Hydrogen's green fix

Green hydrogen could well be tomorrow’s preferred fuel in certain sectors, given the breathtaking pace of activity seen across the world. India is firming up its plan even as some countries take the lead.

Hydrogen can be produced by using electricity to split water in an electrolyser. If this is done using renewable energy, the hydrogen is referred to as green or renewable hydrogen. This hydrogen is pricier than that produced from natural gas or coal currently, but the cost equation is probably going to flip in the next few years. 

“Under the right conditions, the green hydrogen industry could evolve on the lines of the solar sector, with actual price reductions beating the most optimistic projections,” said Martin Tengler, BloombergNEF’s lead hydrogen analyst.

Strategy: As many as 19 countries have a hydrogen strategy today, while another 24 are working on one, according to the latest update from BloombergNEF. In January, the number of countries drawing up a hydrogen plan was less than a dozen. 

India wants to be on one of the leading players in the sector, and it plans to use the tool of competitive bidding — which has worked so well in its renewable energy sector — to become one of the lowest-cost producers of green hydrogen. It also plans to mandate use of green hydrogen in the fertiliser and refining sectors.

“We have to make India a global hub for production and export of green hydrogen,” Prime Minister Narendra Modi said last month in his Independence Day speech. Citing India’s Rs 12 trillion ($164 billion) annual bill for importing energy, he reiterated the goal of energy independence for the country. Locally produced hydrogen can play a key role there.
 

Not all countries are equally ambitious. Australia has a large pipeline of projects aimed at exporting hydrogen, in the form of ammonia, mainly to Japan and South Korea. The UK intends to initially focus on blue hydrogen, which is produced from gas with carbon capture and storage.  The US could pour billions into hydrogen technologies, to enhance its use in the power sector, in industry, heating and transport. The molecule could be produced from renewables, nuclear power or fossil fuels.

Equipment: A record 400 megawatts of electrolysers are projected to be shipped this year, according to BloombergNEF. This could increase anywhere from four to seven times in 2022, firmly establishing a gigawatt-scale market. 

Companies manufacturing electrolysers seem to be racing ahead of demand however. If all the announced manufacturing plans come to fruition, the market would be oversupplied at least until 2025, BNEF estimates.

India’s Reliance Industries has announced a plan to set up an “electrolyser giga factory” to be used for “captive production of green hydrogen for domestic use as well as for global sale.” There are other companies that are planning similar ventures locally.

Cost: The most cost competitive renewable energy combined with the best priced electrolysers would yield the cheapest green hydrogen. India is among the world’s lowest cost producers of solar and wind power. It could be among the five countries that would have the lowest levelized cost of producing green hydrogen by 2050, according to BloombergNEF. The others on the list are Brazil, Chile, the US and UAE. Costs are seen to be well below $2 per kilogram by 2030 and well below $1 per kilogram by 2050 in most markets. This is lower than the price that many markets pay for natural gas today on an energy-equivalent basis. 

In Europe, green hydrogen projects using offshore wind are being constructed. The electrolysers can be located onshore or offshore, depending on the infrastructure available, and the cost.

Projects: Shell started up Europe’s largest proton exchange membrane or PEM electrolyser in July at its energy and chemicals park in Rheinland, Germany. The 10-megawatt unit manufactured by ITM Power will initially produce up to 1,300 tonnes of green hydrogen per year. Plans are under way to expand the capacity of the electrolyser to 100 megawatts. In China, Inner Mongolia’s Energy Administration approved a cluster of plants that will use 1.85 gigawatts of solar and 370 megawatts of wind to produce 66,900 tonnes of green hydrogen per year, Bloomberg News reported last month. The projects are expected to be operational by 2023.

On August 10, Cockerill Jingli shipped a 6-megawatt alkaline electrolyser. The company is a joint venture between Belgium-based John Cockerill and Chinese Suzhou Jingli. This equipment, sold to China Energy Investment Corp, will supply green hydrogen to fuel-cell buses during the 2022 Winter Olympics.

The dash to net-zero emissions is making companies and countries look at deep decarbonisation options for all sectors, including those that are hard to abate — industries where green hydrogen may be critical to their future. 

The writer is editor – global policy for BloombergNEF.  vgombar@bloomberg.net