In another sign of the surging global interest in using hydrogen to reduce carbon emissions, the European Commission (EC) recently published what it called a “roadmap” for the European Union (EU) to install at least 6 GW of renewable hydrogen electrolyser capacity by 2024 and 40 GW by 2030.
European hydrogen electrolyser capacity currently totals less than 1 GW, or less than 2% of the European energy mix, said the EC, the legislative body for the 27-member state EU. The EC projects hydrogen to account for 13-14% of Europe’s energy mix by 2050 to help meet the stringent emissions reduction targets in the Paris Accord.
“Large-scale deployment of clean hydrogen at a fast pace is key for the EU to achieve a higher climate ambition, reducing greenhouse gas emissions by minimum 50% and towards 55% by 2030, in a cost effective way,” EC said.
“As investment cycles in the clean energy sector run for about 25 years, the time to act is now,” the EC said in a paper called, “A hydrogen strategy for a climate-neutral Europe.”
Although the increased use of hydrogen poses financial risks for liquefied natural gas (LNG) and pipeline gas exporters to Europe, U.S. LNG exporter Cheniere Energy Inc. is looking at the potential opportunities in an evolving marketplace. Like LNG, hydrogen can be chilled and liquefied for transport on ships. It can also be blended with natural gas in the pipeline stream to reduce carbon emissions.
“It’s not lost on me that we move four hydrogen atoms for every carbon atom that we sell and that we’re a leader in developing, constructing, operating and owning cryogenic infrastructure here in America,” Cheniere CEO Jack Fusco said last week during the company’s second quarter earnings call.
“We believe that LNG has a major role to play in this whole global decarbonization effort across the globe,” Fusco added, “and that hydrogen may present an opportunity to complement those environmental benefits, as well as leverage our own core competencies in terms of market access, infrastructure development, operations [and] construction.”
Fusco made his remarks in response to an analyst who asked if European targets to blend hydrogen with natural gas in 2030 at rates of 10-15% could weaken European demand for LNG or potentially provide LNG exporters opportunities for downstream investment.
Officials from another U.S. LNG exporter, Sempra Energy, also said last week the company is eyeing hydrogen opportunities around the world, potentially leveraging its LNG expertise and infrastructure.
Sempra is evaluating up to 10 projects that would use hydrogen in transportation, blending opportunities in power generation, blending at compressor stations at its Southern California Gas Co. subsidiary and injecting savings and efficiency in existing facilities, such as LNG projects. It is partnering with hydrogen trade organizations and foreign countries, including Japan and Germany.
Kawasaki Heavy Industries plans late this year to complete the world’s first liquefied hydrogen vessel, which would transport hydrogen produced in Australia to Japan. The ship, Susio Frontier, would have a 1,250 cubic meter storage tank, significantly smaller than standard LNG carriers of about 150,000 cubic meters.
Still, long-term demand for LNG and pipeline gas imports in the EU could be weakened if the EC’s plan for transitioning to hydrogen is successfully carried out. The EC said in its study that blending is less efficient and diminishes the value of hydrogen. Blending could also impact the design of gas infrastructure, end-user applications and cross-border system operability. Current gas quality standards in Europe would need to be adjusted to secure cross-border coordination, the EC said.
Currently most of the hydrogen is produced in the EU using natural gas or coal, releasing 70 million to 100 million tons/year of carbon dioxide, the EC said. But the EC said the EU must pursue the goal of producing cleaner hydrogen to reduce its emission reduction targets.
“For hydrogen to contribute to climate neutrality, it needs to achieve a far larger scale and its production must become fully decarbonized,” the EC said, meaning that it should be produced through the electrolysis of water with electricity produced from renewable sources.
Competitive Clean Hydrogen
The EC said that currently neither clean hydrogen or low-carbon hydrogen, which is fossil-based hydrogen with carbon capture, are competitive with fossil-based hydrogen. The estimated cost for fossil-based hydrogen in the EU is about 1.5 Euros, or $1.77/kilogram (kg), with the price highly dependent on the cost of natural gas. The current estimated cost of clean hydrogen is 2.50-4.50 Euros ($2.95-$5.30/kg), while the estimated cost for fossil-based hydrogen with carbon capture and storage is about 2 Euros ($2.36/kg).
At current costs, carbon prices in the range of 55-90 Euros ($65-$107) per tonne of CO2 would be needed to make fossil-based hydrogen with carbon capture competitive with fossil-based hydrogen, the EC said.
However, electrolyser costs have decreased by 60% in the last 10 years and are expected to be half of current prices in 2030 because of economies of scale. In regions where renewable electricity would be cheap, clean hydrogen is expected to be competitive with fossil-based hydrogen by 2030, the EC said.
Energy consultancy IHS Markit recently came to a similar conclusion. A recent analysis by the company showed that carbon-free hydrogen produced by electrolysis of water and electricity from renewables could be cost competitive by 2030 with current methods that use natural gas as a feedstock. It also attributed the expected drop in prices to economies of scale.
“Costs for producing green hydrogen have fallen 50% since 2015 and could be reduced by an additional 30% by 2025 due to the benefits of increased scale and more standardized manufacturing, among other factors,” said IHS Markit’s Simon Blakey, senior advisor for global gas.
Investment in so-called “power-to-x” projects, which would largely convert excess power to hydrogen, is expected to grow to more than $700 million in 2023 from about $30 million in 2019, IHS Markit said.
Again, economies of scale would be the main driver, as the average size for power-to-x projects scheduled for 2023 is 100 MW, ten times the largest such project operating today.
Hydrogen’s share in the energy mix will depend on the extent of decarbonization. In Europe, which is the current primary market for hydrogen projects, hydrogen could account for up to one-third of the energy mix with decarbonization of at least 95%, IHS Markit said.
“In Europe it is now widely agreed that electrification alone cannot deliver the level of emissions reduction that many countries aspire to,” said IHS Markit’s Catherine Robinson, executive director of European power, hydrogen and renewable gas. “Hydrogen is a highly versatile fuel — both in terms of how it can be transported and the variety of its potential end-use applications. The greater the degree of decarbonization, the greater the likely role of hydrogen in the energy future.”
Two obstacles that would need to be overcome are building infrastructure to distribute hydrogen and developing a liquid market to provide price transparency, the EC said. On the same day that the EC released its study it created the The European Clean Hydrogen Alliance to promote investment in clean hydrogen. The EC will use its Covid-19 recovery plan to “help bridge the investment gap for renewables” that has resulted from the pandemic, it added.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |