Policies essential for hydrogen to reduce global emissions, says BNEF

NET-ZERO goals and policies are needed to allow hydrogen to help address hard-to-abate greenhouse gas (GHG) emissions and reduce global emissions by up to a third, according to global study and research company BloombergNEF (BNEF).

Hydrogen is a clean molecule, suitable to use as an alternative to coal, oil, and gas, in a variety of applications. To enable net environmental benefits, it should be produced using clean sources. Renewable hydrogen can be produced by electrolysis of water – a process which employs electricity to split water into hydrogen and oxygen – using electricity generated via wind or solar power. Clean hydrogen can also be produced using fossil sources, with subsequent use of carbon capture and storage (CCS).

According to BNEF’s Hydrogen Economy Outlook, in the coming decades, clean hydrogen could be deployed to cut up to 34% of global GHG emissions from fossil fuel use and industry at a manageable cost – if policies are implemented which facilitate technology scaleup and drive down costs.

The cost of wind and solar energy is falling, offering a promising route to reduce emissions from fossil fuel dependent sectors of the economy, such as steel and cement.

Furthermore, according to BNEF, the cost of alkaline electrolyser technology – used for electrolysis – fell by 40% between 2014 and 2019 in North America and Europe, going from US$2,000/kW to US$1,200/kW. The cost of Chinese-produced alkaline electrolysers fell by up to 80% to US$200/kW.

Kobad Bhavnagri, lead author and Head of Industrial Decarbonisation at BNEF, said that it currently costs US$0.7–2.2/kg to produce hydrogen from fossil fuels, without carbon capture and storage. Production using renewable electricity costs US$2.5–4.5/kg.

According to the Outlook, the cost of renewable hydrogen is primed to fall, and it suggests that before 2050 hydrogen could be produced for US$0.8–1.6/kg, in most parts of the world. This is equivalent to gas priced at US$6–12/MMBtu, making it competitive with current natural gas prices in Brazil, China, India, Germany, and Scandinavia, on an energy equivalent basis.

Additionally, renewable hydrogen is cheaper than clean hydrogen produced using fossil fuels with use of CCS. However, BNEF expects such production may continue to play a significant role in countries such as China and Germany, that may not have enough land for renewables but are well-endowed with gas and coal.

Transport and storage

Taking into account storage and pipeline infrastructure, costs of renewable hydrogen in China, India, and Western Europe could fall to around US$2/kg in 2030 and US$1/kg in 2050. But for the moment, transport and storage of hydrogen remain challenging.

According to the report, one of the most significant challenges facing the hydrogen economy is large-scale storage. Low-cost options such as salt caverns (current benchmark cost US$0.23/kg) are geographically limited. More geographically available, large-scale liquid storage technologies – such as liquid organic hydrogen carrier (LOHC) – often cost more than the initial hydrogen production.

LOHC technology stores hydrogen by binding it to a carrier molecule, making it as easy to transport as conventional liquid fuels. The carrier can then be recovered once the hydrogen is released. According to the Outlook, the benchmark cost of LOHC is US$4.50/kg and could possibly fall to US$1.86 in future. Last year, Frames Group, Hydrogenious LOHC Technologies, and MAN Energy Solutions entered a partnership to develop large-scale LOHC storage.

Another large-scale storage option is using ammonia as a carrier molecule, which in a similar way to LOHC would enable easy transport. However, there is the toxicity of ammonia to consider, as well as the need to employ high temperatures and a catalyst to enable decomposition for hydrogen release. According to the Outlook, this storage has a benchmark levelised cost of US$2.83, which could fall to US$0.87 in future.

Hydrogen gas has a low density, making it expensive to transport via road or ship. Transport via pipe is a cost-effective option for large-scale hydrogen transport; hydrogen gas flows through pipes three times more quickly than methane.

According to the Outlook, a huge and coordinated programme involving infrastructure upgrades and construction would be needed to replace existing pipes and systems incompatible with hydrogen. Replacing natural gas with hydrogen whilst providing the same level of security would require 3–4 times more infrastructure to be built, at a cost of US$637bn by 2050.

UK projects are currently working to repurpose existing gas infrastructure to enable hydrogen transport. For example, the collaborative UK gas project H21, which began in Leeds in 2016. The pioneering industry project was the first to show that it is technically feasible and economically viable to convert the UK’s gas distribution networks from natural gas to 100% hydrogen. The project is currently working to prove that a hydrogen network presents no greater risk than the natural gas network heating homes and fuelling industry today.

Currently, the outlook for hydrogen is uncertain because insufficient policy exits to support investment and scaleup of the industry. Furthermore, even if the industry were to scale up, “hydrogen is not a silver bullet,” warned BNEF. Carbon prices and emissions policies remain essential to encouraging hydrogen use, particularly in locations where coal and gas are very cheap. For example, if the cost of hydrogen production were to fall to US$1/kg, a carbon price of US$50/tCO₂ would be enough to switch to renewable hydrogen in steelmaking, and US$60/tCO₂ to use renewable hydrogen for heat in cement production.

In 2018, the Singapore budget revealed that companies emitting more than 25,000t/y of GHGs were to face a carbon tax from 2019. It was to start at S$5/t (US$3.46/t) between 2019–2023, with a review planned in 2023. After the review it was reportedly expected that the tax would increase to S$10–15/t by 2030. In 2017, industry supported plans for a US carbon tax that would gradually increase, starting at US$40/t.

Hydrogen needs to be manufactured, where options like oil and gas only require extraction, meaning it is likely to remain the more expensive energy option despite potential cost reductions. A commitment to net-zero and the right policies are therefore needed to encourage industry to switch to hydrogen.

Bhavnagri said: “The clean hydrogen industry is currently tiny and costs are high. There is big potential for costs to fall, but the use of hydrogen needs to be scaled up and a network of supply infrastructure created.”

“This needs policy coordination across government, frameworks for private investment, and the rollout of around US$150bn of subsidies over the next decade.”

Andy Brown, AFIChemE and Engineering Director at Progressive Energy, said: “Low carbon hydrogen has a key role in enabling the UK to meet its net zero obligation, through reducing the carbon impacts of our industries, homes, and transport as well as providing low carbon power to complement intermittent renewables.”

“However, this can only happen with the right policy framework in place to support low carbon solutions, particularly hydrogen production, transportation and use, as well as carbon capture and storage. With the eyes of the world focussed on the UK when COP26 is rescheduled, there is a real opportunity to demonstrate the UK is leading the way in establishing low carbon infrastructure (such as the HyNet hydrogen-to-industry and homes project in NW England, currently in FEED) as we rebuild our economy.”

IChemE’s Clean Energy Special Interest Group is currently working with The Chemical Engineer to publish a series about the hydrogen economy, and the engineering challenges and opportunities it involves.