Who’s investing in hydrogen and why?
This article is based on the paper, “Is hydrogen Asia’s new energy commodity? Opportunities and challenges for Australia”, published in The APPEA Journal 2020, issue 60. Purchase the full report here for A$25.
Decarbonisation is now a key global focus for businesses, governments and individuals. The goal is to be net-carbon neutral, but the pathway to get there is unclear. The future energy mix that will provide a carbon-free solution could come in several different guises, but in many of these future scenarios, hydrogen, and in particular green hydrogen, plays a large part.
What is so attractive about hydrogen?
First, its application is versatile. Approximately 70 million metric tonnes are produced globally and is commonly used in carbon-intensive industrial processes such as fertiliser, steel and concrete manufacturing. But the energy-dense gas can also be used to generate power and heating or potentially be used as a medium to store excess energy.
Second, its ‘high-energy’ density is a key differentiator. Although solar and other renewables have a growing role globally in supplying the grid, for specific energy-intensive industries, such as steel, they are not deemed a suitable replacement for hydrocarbons such as gas.
But there are problems. Almost all the hydrogen generation today is based on fossil fuels. About 71% is ‘grey’ hydrogen (steam methane reformation, or SMR), whereas~27%is ‘brown’ hydrogen (gasification of coal or lignite). These processes have been around for decades and the main challenge is dealing with the carbon emissions generated. A possible remedy is ‘blue’ hydrogen, where the production is paired with carbon capture and storage.
To offer a truly carbon-free hydrogen energy solution, we must look to green hydrogen, a new technology that is making headlines around the world. This is where hydrogen is produced from water by renewable-powered electrolysis (Hulst 2019). The process is carbon-emission free and generates pure hydrogen gas. The concept will have to piggy-back on the rapid rollout of renewable energy over the coming decades.
Which key companies are attracted to hydrogen?
The Hydrogen Council was set up to accelerate the commercialisation of hydrogen. In particular, they target multinationals with the ability to generate critical mass and influence the pace of development.
The council has attracted over 80 global members ranging from innovative small-medium enterprises (SMEs) to large multinationals. Participating members are from a variety of sectors, including automakers (such as BMW, GM and Honda), power and gas utilities (Engie and EDF), engineering (Siemens, Bosch and Alstom) and the newly formed investor group (Antin Infrastructure Partners, BNP Paribas and Société Générale).
Several oil and gas companies such as Saudi Aramco, BP, Shell and Total also sit on the steering group. Among other notable oil and gas companies, Chevron and Woodside are members supporting the core steering group.
What does the global pipeline of green hydrogen technology projects look like?
Today, the green hydrogen production pipeline is tiny, with only US$365 million invested in 94MW of project capacity, based on size of electrolyser. However, the growing list of interested parties with big balance sheets has seen the pipeline of potential and mooted green hydrogen projects balloon. The estimated total capacity of announced projects between 2020 and 2025 is over 3.2 GW, which is roughly 12 times the total installed capacity over the previous decade.
What are the hurdles for the industry?
Reduction of hydrogen electrolyser unit development cost is first and foremost. Wood Mackenzie expects capital costs of new electrolyser capacity to fall by one-third by 2030, with most of the cost reduction being attributed to the manufacturing process moving towards automation. However, using Wood Mackenzie’s proprietary production cost model for green hydrogen, this might still leave green hydrogen out of the money.
Policy will also be an influencing factor. If, as expected, national and corporate strategies embrace green hydrogen as part of the strategy to decarbonise, green hydrogen technology could take off and drive the economic threshold down. Government strategies, such as Australia’s National Hydrogen Strategy, are a necessity to drive technological advancements.
What are the opportunities in Australia?
Australia is primed to take advantage of the increasing global momentum in green hydrogen technologies. Purchase the full paper here for just A$25 here to discover the opportunities and challenges in store for Australia’s budding hydrogen industry.