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PE Live: Stars have aligned for hydrogen economy

The versatility of hydrogen, for use as a decarbonised fuel and as energy storage for renewables, is attracting unprecedented interest

All the factors that are required for the construction of a hydrogen economy have started to fall into place, the expert panel assembled for the PE Live 7 webcast agreed last week.

“The circumstances are now right, or close to being right, for hydrogen, particularly if we are speaking about green hydrogen,” says James F Bowe Jr, partner, corporate, finance and investments, at law firm King & Spalding.

Green hydrogen—produced from renewable power through electrolysis—is gaining increasing prominence as a means to store wind and solar power that would otherwise be curtailed.  “There are a number of different trends that are coming together in a way that makes green hydrogen look as though its time has come or is coming,” Bowe says.

These trends include dramatic reductions in the price of renewable energy and dramatic increases in its availability. “And those trends are expected to continue,” he adds.

“There is a growing realisation that green hydrogen is about to have its day in the sun” Bowe, King & Spalding

“In green hydrogen, we have a number of virtues all tidily put together in one package. We have a fuel that is essentially emissions free and can be produced in a way that does not involve emissions. We also have hydrogen as a storage medium… that permits, essentially, the shifting of electricity production from one period to another… so it has the additional virtue of being a renewables enabler.”

Green hydrogen can solve the problem of solar or wind generation curtailment—when the energy being produced is greater than demand—by diverting that energy into the production of green hydrogen. 

“Those are all virtues that are particularly welcome as we are working toward reducing carbon emissions worldwide, as the public generally is focused increasingly on climate change. The urgency of reducing carbon emissions is yet another action-forcing event [for green hydrogen].”

Competition is breaking out among nations that would like to lead the move into the hydrogen future. Germany has just announced a national hydrogen strategy, and the EU is set to announce its hydrogen roadmap on 24 June. “These all suggest to me that there is a growing realisation that green hydrogen is about to have its day in the sun,” he adds.

Diverse use cases

Michael Ducker, vice president, renewable fuels & western region, at manufacturer Mitsubishi Hitachi Power Systems, says there are two distinct use cases for hydrogen: as a decarbonised fuel source and as a decarbonised energy storage resource.

As a fuel, “hydrogen can really help economy-wide decarbonisation efforts”, he says, citing use in the transportation sector—including long-haul vehicles, maritime aircraft, heavy industrials, manufacturing and even data centres. 

“There is an emerging sense of optimism and bullishness that is centred around an existing and viable industrial reality” Webber, Webber Research

“We really think hydrogen is a fuel to support all these efforts to decarbonise,” says Ducker. “Right now, the focus is on the power sector [while] having eyes to the future, to economy-wide ways to decarbonise.”

In the power sector, he sees green hydrogen as having an important role. Energy storage “is where we really see the opportunities for green hydrogen” he says. “Green hydrogen being derived from renewables… and held in long-duration energy storage.”

Mitsubishi refers to two distinct phases of the decarbonisation of energy grids. “In 1.0 the tactic taken is the retirement and replacement of coal and oil-fired power plants with natural gas and renewables,” says Ducker. “In many parts of the US, particularly the west, this evolution is well underway and actually largely complete.”

The next, or 2.0, stage involves “trying to tackle the long-term intermittency of renewables, which historically was managed by natural gas but now with energy storage resources”. 

He believes hydrogen and lithium-ion batteries will play “very unique, yet important roles”, with hydrogen supporting long-duration bulk grid energy storage services alongside lithium-ion batteries for shorter duration, intra-day energy and balancing needs.

“In the US and really across the world, all these aspects are underway today. We are already seeing grids entering into decarbonisation 2.0. That is certainly why we, as a company, have been focused on delivering green hydrogen storage solutions.”

Capital market interest

Mike Webber, co-founder of energy capital markets consultancy Webber Research & Advisory, notes that it has felt like we are on the cusp of a hydrogen revolution since the 1970s but “it seems like it is just about everywhere we look right now”. 

“It is easily among the most interesting spaces in energy infrastructure,” he says, noting that there are lots of new investments, mergers and asset acquisitions. “And we have seen a number of existing project developers and energy players start to more seriously look at diversifying into both brown and green hydrogen. 

“So certainly, in our universe, it is popping up just about everywhere. It is certainly still early from a capital markets perspective, in the embryonic stages of development within the public markets, but it is certainly a growth vehicle.”

The notable characteristic of hydrogen companies in the public markets recently is the level of growth and focus on the extreme end of the downstream market. “Entities such as [fuel cell truck manufacturing company] Nikola,” he says.

“But what is even more interesting to us is that we are also seeing investors and developers get more serious about bringing down the cost of hydrogen at the industrial level, particularly green hydrogen for use within existing grids, via natural gas blending and as storage. So there is an emerging sense of optimism and bullishness that is centred around an existing and viable industrial reality—and from that perspective, when you think about capital deployment, it is a huge opportunity.”

Decarbonising industry

Laurent Carme, CEO of McPhy, a European leader in the development of hydrogen production and distribution solutions, notes that grey hydrogen—from natural gas without CCS—accounts for almost all hydrogen production from operational facilities and is a significant contributor to global CO2 emissions. 

He says the creation of 115mn t of mostly grey hydrogen is responsible for 830mn t of CO2 emissions worldwide, equivalent to 2pc of all carbon emissions. “There is already a challenge for the world to decarbonise hydrogen that we are producing,” he says.

830mn t — CO2 from hydrogen production

He adds that carbon capture involved in blue hydrogen is “quite costly… and probably adds 10pc of fuel consumption” to the process relative to grey hydrogen “and you do not capture all of the CO2, the maximum captured is 90pc”.

“Carbon capture and storage could be used in transition to reduce the emissions of the hydrogen that we produce today. But unfortunately, we are not up to the challenge of decarbonising current industry needs, which are critical for our economy,” he says citing refining, ammonia production and methanol production.

“On top of this we have a challenge regarding mobilty. We know that batteries can be a good solution for light mobility… But this technology reaches its limits when you go to heavy mobility for trucks, trains and maritime activity and in this case hydrogen would be a great solution.”

He says green hydrogen can be ramped up based on two factors. “The first one is that it is the first time in history when we have massive and affordable renewable electricity,” he says. “The renewable industry—whether solar or onshore and offshore wind—are forced to idle electricity… opening the door to electrolysis,” he says. “In the end, [green hydrogen through] electrolysis is clearly the solution.”

“The second point is simply the fact that we need to reduce our CO2 emissions or our world is in serious trouble. I think the public and the politicians [consider the] time now to invest in this new technology.”

A recording of  PE Live 7: Is the world now ready for hydrogen? can be heard here.


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