Hydrogen today

Present or Future?

Essential link for the transition

It is not the first time that hydrogen has positioned itself breaking into the global energy landscape. Its use as a power source began in the first decades of the 19th century, used as lighting gas and to inflate hot air balloons.

Subsequently, when the approach and concern about running out of fossil fuels (estimate of the ” peak oil ”) was leading strategic analysis around energy, the first two waves of hydrogen hype were coming at the same time as the oil crises (1973 and 1979), and focused on hydrogen as an alternative to conventional fuels.

Today, the alarm is raising due to the excess emissions from fossil resources and their increasingly visible impact on climate change, people, and the environment. Climate neutrality is the objective set by more than 100 countries for 2050 (including the EU or highly emitting countries such as China or the USA ) and involves the decarbonization of all sectors of our economy: it is an ambitious objective in a context where the demand for primary energy is increasing exponentially (the energy sector is responsible for more than 44% of emissions!).

In this context, we are currently having the third wave of hydrogen hype, which is expected to play a significant role in the ongoing energy transition for several reasons:

• It is the only fuel that does not generate carbon dioxide during its use, offering the possibility of decarbonizing multiple sectors (mobility or energy).

• A priori endless reserves, as soon as it is generated by renewable sources.

• It emerges as a solution to use the renewable energy surplus, and at the same time favours the decarbonization of energy demand that is not easily based on electricity (heat, heavy mobility).

• The colors of hydrogen

Hydrogen is the simplest chemical element (one proton and one electron) and the most abundant one in the universe, although we did not find it freely on our planet but forming compounds (such as water or methane), for which it is necessary to apply specific technology and energy to obtain them. Under normal conditions, gas (H2) has a diatomic form, and although it has a higher mass-energy density (energy per unit of mass) than traditional fuels, it is a very light gas (volumetric density 0.09 kg/Nm3), that is why it requires large volumes for storage. This point determines the energy balance of the entire value chain (production, distribution, consumption).

There are different types of hydrogen classified according to its production process and the energy source used.

The methane contained in natural gas is the most common feedstock used in the industrial production of hydrogen (both pure and in the form of syngas ) through the steam reforming process. This form of hydrogen, derived from fossil fuels, is also known as gray hydrogen, and carries the CO2 emission resulting from the process (5.5 t CO2 per t H2 produced). If the CO2 emitted is captured (CCS process), then the hydrogen thus generated is called Blue.

Green hydrogen, free of emissions, currently corresponds to only 0.3 percent of the total, and is generated through the electrolysis of water with renewable electrical energy, such as photovoltaic or wind power. Green hydrogen is one of the backbone elements for decarbonization.

Figure 1 . Hydrogen production. Data 2020. (Others include: 1.9% as a by-product of the chlorine production process, 0.4% SMR with CCS, 03% EERR electrolysis, 0.1% coal gasification with CCS)

Current and future global demand for hydrogen

It is estimated a demand of around 300 tons of hydrogen  by mid-century, and of approximately 520 tons in the year 2070, compared to the current annual demand of 70 tons, to supply mainly the sector of refining and fertilizers production (ammonia).

Figure 2 . Perspective evolution of hydrogen demand (ECA scenario of the AEI)

The sector that will experience the highest increase in demand will be the transport, accounting more than 100 tons per year in 2050, both for direct mobility (fuel cell) and for the synthesis of e- fuels.

In Europe, within the industrial sector, a redistribution in demand is expected between now and 2050, marked by the irruption of hydrogen in the steel sector (prospectively estimated at 123 TWh/year) and the almost total disappearance of demand in refineries.

Figure 3 . Evolution of the distribution of hydrogen demand for the industrial sector in Europe

Green hydrogen production expectations

In order to meet the decarbonization objectives set, supranational entities are currently betting on promoting the production of green hydrogen, and creating an adequate infrastructure that allows the substitution of natural gas as far as possible.

Globally, today there is a total electrolysis capacity of 200 MW, and the largest production plant generates 8t/day of hydrogen. Around 350 electrolysis projects for the generation of green hydrogen have recently been announced, which would produce some 8 Mt in 2030, compared to the 12 Mt H2 projected by the ECA scenario or to the 30 MtH2 that correspond to the scenario even more ambitious goal of Zero Net Emissions (CEN).

In Europe, France leads the forecast for the installation of electrolysis capacity in 2030 (6.5 GW), followed by Germany and Italy. In Spain, a total capacity of 4 GW is expected according to the policy scenarios and announced commitments. If an optimized hydrogen production cost scenario were considered, assuming a higher deployment of photovoltaic and wind energy, the estimated capacity figures could be multiplied by a factor of 10.

Figure 4. Forecast of capacity and consumption in Europe in 2030.

Prospective costs in hydrogen production

One of the barriers that must be overcome to reduce the gap between projected green hydrogen production with the prospective demand necessary to meet decarbonization targets is its generation cost.

In most of the world, gray hydrogen production is the cheapest option, ranging from €0.5 to €1.7/kg depending on the gas price. The levelized cost of green hydrogen is between €3 and €8/kg, with the cost of renewable electricity representing 50-90% of the total (depending on the cost of electricity generation and hours of availability).

Figure 5. LCOE in Europe based on PV in 2020.

One of the barriers to overcome to reduce the gap between green hydrogen production altogether with the prospective demand necessary to meet decarbonization targets is its generation cost.

Most of the world considers grey hydrogen production the cheapest option, ranging from €0.5 to €1.7/kg depending on the gas price. The levelized cost of green hydrogen is between €3 and €8/kg, representing 50-90% of the total cost of renewable electricity (according to the cost of electricity generation and hours of availability).

The factors which can reduce the gap in the cost of production of grey and green hydrogen in the future are the decrease in the price of renewable electricity, the price fall in equipment costs as the technology deployment advances (electrolysis) and the cost of CO2 emission.

In addition, the technological improvement that results in greater production efficiency (including the overall performance of the equipment or BoP , not only the electrolysis stack ) will modify the impact of the cost of electricity on the levelized price. Although with the massive deployment of renewable energies, surplus energy available at low cost will bring a drop in the price of electrolysis production, most of the projected scenarios that allow a drop below €3/kg of hydrogen contemplate continuous operation. (RE installation dedicated to hydrogen generation).

In addition to the production costs, it is relevant to analyse the costs of transportation and distribution of hydrogen. Although pipelines are the most direct means of transportation, conversion of existing pipelines is technically challenging.

Hydrogen can be stored as a compressed gas, in liquid form, or by means of liquid organic hydrogen carriers (such as methanol or other aromatic molecules) and ammonia. Liquid hydrogen transport is estimated to be the most expensive option, although regasification at import terminals would have significantly lower cost than ammonia cracking.

Figure 6. Forecast of prices of green Hydrogen in 2030 according to transport route and method .