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| Blending public and private capital can make hydrogen projects bankable and commercially viable. | Superestrella, Shutterstock |
Green Hydrogen:
A key investment for the energy transition
June 23, 2022
Produced by using renewably generated electricity that splits water molecules into hydrogen and oxygen, green hydrogen holds significant promise to help meet global energy demand while contributing to climate action goals.
The demand for hydrogen reached an estimated 87 million metric tons (MT) in 2020, and is expected to grow to 500–680 million MT by 2050. From 2020 to 2021, the hydrogen production market was valued at $130 billion and is estimated to grow up to 9.2% per year through 2030. But there’s a catch: over 95% of current hydrogen production is fossil-fuel based, very little of it is “green”. Today, 6% of global natural gas and 2% of global coal go into hydrogen production.
Nevertheless, green hydrogen production technologies are seeing a renewed wave of interest. This is because the possible uses for hydrogen are expanding across multiple sectors including power generation, manufacturing processes in industries such as steelmaking and cement production, fuel cells for electric vehicles, heavy transport such as shipping, green ammonia production for fertilizers, cleaning products, refrigeration, and electricity grid stabilization.
Moreover, falling renewable energy prices—coupled with the dwindling cost of electrolyzers and increased efficiency due to technology improvements—have increased the commercial viability of green hydrogen production. The figure below shows the forecast of the global range of levelized cost of hydrogen production for large projects through 2050.
According to Bloomberg New Energy Finance, if these costs continue to fall, green hydrogen could be produced for $0.70 – $1.60 per kg in most parts of the world by 2050, a price competitive with natural gas. NEL, the world’s largest producer and manufacturer of electrolyzers, believes that green hydrogen production cost parity (or even superiority) with fossil fuels could be achieved as early as 2025.
How do we structure a bankable green hydrogen project?
Given this significant growth in demand, the scale of input energy required (22,000 TWh of green electricity to produce 500 million tons of green hydrogen per year), and the parallels of the hydrogen value chain to that of the fossil fuel value chain (with upstream, midstream, and downstream elements), the green hydrogen industry should attract investments.
Yet, to date, only a few green hydrogen projects have been successfully brought to market. According to PricewaterhouseCoopers (PWC), most green hydrogen projects under construction and in operation are at the pre-commercial phase with limited electrolyzer capacity—typically less than 50 MW. While some proposed plants are of 100 MW capacity or more, they remain small compared to fossil fuel alternatives. In addition, green hydrogen projects present other peculiarities and risks that challenge traditional project finance: nescience of the technology; segmentation of energy input; production and transformation; storage; and transportation to end-users.
At the recent Global Infrastructure Facility (GIF) Advisory Council Meeting, panelists agreed that
One way to position these projects for success is to locate renewable energy production and hydrogen production facilities together so they can be better integrated. This was the approach in Puertollano, Spain, home to both a 100 MW solar farm and Europe’s largest green hydrogen facility for industrial use.
Governments also need to create policy and regulatory frameworks that incentivize investments. Building capacity and providing technical assistance for governments, especially in emerging markets and developing economies, is key to developing these regulations and ensuring their enforcement and compliance. Further, there is need for a globally agreed definition of green hydrogen and methods to guarantee and certify the origin of the fuel. Also critical, especially in light of the Just Transition agenda, is the need to help workers develop the skills they need for this emerging industry.
How is the World Bank Group helping?
To achieve this, we provide technical assistance to foster enabling policy, regulatory, and fiscal frameworks; build innovative financing that catalyzes concessional and climate finance resources; integrate risk mitigation and credit enhancement instruments to mobilize private capital; and transfer knowledge to develop local green jobs to support a just transition.
One example of our work is the World’s Bank program in the Latin America and Caribbean region, which has the cleanest energy mix globally and abundant, low-cost renewable energy potential. Specifically, we are working to design green hydrogen financing facilities, develop mechanisms to certify green hydrogen along the value chain, and establish carbon pricing through the Partnership for Market Readiness. Our program in the region is fully aligned with the countries’ visions to leverage green hydrogen as means to decarbonize their economies and facilitate a just energy transition. Ultimately, making these changes would increase competitiveness, open new markets, create local green jobs, and attract even more private sector investment—contributing to green, resilient, and inclusive growth.
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At MITEI’s 2022 Spring Symposium, the “Options for producing low-carbon hydrogen at scale” panel laid out existing and planned efforts to produce hydrogen at scale to help achieve a decarbonized energy system. | Credits:Photo: Kelley Travers |
Making hydrogen power a reality
by Calvin Hennick | MIT Energy Initiative
June 27, 2022
Hydrogen fuel has long been seen as a potentially key component of a carbon-neutral future. At the 2022 MIT Energy Initiative Spring Symposium, industry experts describe efforts to produce it at scale.
For decades, government and industry have looked to hydrogen as a potentially game-changing tool in the quest for clean energy. As far back as the early days of the Clinton administration, energy sector observers and public policy experts have extolled the virtues of hydrogen — to the point that some people have joked that hydrogen is the energy of the future, “and always will be.”
Even as wind and solar power have become commonplace in recent years, hydrogen has been held back by high costs and other challenges. But the fuel may finally be poised to have its moment. At the MIT Energy Initiative Spring Symposium — entitled “Hydrogen’s role in a decarbonized energy system” — experts discussed hydrogen production routes, hydrogen consumption markets, the path to a robust hydrogen infrastructure, and policy changes needed to achieve a “hydrogen future.”
During one panel, “Options for producing low-carbon hydrogen at scale,” four experts laid out existing and planned efforts to leverage hydrogen for decarbonization.
“The race is on”
Huyen N. Dinh, a senior scientist and group manager at the National Renewable Energy Laboratory (NREL), is the director of HydroGEN, a consortium of several U.S. Department of Energy (DOE) national laboratories that accelerates research and development of innovative and advanced water splitting materials and technologies for clean, sustainable, and low-cost hydrogen production.
For the past 14 years, Dinh has worked on fuel cells and hydrogen production for NREL. “We think that the 2020s is the decade of hydrogen,” she said. Dinh believes that the energy carrier is poised to come into its own over the next few years, pointing to several domestic and international activities surrounding the fuel and citing a Hydrogen Council report that projected the future impacts of hydrogen — including 30 million jobs and $2.5 trillion in global revenue by 2050.
“Now is the time for hydrogen, and the global race is on,” she said.
Dinh also explained the parameters of the Hydrogen Shot — the first of the DOE’s “Energy Earthshots” aimed at accelerating breakthroughs for affordable and reliable clean energy solutions. Hydrogen fuel currently costs around $5 per kilogram to produce, and the Hydrogen Shot’s stated goal is to bring that down by 80 percent to $1 per kilogram within a decade.
The Hydrogen Shot will be facilitated by $9.5 billion in funding for at least four clean hydrogen hubs located in different parts of the United States, as well as extensive research and development, manufacturing, and recycling from last year’s bipartisan infrastructure law. Still, Dinh noted that it took more than 40 years for solar and wind power to become cost competitive, and now industry, government, national lab, and academic leaders are hoping to achieve similar reductions in hydrogen fuel costs over a much shorter time frame. In the near term, she said, stakeholders will need to improve the efficiency, durability, and affordability of hydrogen production through electrolysis (using electricity to split water) using today’s renewable and nuclear power sources. Over the long term, the focus may shift to splitting water more directly through heat or solar energy, she said.
“The time frame is short, the competition is intense, and a coordinated effort is critical for domestic competitiveness,” Dinh said.
Hydrogen across continents
Wambui Mutoru, principal engineer for international commercial development, exploration, and production international at the Norwegian global energy company Equinor, said that hydrogen is an important component in the company’s ambitions to be carbon-neutral by 2050. The company, in collaboration with partners, has several hydrogen projects in the works, and Mutoru laid out the company’s Hydrogen to Humber project in Northern England. Currently, the Humber region emits more carbon dioxide than any other industrial cluster in the United Kingdom — 50 percent more, in fact, than the next-largest carbon emitter.
“The ambition here is for us to deploy the world’s first at-scale hydrogen value chain to decarbonize the Humber industrial cluster,” Mutoru said.
The project consists of three components: a clean hydrogen production facility, an onshore hydrogen and carbon dioxide transmission network, and offshore carbon dioxide transportation and storage operations. Mutoru highlighted the importance of carbon capture and storage in hydrogen production. Equinor, she said, has captured and sequestered carbon offshore for more than 25 years, storing more than 25 million tons of carbon dioxide during that time.
Mutoru also touched on Equinor’s efforts to build a decarbonized energy hub in the Appalachian region of the United States, covering territory in Ohio, West Virginia, and Pennsylvania. By 2040, she said, the company's ambition is to produce about 1.5 million tons of clean hydrogen per year in the region — roughly equivalent to 6.8 gigawatts of electricity — while also storing 30 million tons of carbon dioxide.
Mutoru acknowledged that the biggest challenge facing potential hydrogen producers is the current lack of viable business models. “Resolving that challenge requires cross-industry collaboration, and supportive policy frameworks so that the market for hydrogen can be built and sustained over the long term,” she said.
Confronting barriers
Gretchen Baier, executive external strategy and communications leader for Dow, noted that the company already produces hydrogen in multiple ways. For one, Dow operates the world’s largest ethane cracker, in Texas. An ethane cracker heats ethane to break apart molecular bonds to form ethylene, with hydrogen one of the byproducts of the process. Also, Baier showed a slide of the 1891 patent for the electrolysis of brine water, which also produces hydrogen. The company still engages in this practice, but Dow does not have an effective way of utilizing the resulting hydrogen for their own fuel.
“Just take a moment to think about that,” Baier said. “We’ve been talking about hydrogen production and the cost of it, and this is basically free hydrogen. And it’s still too much of a barrier to somewhat recycle that and use it for ourselves. The environment is clearly changing, and we do have plans for that, but I think that kind of sets some of the challenges that face industry here.”
However, Baier said, hydrogen is expected to play a significant role in Dow’s future as the company attempts to decarbonize by 2050. The company, she said, plans to optimize hydrogen allocation and production, retrofit turbines for hydrogen fueling, and purchase clean hydrogen. By 2040, Dow expects more than 60 percent of its sites to be hydrogen-ready.
Baier noted that hydrogen fuel is not a “panacea,” but rather one among many potential contributors as industry attempts to reduce or eliminate carbon emissions in the coming decades. “Hydrogen has an important role, but it’s not the only answer,” she said.
“This is real”
Colleen Wright is vice president of corporate strategy for Constellation, which recently separated from Exelon Corporation. (Exelon now owns the former company’s regulated utilities, such as Commonwealth Edison and Baltimore Gas and Electric, while Constellation owns the competitive generation and supply portions of the business.) Wright stressed the advantages of nuclear power in hydrogen production, which she said include superior economics, low barriers to implementation, and scalability.
“A quarter of emissions in the world are currently from hard-to-decarbonize sectors — the industrial sector, steel making, heavy-duty transportation, aviation,” she said. “These are really challenging decarbonization sectors, and as we continue to expand and electrify, we’re going to need more supply. We’re also going to need to produce clean hydrogen using emissions-free power.”
“The scale of nuclear power plants is uniquely suited to be able to scale hydrogen production,” Wright added. She mentioned Constellation’s Nine Mile Point site in the State of New York, which received a DOE grant for a pilot program that will see a proton exchange membrane electrolyzer installed at the site.
“We’re very excited to see hydrogen go from a [research and development] conversation to a commercial conversation,” she said. “We’ve been calling it a little bit of a ‘middle-school dance.’ Everybody is standing around the circle, waiting to see who’s willing to put something at stake. But this is real. We’re not dancing around the edges. There are a lot of people who are big players, who are willing to put skin in the game today.”
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SUSTAINABLE ENERGY [PROJECTS]
The race to make green hydrogen competitive is on. And
Europe is building industrial-scale electrolyzers to help
June 24, 2022
- Hydrogen has a diverse range of applications and can be deployed in a wide range of industries.
- Siemens Energy and Air Liquide have announced plans to focus on the production of “industrial scale renewable hydrogen electrolyzers in Europe.”
- A growing number of multinational firms are attempting to lay down a marker in the green hydrogen sector.
Siemens Energy and Air Liquide have announced plans to set up a joint venture focused on the production of “industrial scale renewable hydrogen electrolyzers in Europe.”
The move, announced on Thursday, represents the latest attempt to find a way to drive “renewable” or “green” hydrogen production costs down and make the sector competitive.
The establishment of the joint venture — Siemens Energy will have a 74.9% stake, while Air Liquide will hold 25.1% — is subject to approval from authorities.
If all goes to plan, its headquarters will be in Berlin, with a facility producing electrolysis modules, or stacks, also based there.
Plans for electrolyzer production in the German capital had been previously announced. Manufacturing is set to begin in 2023, with a yearly production capacity of 3 gigawatts reached in 2025.
The European Union’s executive arm, the European Commission, has previously said it wants 40 GW of renewable hydrogen electrolyzers to be installed in the EU in 2030.
In Feb. 2021, Siemens Energy and Air Liquide announced plans related to the development of “a large scale electrolyzer partnership.”
Siemens Energy shares, year-to-date
Described by the International Energy Agency as a “versatile energy carrier,” hydrogen has a diverse range of applications and can be deployed in a wide range of industries.
It can be produced in a number of ways. One method includes using electrolysis, with an electric current splitting water into oxygen and hydrogen.
If the electricity used in this process comes from a renewable source such as wind or solar then some call it “green” or “renewable” hydrogen. Today, the vast majority of hydrogen generation is based on fossil fuels.
In Oct. 2021, Siemens Energy CEO Christian Bruch spoke of the challenges facing the green hydrogen sector. On Thursday, he stressed the importance of scale and collaboration going forward.
“To make green hydrogen competitive, we need serially produced, low-cost, scalable electrolyzers,” Bruch said in a statement. “We also need strong partnerships,” Bruch added.
Air Liquide CEO François Jackow described the creation of the joint venture as “major step towards the emergence of a leading European renewable and low-carbon hydrogen ecosystem.”
Siemens Energy and Air Liquide’s plan for a joint venture represents the latest attempt by multinational firms to lay down a marker in the green hydrogen sector.
Just last week, oil and gas supermajor BP said it had agreed to take a 40.5% equity stake in the Asian Renewable Energy Hub, a vast project planned for Australia.
In a statement, BP said it would become the operator of the development, adding that it had “the potential to be one of the largest renewables and green hydrogen hubs in the world.”
In Dec. 2021, Iberdrola and H2 Green Steel said they would partner and develop a 2.3 billion euro (around $2.42 billion) project centered around a green hydrogen facility with an electrolysis capacity of 1 gigawatt.
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