used to produce “grey” hydrogen, which is cheaper than producing green hydrogen. However, with technological advancements and economies of scale in renewable energy and hydrogen production, green hydrogen production costs are expected to fall in the coming years.
According to Wood Mackenzie’s analysis, given the right policy environment and industry sentiment, green hydrogen will be able to successfully scale and realise production cost declines of up to 64 per cent by 2040. While rising fossil fuel prices are expected to increase the competitiveness of green hydrogen, electricity prices lower than $30 per MWh and high utilisation rates will also be required for this to happen. As renewable energy prices continue to fall across various countries rich in renewable resources, the production of green hydrogen will also become cheaper. For instance, Europe is well positioned to take advantage of the falling wind power costs. Some European countries have an additional advantage due to existing gas pipelines, which can be used to meet local demand. Meanwhile, sunny countries across Asia with large-scale solar installations, such as India and Saudi Arabia, are well placed to reduce green hydrogen production costs due to cheaper solar power.
The way forward
The future of production looks promising, as many countries and companies have committed to utilising hydrogen to meet their clean energy targets. BP, Shell and Repsol are some of the major companies that have made commitments to deploy low-carbon hydrogen projects in order to meet their net-zero-emission goals.
Hydrogen fuel has a variety of applications in the transport and energy sectors. It can help in greater deployment of renewable energy in these sectors, while also making use of existing gas supply infrastructure. In the transport sector, hundreds of new hydrogen refuelling stations and fuel cell bus deployments have been announced across the world. In addition to infrastructure being developed to channel the demand, the progressive deployment of green hydrogen would need a comprehensive supply chain. This would, in turn, involve scaling up of capacity for production as well as purification and pressurising for transport. Transport and distribution capacity will also need to be expanded. With a solid supply chain and a conducive policy environment, green hydrogen will be well positioned to become the fuel of choice in a future that is not too far away.
By Meghaa Gangahar