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CERAWeek: Experts say “Green” hydrogen prospects depend on renewable power costs

10 March 2021 Amena Saiyid

Prospects for producing "green" hydrogen from renewable energy sources is largely dependent on the cost of producing renewable power, according to various energy experts at the recently concluded CERAWeek by IHS Markit conference.

As more countries commit to net-zero carbon goals and transition to low-carbon economies, hydrogen, irrespective of its origin from renewables or from fossil fuels equipped with carbon capture technology, is increasingly being viewed as a viable approach.

Green hydrogen has the potential to decarbonize the most energy-intensive sectors of the economy. Some companies, like Emirates Global Aluminium, already are producing with green-powered hydrogen supplied by Mohammed Bin Rashid Al Maktoum Solar Park in the UAE.

Experts say producing green hydrogen right now isn't as cost-competitive as producing "grey" or "blue" fossil fuel-origin hydrogen primarily because companies have to factor in the cost of producing renewables.

During CERAWeek panels and discussions, the prospects for extracting hydrogen in a "green" format rather than from a "grey" or "blue" fossil fuel-origin garnered air time, with even the Biden administration's Special Envoy on Climate John Kerry name-checking hydrogen as part of the climate change solution set, according to IHS Markit Cleantech Executive Director Peter Gardett.

The reason why oil and natural gas companies are eyeing the blue and grey varieties is that they work with existing markets, infrastructure, and business models, while preserving workforces with existing skills.

Green power cost dominates

For green hydrogen to be viable, the levelized cost of producing hydrogen, or the lifetime cost of building and operating an energy source, has to decline, Armin Schnettler, executive vice president of Siemens Energy's new energy business, said during a March 5 discussion called "What Color is my Hydrogen?"

"If we look at the cost of hydrogen, or green hydrogen, for the future then it is important to notice that the green electricity cost is [the] dominating factor, so we need to go where green electricity is cheap," Schnettler said.

The levelized cost of green hydrogen in locations with good availability of renewables is around $4-$5/kg, according to Soufien Taamallah, director of IHS Markit energy technologies and hydrogen research, who moderated a separate 2 March panel on hydrogen production and costs. This panel had representatives from Nel Hydrogen US and Malaysian oil firm Petronas, as well as a research scientist from MIT Energy Initiative.

An IHS Markit "Top 10 CleanTech Trends in 2021" white paper reports a 40% decline in the cost of hydrogen from electricity between 2015 and 2020, with cost reduction anticipated to continue as the costs to generate renewable power and produce hydrogen from electrolyzing water are lowered. By 2025, IHS Markit estimates, an additional 40% decline in levelized cost of green hydrogen when triple-digit MW electrolysis plants come online.

Nel Hydrogen, Oslo-based company that manufactures electrolyzers, has set a target of bringing the cost of producing green hydrogen down to $1.50/kg by 2025, which will make it competitive with grey hydrogen, or hydrogen produced from reforming of oil and natural gas that analysts say is around $1-$2/kg.

When comparing capital expenditure versus operating expenditure, the cost of electricity is the biggest factor driving up the cost of green hydrogen, which is produced in an electrolyzer from using electric current to break up water molecules, according to Everett Anderson, advanced product development vice president for Nel Hydrogen US.

Malaysian oil firm Petronas is already at work on an in-house electrolyzer technology. It also has embarked on a green hydrogen demonstration project with the state-owned utility Sarawak Energy in the hopes of driving down the cost of production to the $1-$2/kg range, Mahpuzah Abai, CEO for Petronas Technology Ventures, said 2 March.

In the long run though, Schnettler and others agree that hydrogen has to come from green, renewable sources, but for the short-term blue hydrogen, or hydrogen derived from natural gas facilities equipped with carbon capture, is the way to go.

Also participating in the 5 March discussion with Siemen's Schnettler was Bashir Dabbousi, technology, strategy & planning director for Saudi Aramco. Dabbousi told IHS Markit Vice President Shankari Srinavasan that the national oil company of Saudi Arabia is "definitely" interested in opportunities to produce hydrogen that has zero carbon attached to it, but especially from its oil and gas resources.

Importance of "blue" hydrogen

"Blue is very important to us," Dabbousi said, pointing to the company's successful demonstration project in which 40 metric tons of "blue" ammonia were shipped to Japan, with the resulting carbon dioxide partly used in an enhanced oil recovery project and partly to produce methanol.

Noting that Saudi Arabia is endowed with tremendous solar resources, he added: "As costs of producing green hydrogen become competitive, this is another area the Kingdom and other players in the region will be looking at."

Unlike Dabboushi, ExxonMobil CEO John Woods, however, wasn't as enthusiastic about the prospects for green hydrogen, saying it is limited by costs and technology limitations. "Frankly, to do the job as required to help get society to net zero, we are going to need more advances and costs associated with that," Woods said in yet another 2 March discussion on energy prospects with IHS Markit Vice Chairman Daniel Yergin.

Viable alternative

That hydrogen is now being recognized as a viable alternative to a carbon-intensive economy comes as no surprise to Dharik Mallapragada, research scientist with MIT Energy Initiative.

Mallapragada said vast declines in wind and solar installation costs, coupled with the realization that electrification may not be possible for all aspects of the economy, has increased the appeal for hydrogen as a viable alternative.

Which form of hydrogen production will yield the most cost-effective low-carbon option depends on the region, according to Mallapragada.

For instance, where gas is abundant and cheap, blue hydrogen might be the low-carbon cost-effective option, along with some grid-based or renewables-based electrolytic production of hydrogen. In other places where gas has to be imported in large quantities like India, and the rest of South Asia, electrolytic production of hydrogen may be the solution, he added.

Looking ahead though, Dabbousi said he expects hydrocarbons, notably oil and gas, will remain a feedstock for hydrogen.

"We don't believe green or renewable-based hydrogen will be the only player," he said, citing a recent Hydrogen Council report that said blue and green hydrogen would share the market on a roughly 50-50 basis come 2050.

What will disappear from the map is grey hydrogen, he added.

Posted 10 March 2021 by Amena Saiyid, Senior Climate & Energy Research Analyst, IHS Markit

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