For a country, achieving net zero emissions, or something close to it, by half a century would make a profound impact. And, according to experts, rapid advancements in technology and the evolution of renewable hydrogen can make that happen. “What the world naturally wants to see is hydrogen that is produced with no carbon emissions or other potentially harmful emissions as a by-product,” Adam Bond, CEO of AFC Energy, told International Finance. In the interview, Bond says “The importance of renewable hydrogen is that it can provide long-term sustainable solutions to the world’s energy needs; not only is it free from harmful emissions in its combustion but it joins up renewable energy creation with transportation and energy storage.”
The biggest advantage of renewable hydrogen is that it burns clean, leaving residual water vapour, which is impressive to a world that is highly exposed to heat-trapping emissions. “As a fuel, hydrogen has the characteristics of high energy density while producing nothing but water as a by-product,” says Bond. It can also act as an energy storage medium, when there is surplus energy from wind turbines or solar panels, which can be used to power electrolysis. “Once hydrogen is created through electrolysis it can be used in stationary fuel cells to provide fuel for vehicles, or even stored as a compressed gas, cryogenic liquid or wide variety of loosely-bonded hydride compounds for later use,” he explains.
This is not the first time that renewable hydrogen has become so popular. There have been multiple cycles of it being put in the spotlight, as early as the 1970s. BloombergNEF had carried out an interview with the CEO of Ballard Power Systems in 2005, who then said that in 2010 they were going to be selling hundreds and thousands of fuel cell systems. “Of course, that didn’t happen,” says Martin Tengler, a BloombergNEF lead hydrogen analyst. “Fast forwarding to 2009-2010 the manufacturers believed strongly that it would happen by 2015.” This time around it is the push to decarbonise economies or sectors that will actually see new developments take place in renewable hydrogen. “In our view, this time is going to be different because for the first time in history the focus is not on ‘let us use hydrogen because it is very cool as fuel for cars or something like that’ but it has more to do with ‘let us use hydrogen for decarbonisation or sectors that need to be decarbonised,’” Tengler says.
Market competitiveness depends on carbon price
Today, producing renewable hydrogen using electrolysis from renewable energy has become technically viable and it is moving quickly toward achieving the most critical aspect of economic competitiveness. “It is mainly driven by two important factors: reducing the cost of renewables and system integration challenges owing to the growing share of intermittent renewable power,” says Suchitra Sriram, an associate director of Energy & Environment at Frost & Sullivan Asia-Pacific. This supply option is slowly gaining centre ground. There is global urgency to mitigate carbon emissions. For that reason, “countries have started to show commitment to decarbonise their economies,” she says, pointing to the European Union which seeks to become carbon neutral by 2050 and China has already committed to the same target by 2060.
Analysts at Goldman Sachs are bullish on the long-term prospects of renewable hydrogen. They estimate the market could be worth $11.7 trillion by 2050, split between Asia, the US and Europe. The European Commission’s Energy Roadmap for 2050 has proposed to use excess electricity to split water molecules into hydrogen and oxygen, and store the former for later use. The fact that hydrogen can replace fossil fuels as feedstock in various processes is making it a versatile resource that can help to decarbonise economies. Tengler reiterated that the only reason renewable hydrogen is going to take off this time is because there is a need for decarbonisation, which implies that it will be used to decarbonise certain sectors.
Can renewable hydrogen become competitive with SMR hydrogen? And could it be a viable option for tackling climate change? Some say that introducing a carbon price backed with the right kind of policies can scale up quickly and affordably. “There will be a market for renewable hydrogen. We will need all available colors of hydrogen if we really want to reach the target of Paris agreement regarding the limitation of temperature increase,” Adamo Screnci, vice president of the Clean Hydrogen Business Unit at Total told International Finance.
Using fossil fuels in certain sectors today also means it is the cheapest. Truth be told, it is never going to be cheaper to produce steel with hydrogen compared to coal or ammonia with hydrogen, or natural gas for that matter. “What is going to be needed is a carbon price which is high enough to make hydrogen competitive. It might be different based on countries and how much fossil fuels cost,” Tengler said. “On average, one of the most promising sectors we found is the making of steel, because the carbon price required for that will be only around $50/tonne by 2050 assuming hydrogen at $1/kg.” By competitiveness, a lot depends on carbon prices which in turn points to policy. The market size will depend a lot on decarbonisation policies around the world.
Wood Mackenzie has carried out research to understand the competitiveness of renewable hydrogen. On average, the cost of hydrogen produced from natural gas is $1.5–3/kgH2, while renewable hydrogen produced from solar PV or onshore wind is around $2.5–6/kgH2. Optimists like Thierry Lepercq, founder of Soladvent specialising in hydrogen said that the combined power of super-cheap solar and electrolysis and development of the midstream infrastructure should decrease the cost of renewable hydrogen to $1.5 per kg by 2025, and further decrease it to $1 by 2030, matching the cost of natural gas in Europe. Mackenzie analysts estimate that, going forward, renewable hydrogen will be competitive with hydrogen produced from natural gas with an end date of 2040. Other developments like ‘effects of scale, plant automation and plant load maximisation’ can reduce the cost of electrolysis plants to $300 per kilowatt by 2025 and to $200 per kilowatt in 2030.
“Competitiveness of renewable hydrogen is still not there, except for niche markets. We still need some scale effect in terms of technology to bridge the gap,” says Screnci, showing optimism that he is “convinced this will come soon, with some incentives and the fact that almost every nation has now an hydrogen plan to allow the development of this technology.”
Decarbonising energy-intensive industries and economies
If the idea of powering economies with hydrogen seems popular, it is. Now some of the world’s largest power companies are strongly lobbying for renewable hydrogen to achieve full decarbonisation because electrification will be a tough option to decarbonise energy-intensive industries such as aviation, heavy transport and certain industrial operations such as iron, steel and chemicals. According to Suchitra, the global energy systems operate on a vertical industry value chain that aligns specific fuels to particular application markets, and significant amounts of energy is lost during the process in the form of waste heat and lower energy efficiency. This model cannot persist if countries pursue carbon neutral goals and it needs to be replaced with an integrated energy system. To that end, it is pertinent to move away from silos to establish a link between the diverse energy carriers, infrastructure and consumption sectors.
“It can play a critical role in establishing this link at every stage where hydrogen can augment the power system for renewables, can be easily transported, distributed and stored, and can be used in varied applications safely, “ Suchitra said. “Establishing this new energy infrastructure will create jobs at every level of the industry value chain that can help economies to recover from the Covid-19 pandemic in the long term.”
Renewable hydrogen has transitioned from the laboratory to an industry that is expected to provide at least 20 percent of the world’s energy over the next couple of decades. “With this scale up comes tremendous opportunities for cost reduction, economies of scale and improved competitiveness versus incumbent fossil fuels. We are already seeing a number of industries where power generation from renewable hydrogen is approaching price parity with traditional generation,” Bond says.
Igniting a powerful storage strategy
Essentially, the transition to renewable low-carbon economy is governed by the availability of energy storage. “We have plenty of energy in the world—all it takes is just two minutes of sun rays on the earth to transfer the same amount of energy as humans use in totality in a year—but its capture and storage has been the challenge,” says Bond. Recently, Boris Johnson had expressed his interest in transforming the UK into a ‘big bet’ on wind power, hydrogen and carbon capture and storage as part of the government’s zero-emissions strategy.
“In recent years we have made substantial progress in photovoltaics and wind turbines to the point where in some regions the production costs per kWh are already lower than for natural gas. The storage of the electricity produced by solar and wind farms has been more of a challenge and hydrogen along with batteries is offering the solution,” Bond said. “However, important development for the long-term storage and transportation of renewable energy is the use of renewable ammonia—an excellent chemical carrier of Hydrogen. This involves using hydrogen produced through the renewables-powered electrolysis of water, together with nitrogen sourced from the air, to create renewable ammonia which can then be stored safely as a liquid at room temperature until needed. renewable ammonia is several times more energy dense than renewable hydrogen alone, making it an excellent hydrogen carrier in transport or off grid applications.”
HyDeploy makes a point
The UK is already developing projects to assess the role of renewable hydrogen. HyDeploy, a pioneer hydrogen energy project, has demonstrated that a blend of up to 20 percent renewable hydrogen can be used to heat and cook at homes. “The hydrogen for HyDeploy is produced using an electrolyser and is also used in 30 commercial buildings on campus. It has played a very active part in the promotion of hydrogen as an alternative to ‘natural’ or fossil gas,” Andy Lewis, Innovation Project Manager at HyDeploy told International Finance.
“We have held campus tours and a highly successful webinar which attracted around 200 attendees. The Keele University demonstration will continue until March 2021 and a report will be published in May or June which will be launched at Westminster. There will then be a larger demonstration of blending on a public network in Gateshead,” Lewis explains. It seems that 100 homes on Keele University’s private gas network have been using a hydrogen blend for several months and they are quite positive replacing it with fossil fuels.
Lewis said if the same technology were to be applied across the UK, “we would instantly save six million tonnes of carbon dioxide which is equivalent to taking 2.5 million cars off the road. We are now talking to the government to encourage it to adopt the HyDeploy approach nationally.” This development is anticipated to bring two benefits for the country. First: It will allow customers to replace fossil fuels with hydrogen showing them that it can play the same role. Second: It will give investors time to build hydrogen production plants to meet demand that might increase from 2025 onward if the government adopts renewable hydrogen as part of its energy strategy.
It could be argued that the government should give a clear statement that it will include hydrogen in its energy strategy which is slated for next year “This would give investors the confidence to start building hydrogen infrastructure and it would create a market for hydrogen,” says Lewis. The UK government needs to make “necessary changes in regulations so that hydrogen can be used in the gas pipelines either as a blend or as 100 percent. Then, the government would have to think about incentives and subsidies to help customers move to new renewable energy in an affordable way.”
AlkaMem is a game-changer in the electrolysis process
HyDeploy is not alone. AFC Energy, meanwhile, has developed two engagements with renewable hydrogen: one as a user and the other as an enabler. Extreme E which is pioneering an off-road rally for electric vehicles will be recharged through the company’s hydrogen fuel cells. “As the demand for hydrogen increases such as through use in fuel cells for power generation, we believe we will see a greater demand for renewable hydrogen—and the increased scale combined with new technological advances will lead to a virtuous circle of lowering prices,” says Bond.
In regard to its second engagement, the research facility in Surrey is where it has developed a technology known as AlkaMem that will enable greater efficiency in the production of renewable hydrogen at a lower cost compared to incumbent technologies. AlkaMem is distinctive because it will be a game-changer for the production of renewable hydrogen as the relative energy intensity of electrolysis which splits water into hydrogen and oxygen is observed to be a huge challenge for the industry.
Germany will ramp up production capacity in the next decade
Germany, on the other hand, is making its vision in renewable hydrogen come true, by pledging to ramp up its production capacity to 5 GW by 2030 and 10 GW by 2040. When Economy Minister Peter Altmaier presented the national hydrogen strategy in June, it became obvious that the country wants to become the global leader in hydrogen technology. Immediate progress is seen in terms of allocating funds for renewable hydrogen development. It is reported that €7 billion of the economic stimulus package is spent to promote renewable hydrogen to ‘make it market-ready and create a demand-driven market’.
“Germany has announced a target which is well funded of $10 billion between 2020 and 2030 for the development of hydrogen. These investments will be spent on different things such as producing hydrogen using electrolysis and parts of it will be used for how to import hydrogen from overseas,” says Tengler. In fact, a group of oil and utility companies are planning a 130-kilometre hydrogen pipeline to supply industrial customers in north-west Germany. These companies are interested in the production of renewable hydrogen, and the proposed pipeline will be built under the streets in Lower Saxony at Lingen for flowing hydrogen to chemical plants and refineries.
In March, BloombergNEF published its hydrogen economy outlook which found that for hydrogen to scale up, policies are needed that are not there yet. “We are in October and the situation has changed significantly which is attributable to all that has been happening in the European Union,” says Tengler. This started when the European Union made an announcement on its target of producing hydrogen with 40 gigawatts of electrolysers by 2030, while potentially importing another 40 gigawatts worth of hydrogen from overseas.
Then came the pledges by different European Union members like Germany, France and the Netherlands, while Spain and Portugal have released drafts regarding hydrogen. “So if we sum up the financial commitments that would be required to meet all these targets then this will be enough to get us to more than $450 billion in investments and subsidies from governments,” says Tengler. “We think that the European Union targets themselves could be enough to achieve those numbers that I mentioned will help us to get to that optimistic trajectory.”
Africa’s devotion to renewable hydrogen with H2 Atlas project
The goal to replace fossil fuel with renewable hydrogen is not something that is only encouraged by the developed part of the world. It is refreshing to know that Africa has become a significant player in the renewable hydrogen trajectory. Launched in June, the H2-Atlas Africa project, which maps green hydrogen generation potential across the continent, is an important development to its work in this space. The SADC Centre for Renewable Energy and Energy Efficiency (SACREEE) and the Southern African Science Service Centre for Climate Change and Adaptive Land Management are joining forces to coordinate the project in the Southern African Development Community (SADC) region.
Currently, the project is in the first phase of a joint initiative of the German Federal Ministry of Education and Research and African partners in the Sub-Saharan region (SADC and ECOWAS countries). The main objective of the project is to identify the potentials of renewable hydrogen production from renewable energy sources in those regions. For the ECOWAS region, in particular, West African Science Service Center on Climate Change and Adapted Land Use (WASCAL) and ECOWAS Regional Centre for Renewable Energy and Energy Efficiency (ECREEE) are actively taking part in the project.
What is interesting about the H2-Atlas-Africa project is that it intends to support and strengthen sustainable development through a hydrogen economy. Identifying the potentials of renewable hydrogen is needed for the continent because it will transform it into an exporter of renewable hydrogen—and uplift its position in international energy markets—expanding its growth opportunities beyond fintech space. The project is mainly focused on sub-Saharan Africa, in terms of assessing its potential in producing renewable hydrogen. A report published by Sacree said that the project will add more value to the continent’s upscale by focusing on select areas such as ‘derailed technologies, environmental, economic and social feasibility assessment taking present and future local energy demands into consideration’.
Buy-in into the green hydrogen economy concept
In September, it was reported that Sasscal was holding virtual national team engagement meetings with all participating SADC countries to begin the project. These countries include Angola, Zambia, Zimbabwe, Mozambique, South Africa, Botswana, Tanzania and Namibia among others. The vision of the meeting was to discuss the modalities for national data that will be collected for the project. Dr Jane M. Olwoch, SASSCAL’s Executive Director, during the meeting, said, “Green Hydrogen project isn’t a project like others, it is a programme as we seek emission-free and sustained future as we transition from fossil fuel to renewable energy.”
In fact, South Africa has come up with a buy-in into the green hydrogen economy concept that is intriguing and exceeding expectations, for the development of the sector. Private sector companies are expressing their interest to sign Memorandums of Understanding, while others are looking for ways to push development into the renewable energy sector. That said, the green hydrogen Atlas-Africa project is helping to make profound advancements in the region, and highlighting the value of the region’s platinum group metals which might be in sync with the renewable hydrogen economy. Interestingly, SADC has hosted a series of metals and minerals used in the hardware that produces solar and wind power for generating clean electricity. This is found to decarbonise the nature of hydrogen.
Total’s efforts in renewable hydrogen play
Hydrogen is already an important molecule for refineries. It is in fact used in large amounts for hydrodesulfurisation, methanol production and intermediate production, becoming more of an energy vector. For that reason, oil and companies like Total are looking at this opportunity where renewable hydrogen can be used in various domains of applications. Total is gaining momentum in the renewable hydrogen play with the development of a specific project known as ECO2MET, which is targeting a 1MW range electrolyser based on the high temperature technology, with a very high efficiency rate of 90 percent.
The demonstration plant will be installed in “our Leuna refinery in Germany, one of the most advanced petrochemical hubs,” says Screnci. This plant will produce renewable hydrogen that will be combined with carbon dioxide to make clean Methanol. In another development, Total announced its ambition to achieve net-zero emissions by 2050 together with the society for its global business across its production and energy products used by its customers. “On September 30, we have added an intermediate and strong goal for Europe which concentrates 60 percent of our Scope 3 emissions worldwide, with a commitment to reduce our emissions by 30 percent by 2030, becoming the first energy company to firmly commit at this level and within this timeframe,” Screnci explains.
Certainly, renewable hydrogen can contribute to decarbonisation of the gas sector, either produced with carbon capture, utilisation and storage or from renewable energy. Screnci said a zero-carbon hydrogen can be mixed with gas to decrease the carbon dioxide content and in the near future a potential dedicated network can be implemented that would become the backbone of the European hydrogen system. The developments and plans aside, there are often unspoken problems in reaching the market’s full potential.
A lot of it will depend on government policies and regulations to drive investments into the market. Based on the ongoing research and developments, renewable hydrogen is expected to become competitive in select markets by 2030. Obviously, a clear framework is necessary to kick-start large scale projects that will drive costs down. “On top of that, we need a carbon price that will make the transition economically viable to create a real market where growth will be inevitable,” says Screnci.