Breaking through: The promise of green hydrogen
Conventional “grey” hydrogen produced from natural gas claims the lion’s share of the hydrogen market. But Leidos has recently seen a surge in interest from investor and developer clients in “green” hydrogen, which is produced by the electrolysis of water using renewable electricity.
Electrolysis technology is not new – so what has sparked the increased interest? The answer has to do with advances in electrolyzer technologies, cost reductions in green hydrogen production, and emerging uses and applications that promise to increase the demand for hydrogen.
Electrolysis: The Basic Facts
Electrolyzers split water into hydrogen and oxygen by passing direct current through two electrodes in water. Oxygen is produced at the positive electrode (anode), and hydrogen is produced at the negative electrode (cathode). Dating to the mid-20th century, alkaline-type electrolyzers using an aqueous solution of potassium hydroxide (KOH) have been used to commercially produce conventional hydrogen. While alkaline electrolyzers are still in use today, newer electrolyzer technologies improve on efficiency and, potentially, cost. A newer type of electrolyzer, known as either a proton exchange membrane or polymer electrolyte membrane (PEM), uses a specialty plastic membrane as the electrolyte and pure water instead of a KOH solution. Another technology currently in the experimental phase – the solid oxide electrolyzer cell (SOEC) – uses ceramics as the electrolyte. The SOEC technology operates at high temperatures, splits the water in the form of steam, and makes use of available heat to reduce its use of electricity.
Each of these technologies has trade-offs. Alkaline technology is mature and less capital intensive than PEM. PEM electrolyzers are more efficient and are able to react quickly to fluctuations in renewable power generation. These advantages come with higher capital costs, although costs for PEM are beginning to come down. Lastly, SOEC technology is still emerging but has the potential to operate very efficiently. Finding the sweet spot between efficiency and costs along with a strong global appetite to move away from fossil fuels are the keys to making the production of green hydrogen more competitive with conventional hydrogen.
The Cost Imperative
The primary drivers for the cost of green hydrogen production are the capital cost of electrolyzers and the cost of renewable power. Current estimates for the all-in production cost of green hydrogen range from $3 to $8 per kilogram. This wide cost spread is due to the varied cost of renewable power, which in turn is linked to geographic location. Grey hydrogen, on the other hand, costs approximately $2 per kilogram, primarily linked to the cost of natural gas, and has low technology risk.
While the cost of green hydrogen is not currently competitive with conventional hydrogen, several trends are beginning to close the gap. Foremost, the costs of producing electricity from wind and solar energy continue to fall. Advances in electrolyzer technologies are driving toward reduced cost and increased efficiency of electrolysis. Additionally, potential carbon reduction credits could offset a portion of the cost for green hydrogen. All these factors, combined with additional governmental support and incentives, will play their part in green hydrogen potentially reaching a competitive price point in the foreseeable future.
With efforts worldwide to reduce carbon emissions from the production and use of energy, green hydrogen represents a promising carbon-free fuel that can be used in a variety of new ways. Up until now, hydrogen's primary use has been as a feedstock for the production of ammonia fertilizer and in hydroprocessing to upgrade heavy crude oil. As more of the demand for oil is met by heavier crude, more hydrogen is being used in oil refining. Outside of these traditional spaces, developers are pursuing new uses for hydrogen such as hydrogen fuel cell vehicles; home and industrial building heating; and electrical power production through hydrogen-fueled combustion turbines, boilers, and fuel cells. Combustion turbine suppliers are adapting their technologies to use high-hydrogen/natural gas blends and even pure hydrogen as fuel; natural gas suppliers are testing transporting natural gas/hydrogen blends through existing pipeline systems and for use in home appliances.
Another potential use of hydrogen is renewable energy storage. Hydrogen can be transported as a compressed gas, a cryogenic liquid, or a solid. The gas and liquid storage options are commercially proven. Research is underway to develop cost-effective and energy-efficient solid storage options such as metal hydrides, chemical hydride, and sorbent-based materials. Alternatively, hydrogen can be converted to ammonia, transported in that form, and converted back to hydrogen at the destination point.
For green hydrogen to achieve commercialization as a carbon-free fuel, the industry must overcome the classic chicken-and-egg dilemma: putting in place the needed infrastructure – including hydrogen transport, hydrogen vehicle refueling stations, and end users equipped to use hydrogen – before hydrogen production is fully scaled. There is less incentive to construct the supporting infrastructure and deploy end-user technologies if the hydrogen production facilities are not available and vice versa. It’s likely that government support will be required to unravel this conundrum and promote widespread application. In the meantime, green hydrogen could be initially implemented to reduce the carbon footprint in the existing hydrogen markets, primarily ammonia production and petroleum refining.
When it comes to development and financing of green hydrogen production, investors and developers must be aware of technology risks of emerging electrolyzer technologies, such as service life, maintenance costs, and long-term performance and associated guarantees and warranties. Leidos offers experience in due diligence across many types of first-of-a-kind technologies and traditional hydrogen technologies, understanding of the risks that lenders and developers face, and detailed knowledge of combustion turbine technologies. Contact us to learn more about new and emerging opportunities for green hydrogen.