Following our first article on hydrogen and its potential as a renewable energy carrier, we’ll now venture into a common curiosity - what has pushed the recent launches of green hydrogen projects?
The list below is not exhaustive and there are a plethora of reasons (which could possibly take up a series on their own!) why green hydrogen has been pegged as the ‘energy carrier of the future.’ But let’s take a look at the main factors driving this wave:
1. Declining costs of renewable electricity: The cost of green hydrogen is greatly influenced by the cost of electricity procured from solar photovoltaics (PV) and onshore wind plants. As observed in the diagram below, the global weighted levelized cost of electricity (LCOE) produced by solar PV and wind plants have significantly decreased in recent years. This has resulted in launches of green hydrogen projects around the world.
Change in global weighted levelized cost of electricity by technology, 2020-2021 (IRENA, 2021).
Since the pandemic, costs of raw materials and freight have been on the rise, however, this has not negatively impacted the competitiveness of renewables (IEA, 2022). Governments and large energy consumers have been intent on reducing dependency on imported gas due to supply chain disruptions and soaring prices caused by lockdowns and the Russia-Ukraine War.
Installation of renewables has been the focus, particularly in Europe and North America (S&P Global, 2023). S&P Global reported that between 2021 and 2030, Europe and North America will install 2,000 square miles of solar panel, which is approximately the area of Los Angeles. This will further decrease the cost of renewable electricity in these countries.
Furthermore, with regards to the manufacturing of equipment for solar and batteries, various policies have been introduced in Europe and North America to circumvent China’s dominance over the industry.
2. Technologies scaling up: Expansion, expansion, expansion - the key to achieving economies of scale in green hydrogen production.
Electrolysers are central to hydrogen supply chains and their deployment will decide the potential capacity of renewable energy and thus, the future of green hydrogen (Odenweller, A et. al., 2022). It has been reported that the capital cost of electrolysis has declined by 60% since 2010, resulting in a decreased cost of green hydrogen from USD10-15/kg to USD4-6kg (Hydrogen Council, 2020).
The average unit size of these electrolysers has increased from 0.1 MWe in 2000–09 to 1.0 MWe in 2015–19. This indicates a transition from small demonstration projects to commercialized applications (IEA, 2019). A move necessary to reach economies of scale and ensure cost-competitiveness of green hydrogen.
The IEA reported that electrolysis deployment reached a new high in 2021, with 200 megawatts of additional installed capacity, three-times more than the previous year (IEA, 2022). Due to the energy crisis, there has been an unprecedented surge of projects with the aim of enhancing electrolysis capacity. However, it is worth noting that a large majority of these pledges and announcements have yet to be backed by final investment decisions (Odenweller, A et. al., 2022).
3. Wide array of existing and potential application: At present, hydrogen is predominantly used for the production of ammonia and in oil refining. It is applied at a smaller scale in the production of iron and steel, glass, electronics, specialty chemicals and bulk chemicals (IRENA, 2018). IRENA has segmented the applications of hydrogen to four industry categories:
IRENA based on FCH JU (2016)
As observed in recent years, hydrogen use has been making inroads into hard-to-abate sectors where it had been mostly absent. These include transportation, buildings and power generation (X. Li et. al., 2023). In fact, hydrogen buses are already at their infancy stages around the world. In Europe, a hydrogen bus consortium has been established, with a goal of deploying 1,000 commercially competitive buses powered by green hydrogen, with the first 200 scheduled for use by this year (World Energy, 2020). In Kuching, three hydrogen-powered buses have begun trial operations, with plans to utilize them for public transportation and as feeder buses for the upcoming autonomous rapid transport (ART) system (Malay Mail, 2022).
Green hydrogen has the potential of channeling considerable amounts of renewable electricity to these hard-to-abate sectors. It is highly advantageous as it can be stored in large amounts, thus ensuring it can cope with swings in demand as well as allowing for inter-seasonal storage, where demand could peak (IRENA, 2018).
Manufacturers of heavy-duty vehicles are also increasingly considering replacing lithium ion batteries with hydrogen as the latter can store more energy in smaller spaces and at lower weight (McWilliams & Zachmann, 2021).
4. Prospects for net-zero emissions: More than 120 countries have announced net-zero emission goals, with some including this target in legislations and policy documents (ECIU, 2023). We’re already on the precipice of surpassing 1.5℃ - so it is pertinent that this goal is at the forefront of all economic and industrial agendas. Fortunately, countries across continents share this sentiment, and many of them are adopting a green hydrogen pathway. However, industry players and experts are still questioning the viability of these pathways, emphasizing the need for heavy investments and subsidies.
Selected countries and blocs with a green hydrogen plan
The European Union’s hydrogen strategy, published in July 2020, sets out a vision for decarbonising various sectors through clean hydrogen (European Commission, 2020). In line with the REPowerEU Plan, the EU aims to produce 10 million tonnes of renewable hydrogen by 2030 and to import 10 million tonnes by 2030 (European Commission, 2022). The strategy is centered on scaling up electrolysis production with renewable electricity.
The European Commission understands the behemoth task ahead of them - their plan to produce 10 Mt of green hydrogen would require 80 to 100 GW of electrolyser output capacity and roughly 150 to 210 GW of additional renewable electricity capacity (Reuters, 2023).
The EU intends on exporting hydrogen through pipelines in the UK and France, and by sea using tankers. It also plans on the increasing hydrogen storage capacity of salt caverns in the UK, Central Europe and Spain (V.A. Panchenko et al., 2023).
The implications of Brexit on the application of the Commission’s policies in the UK are still unclear. However, it is expected that the UK will not deviate too much due to shared infrastructure (such as gas pipelines) and trade with EU counterparts (Machado et al., 2022).
Over in Asia, China has established the Hydrogen Industry Medium and Long-Term Development Plan (2021–2035), focusing on green hydrogen production. With demand of more than 33Mt/yr, China is the largest hydrogen producer and consumer in the world (RMI, 2022). However, at present, most of China’s hydrogen supply is produced from fossil fuels, resulting in coal-based hydrogen costing about half as much as green hydrogen (CSIS, 2022). This cost factor has curbed the production of the latter.
Nevertheless, this status quo is quickly shifting due to China’s renewable power capacity. Currently, the largest in the world, the East Asian nation plans on doubling its solar and wind generation capacity from approximately 600 GW to 1,200 GW by 2030 (CSIS, 2022). As such, the Hydrogen Council predicts that electrolysis will become the most affordable low-carbon production technology in China (Hydrogen Council, 2021). The country’s short-term goal is to reach a 100GW green hydrogen deployment target by 2030, by focusing utilization in the chemicals, steel and heavy-duty transportation sectors (RMI, 2022).
Chinese state-owned oil giant Sinopec is in the midst of constructing the world’s largest green hydrogen facility in Kuqa, Xinjiang, with commercial operations set to begin by June 30th (Hydrogen Insight, 2023). Green hydrogen produced at this facility will be channeled via pipelines to a nearby oil refinery where it will replace the existing use of grey hydrogen.
However, questions have been raised regarding the extent of renewable energy supplied to the facility. It has been said that only 58% of the electricity needed will be sourced from a solar farm, with the rest supplied from a coal-reliant grid (Hydrogen Insight, 2023). This may negate the effectiveness of the Kuqa facility in reducing carbon emissions.
The start of construction at the Kuqa green hydrogen project in December 2021 (Sinopec via Hydrogen Insight).
In 2019, Australia published its National Hydrogen strategy, with the aim of creating a clean, innovative, safe and competitive hydrogen industry that will be a major global player by 2030 (COAG Energy Council, 2019). The strategy focuses on removing market barriers, building supply and demand, and accelerating global cost-competitiveness. A key feature of this strategy is the establishment of hydrogen hubs which will promote economies of scale, innovation and cost-effective developments.
In addition to production for domestic use, the strategy also places emphasis on exporting hydrogen, with the aim of becoming among the top 3 exporters of hydrogen to Asian markets by 2030. The strategy is currently under review to take into account recent global developments, in light of the US’ Inflation Reduction Act (IRA) (S&P Global, 2023).
Although a large share of Australian hydrogen production is sourced from natural gas, the country has shifted its focus to green hydrogen in recent years. This is largely due to Australia’s vast potential in harnessing solar and wind energy, especially along its southern and western coastlines (COAG Energy Council, 2019). The shift to green hydrogen is exemplified in Australia’s 2023-2024 Federal Budget, where it introduced Hydrogen Headstart, an AUD2 billion initiative to underwrite the biggest green hydrogen projects to be built in Australia (ARENA, 2018). This investment will reduce the cost of hydrogen production and scale up the industry.
The United States’ Department of Energy published their National Clean Hydrogen Strategy and Roadmap in 2022, setting out strategies, opportunities and goals for the country’s green hydrogen future (DOE, 2022).
With a goal of 50 million metric tonnes of clean hydrogen produced annually by 2050, the roadmap predicts that US emissions will reduce by approximately 10% from 2005 levels. Among the three strategies put forth, the Hydrogen Shot (launched in June 2021) has gained the most traction - this ambitious initiative aims to reduce production cost to USD1 for 1kg of hydrogen in 1 decade (111). This goal will be supported by investments in clean hydrogen hubs and electrolysis programmes.
Prior to the publication of this roadmap, the Biden-Harris administration had successfully passed laws to galvanize the production of clean hydrogen. The Inflation Reduction Act (IRA) provided for policies and incentives, including a Production Tax Credit to encourage the proliferation of green hydrogen across industries (This tax credit will be further discussed in our next article).
The IRA has prompted several green hydrogen projects, including a USD$4 billion green hydrogen production facility in North Texas (the largest to date in the US) (S&P Global, 2022). With 1.4 GW of dedicated renewable power, the facility is expected to begin operations in 2027, providing clean hydrogen to industries and the mobility market.
Now that we’ve explored the basis of green hydrogen projects and their driving factors, stay tuned for the next and final part of this series, where we’ll dive into the shortcomings of this climate neutral energy carrier.
This is the second article of a three-part series on the topic of green hydrogen as an alternative source of energy by Khor Reports.
By Nithiyah TAMILWANAN, Segi Enam Intern, 27 June 2023 | LinkedIn