Australia, US See Low Cost Green Hydrogen On Horizon

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The emerging green hydrogen industry threatens to squeeze natural gas out of the global hydrogen supply chain, but so far the threat has been an empty one due to high costs. Hydrogen produced from natural gas currently ranges about US$1.00 to $3.00, while green hydrogen costs three times as much, or more. Government subsidies can make up some of the difference, but the real impact won’t be felt until new technologies and economies of scale kick in.

Low Cost Green Hydrogen To Kick Natural Gas Out Of Global Supply Chain, Eventually

Green hydrogen gets a lot of attention as a fuel for zero emission fuel cell vehicles, though it has yet to gain traction in mobility markets. A more promising area activity consists of non-mobility markets that are difficult to decarbonize through direct electrification alone. That includes steelmaking and other heavy industries as well as chemical production and construction equipment, among other use cases where fossil energy still holds a firm grip.

BloombergNEF editor Kamala Schelling outlined the cost barrier last summer, citing a figure of $0.98-$2.93 per kilogram for gray hydrogen, meaning hydrogen sourced from natural gas. In contrast, green hydrogen comes in at $4.5-$12 per kilogram.

“In every single market we’ve surveyed, green hydrogen is more expensive than its gray counterpart,” BNEF hydrogen analyst Adithya Bhashyam told Schelling.

“Yet in their most recent levelized cost of hydrogen analysis, Bhashyam and his team found that a tipping point is just around the corner,” Schelling wrote. “From 2030 on, they find, producing green hydrogen in a new plant could be as much as 18% cheaper than continuing to run an existing gray hydrogen plant in five major economies around the world.

However, There Is A Catch (Or Two)

For those of you new to the topic, green hydrogen refers to electrolysis systems, which deploy electricity from renewable resources to “split” hydrogen gas from water. In contrast, gray hydrogen is produced by submitting natural gas to a steam reformation process. Gasified coal also supplies part of the global hydrogen chain.

Don’t break out the green hydrogen pom-poms just yet. The numbers came from the BNEF 2023 Hydrogen Levelized Cost Update, which modeled 28 markets. Green hydrogen only beats gray hydrogen in eight of those markets by 2030, when new-built green hydrogen electrolyzer facilities are compared with existing natural gas reformation plants.

That’s one catch. However, the picture improves significantly when new-built steam reformation plants are compared to new electrolyzer facilities.

“Using Western-made alkaline systems, green hydrogen beats out blue hydrogen by 2030 in all but a handful of modeled markets,” Bhashyam told BNEF, referring to steam reformation systems coupled with carbon capture.

And that’s the other catch. Alkaline electrolysis systems are less expensive and more suitable for large-scale production than the other available alternative, PEM (Proton Exchange Membrane) electrolyzers. However, alkaline systems produce a lower-grade hydrogen, which limits their use.

The Long (Or Short) Road To Low-Cost Green Hydrogen

Australia and the US have made the list of best-case markets for competitive green hydrogen production, mainly due to the abundance of low-cost renewable energy. Apparently Australia is not resting on its reputation. Though performance improvements in alkaline systems could help bring quality up while keeping costs down, a researchers at Griffith University in Australia anticipate that the cost of PEM systems will drop, making it a more competitive alternative.

The research team modeled various PEM scenarios in a new study under the title, “Economics of renewable hydrogen production using wind and solar energy: A case study for Queensland, Australia.” They concluded that with proper sizing and scale-up, PEM electrolyzers powered by wind and solar resources could produce hydrogen at AU$3.00 per kilogram, which comes out to about US$2.00.

“The model assumes that small-scale to large-scale wind turbine (WT)-based and photovoltaic (PV)-based power generation plants are directly coupled with an electrolyser array and utilises hourly generation data for the Gladstone hydrogen-hub region,” the researchers explained.

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More Green Hydrogen For The USA

The US is also not taking the competition standing still. The US Department of Energy has set an ambitious goal of bringing down the cost of green hydrogen to $1.00 per kilogram, where it can compete with the lowest-cost gray hydrogen.

On March 13, the Energy Department announced the selection of 52 different projects, totaling $750 million in funding from the 2021 Bipartisan Infrastructure Law, aimed squarely at that target. With additional cost-share funding from the awardees, the total cost of the program is $1.6 billion.

The emphasis is on bringing down the cost of both fuel cell and electrolyzer systems. The program also includes funding for end-of-life handling and recycling of electrolysis systems.

“The projects are expected to enable U.S. manufacturing capacity to produce 14 gigawatts of fuel cells per year, enough to power 15% of medium- and heavy-duty trucks sold each year, and 10 gigawatts of electrolyzers per year, enough to produce an additional 1.3 million tons of clean hydrogen per year,” the Energy Department explained, noting that “industrial and chemical processes like steelmaking and fertilizer production” are the target markets, along with heavy-duty transportation.

The Energy Department also anticipates that renewable energy stakeholders will feel the follow-on effect of increased electricity demand from hydrogen producers.

“Clean hydrogen can also support the expansion of clean electricity by providing a means for long-duration energy storage and offering flexibility and multiple revenue streams for all types of clean power generation—including renewables, advanced nuclear, and other innovative technologies,” the agency explains.

Many Roads To Low-Cost Green Hydrogen

If you caught that thing about nuclear energy, that is a thing. Some stakeholders have been floating the idea of using nuclear power plants to run electrolyzer systems. However, the $750 million round of funding is not focusing on the source of the electricity. That comes into play under the Energy Department’s $8 billion Regional Clean Hydrogen Hubs program, which is also funded through the Bipartisan Infrastructure Law.

The new round of funding includes both electrolyzer and fuel cell projects focusing on scaling up volume, and improving automation and quality control, while reducing supply chain risks, in addition to facilitating end-of-life materials recovery.

The program also zeroes in on key electrolyzer components including catalysts and  membranes, along with innovative new materials, components, and systems designs.

The innovation angle is the key to achieving the $1.00 per kilogram goal. “Longer-term cost reductions enabled by these cutting-edge projects are likely to play a significant role in achieving DOE’s Hydrogen Shot goal,” the Energy Department explains, referring to the $1.00 per kilogram benchmark.

For those of you interested in more details, the Energy Department provides a keyw0rd-searchable lookup tool for all 52 hydrogen and fuel cell projects. The website also includes a map indicating that most of the projects are clustered along the eastern seaboard. If you have any thoughts about that, drop us a note in the comment thread.

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Image: US Department of Energy awards $750 million in funding for new, cost-cutting green hydrogen and fuel cell projects (courtesy of DOE).

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