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Renewables key to lowering US green hydrogen costs: Hydrogen Council CEO

31 August 2021 Amena Saiyid

Meeting the US goal of producing a kilogram of hydrogen using renewable electricity for $1 in a decade will be impossible unless the cost of generating that power decreases, the head of the Brussels-based Hydrogen Council said 31 August.

Describing the US Department of Energy (DOE) target cost for "clean" hydrogen, which was announced in late June, as "a very ambitious target," Hydrogen Council CEO Daryl Wilson said 80% of the current cost of producing green hydrogen lies on the energy side, "so, we need to fully deploy some very low-cost renewable energy and add some innovation to make this target."

Rather, "we are projecting—on the basis of current industry efforts around the world—the price of producing green hydrogen somewhat above $2/kg in the US by 2030," Wilson told DOE's Hydrogen Earthshot summit, which is being held 31 August through 1 September.

US Secretary of Energy Jennifer Granholm has described "clean hydrogen" as a "game changer" in US efforts to decarbonize the economy by mid-century.

She said the existing clean energy technologies won't get the US to its net-zero goal so "we have to innovate" and "deploy, deploy, deploy."

According to IHS Markit estimates, the cost of producing green hydrogen through splitting water molecules by electrolysis that is powered by renewable electricity is currently $4-$5/kg. In comparison, the cost of producing "blue" hydrogen from fossil fuels while sequestering the carbon or from renewable natural gas captured from landfills is estimated at $1.50/kg-$2/kg.

Promise of clean hydrogen

The challenge is to make "the promise of clean hydrogen a reality" and that means investing across the entire value chain from production to transportation to end use, said Senator Joe Manchin, Democrat-West Virginia, who chairs the US Senate Energy and Natural Resources Committee and delivered the summit's keynote address.

Manchin pointed to the Senate-approved bipartisan infrastructure bill that authorizes $9.5 billion to promote research, development, demonstration, and deployment of technologies to produce hydrogen and apply them across the value chain, including hard-to-abate sectors like long-distance trucking, shipping, steel, cement, and chemical manufacturing.

Of this amount, he said, $1 billion is reserved to improve the efficiency, increase the durability, and reduce the cost of producing clean hydrogen using electrolyzers to less than $2/kg by 2026.

According to DOE, there are about 170 MW of electrolyzers currently installed in the US.

Commercialization is key

The "name of the game is commercialization," Vanessa Chan, director of the DOE Office of Technology Transition, which is charged with expanding the commercial impacts of research in technology that the agency conducts.

"Moving along that continuum is hard. It is hard because to get to that full-scale market adoption requires entire ecosystems and value chains to be convinced that investors are better off supporting your solution than what the status quo is right now," Chan said during a session on financing and deployment.

Commercialization takes a lot of time and a lot of capital, she added, pointing to the $30 million fund that pairs national laboratories with external partners to commercialize energy technology.

However, Jigar Shah, who heads DOE's Loan Program Office (LPO), remains confident the vast majority of the green hydrogen cost reduction can be met through scaling up technology deployment that "we have helped develop at the Department of Energy and fund over 20 years."

Shah said the LPO, which provides loans and loan guarantees for large energy infrastructure projects, has received requests from $3 billion-worth of active projects in the hydrogen industry "some of that is powered by renewable energy and green hydrogen and some of them are other colors."

Rounding error

In the US, IHS Markit anticipates a $14-billion need for capital expenditure on electrolyzers by 2030.

Currently, the capital investment in green hydrogen is "just a rounding error" in the US, "but the future looks very bright and we see our outlook materializing as we go forward and gain momentum," according to Alex Klaessig, senior director for IHS Markit's Hydrogen and Renewable Gas Forum and a panel participant.

"Our planning scenario might actually undershoot the actual demand by 2030, and this massive growth will all be underpinned by technology innovation, government policy and support, and the continuing evolution of the marketplace itself," Klaessig said.

Posted 31 August 2021 by Amena Saiyid, Senior Climate & Energy Research Analyst, IHS Markit

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