Hydrogen from natural gas is an opportunity for energy companies and will be a key part of the energy transition, industry executives said recently.
At CERAWeek by S&P Global held earlier this month, Snam SpA CEO Marco Alverà said “there isn’t one solution that will fit all.” Hydrogen as a fuel will take many forms and projects will be spurred by natural gas, renewable energies, and even nuclear power.
The chief of the Italian energy infrastructure company said blue hydrogen should take off in the United States, where natural gas is plentiful and comparatively cheap. Given soaring natural gas prices in Europe, green hydrogen could be cost competitive soon and would be the better option.
Green hydrogen is created from water using renewable energy and electrolysis. Blue hydrogen involves splitting hydrogen atoms from natural gas, with carbon capture, utilization and storage (CCUS) used to limit emissions.
CCUS “is absolutely necessary” along with standards to “decide what ‘blue’ means,” so that there is no leakage from methane or carbon dioxide, Alverà said.
Global service sector spending on carbon capture and storage is set to quadruple from 2022 to 2025, with cumulative expenditure over the next three years topping $50 billion, according to new analysis from Rystad Energy.
Alverà said hydrogen’s “mass deployment will come later” and “will happen on its own,” once costs come down.
Given the net zero goals of so many companies and countries, the challenge for the industry is that the scale-up happens in the next five-to-10 years. Alverà thinks hydrogen will be 15-20% of the primary energy mix in a decarbonized world.
‘Technology Agnostic’ Policy
“It’s not just about the green,” said CEO Samir Serhan of industrial gas supplier Air Products & Chemicals Inc. “Blue hydrogen is essential.”
His company is developing a net-zero hydrogen energy complex in Western Canada in Edmonton. The $1.3 billion production and liquefaction project would use natural gas as a feedstock using carbon capture to reduce emissions. It’s expected to come online in 2024.
“We believe hydrogen policy should be technology agnostic,” Serhan said. Hydrogen policy meanwhile should be focused on “end market use.” The key, he said, is “generating the demand.”
Mitsubishi Power Americas Inc. is also developing a blue hydrogen hub using gas from the Bakken Shale in North Dakota. The hub would produce, store, transport and consume blue hydrogen, and be connected by pipeline to other hydrogen hubs being developed throughout North America.
“The energy transition has got to be reliable, clean, accessible and cost-effective,” Mitsubishi Power Americas CEO Bill Newsom said.
He said the next step was scaling up the production of electrolyzers, with a focus on standardization and manufacturing. Currently, most electrolyzers are produced bespoke, he said. Research and development would also bring down costs.
“We need to incentivize the whole value chain” to decarbonize, Newsom said. He said that tax credits would help drive innovation and reduce costs. He cited higher ocean freight and logistics costs as being an impediment.
“We do need funding” and “real projects and unprecedented collaboration.”
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Creating A Hydrogen Market
In Europe, the natural gas pipe network can already switch over to hydrogen, according to Alverà. Depleted oil and gas reservoirs could also store hydrogen. He said blending with natural gas “is a neat way to create demand.”
“We can not only blend” with natural gas but also get to complete hydrogen eventually, he said. He added that “just a 2% blending obligation” would create immediate overnight demand.
But, he said, “We are too slow in developing projects.” He said the global industry needed to “go from concept to shovel ready in months not years.”
For a market to form, regulation also needs to be in place. “Hydrogen, once it’s on a ship or a pipe, it’s hard to trace,” Alverà said. “We need to work on certificates of origin and how it was sourced.”
The next 18 months are “going to be really important” to define common standards, and “that’s the way to get a global market going.”
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