Everything you wanted to know about the hydrogen economy, but were too busy to research.

A summary based of my work @LiebreichAssoc

Part 1: Path to emission-free Hydrogen at 1$/kg

In September, I argued that electrolytic (=green) H2 will become competitive with fossil fuel H2 somewhere in 2030s. Much research has come to light since then, which led me to ponder what is the potential of H2 in decarbonizing our economy. https://twitter.com/gnievchenko/status/1176451011600441344

Almost all hydrogen today is used in industrial processes, particularly in the production of ammonia and petrochemicals. Around 99% of this hydrogen is produced with either gas or through coal gasification, followed by steam methane reforming.

To start competing with hydrogen derived from fossil fuels, green H2, must fall below 2$/kg.

Median cost of green H2 today would be around $3.5/kg.

The price of green H2 is certain to come down. In the near term, economies of scale will drive down levelised costs of H2 (LCOH). In the long run, however, it’s ever-cheaper power from wind and solar that will improve green H2 economics.

Imagine you own or are planning to build a wind or solar project and expect curtailment. Recalling @MLiebreich, with 33% curtailment, $20/MWh power is still competitive with other power sources at $30/MWh, but 1/3 of your product goes unmonetised. https://twitter.com/MLiebreich/status/1209787984343633920?s=20

Consider connecting to an electrolyser in order to capture excess power from renewables. Wind CF 40% means 3504 hours per year of operation, so 33% curtailment is 1168 hours.

For solar, where sun shines 8 hours per day, that’s 963 hours of curtailment.

If you’re getting curtailment only from one source or the other, and purchased your electrolyser at $450/kW CAPEX, can just about produce H2 at $2/kg.

Congratulations, you can now compete with fossil fuel H2, and upset the status quo for ammonia and petrochemical markets.

But I am going to be a little cheeky here, and assume 0.3 anticorrelation between wind and solar generation,

Allowing addition of third of curtailed solar to wind to a total of 1,500 hours. We’re now at $1.5/kgH2, where green H2 outcompetes blue H2

However, if the goal is to push out all fossil-fuel hydrogen, whether abated or not, that means going below $1/kgH2.

Getting there requires either:

1) increasing yearly curtailment to 2000 hours, or
2) further electrolyser CAPEX reductions from $450 to $250/kW.

Making most of curtailment would require PEM electrolysers, whose quick ramp up time is suitable to capture curtailed electricity. Their CAPEX is currently around $900/kW.

When could we expect economies of scale to bring that down to $250/kW?

I estimate about 80 MW of global PEM electrolysis capacity currently. With 17% learning rate, we would need to deploy somewhere around 13 GW to reach a CAPEX of $250/kW.

That’s 13 GW away from producing H2 at $1/kg within the energy system we have today.

If that doesn't seem much consider that in 2019 we deployed only ~ 50 MW of PEM electrolysers. By my estimate, reaching such scale would require $15 billion investment.

A parallel scale-up for solar PV took 13 years. But these things always go quicker than you expect.

If you are planning on investing in hydrogen from SMR, especially with CCS, this should give you pause for thought. Green H2 might undercut your plant before the end of it’s 20 year life.

Especially when gas prices are unlikely to remain as low. https://twitter.com/davidfickling/status/1229215228757307392

That point might even come before 2030.

But reclaiming curtailment value is not as simple as just adding an electrolyser. To that end, there needs to be a market for carbon-free hydrogen.

What sectors of our economy could be disrupted? More on that next week in Part II.

We @AuroraER_Oxford are currently embarking on a multi-client study:

What will the Northwest European market for hydrogen look like?

If you're interested in finding out more, get in touch!

Mr @JeffBezos , I’ve heard you might have $10 bn to spare on climate issues. Care to help? :)