by Steven Carlini, VP of Innovation and Data Center
Hydrogen definitely has a role to play in global decarbonization. In the decarbonized world of the future, electricity will become the dominant energy with a 60-70% share in 2050, biofuels will rise, dependence on fossil-based energy will significantly decrease and hydrogen will increase. I want to focus on green hydrogen – derived from water using electrolysis since it is the most promising. In my estimation, green hydrogen will rise between 3 – 10 times the 90 Mt of hydrogen used today by 2050. The 3X – 10X projection goes from a very conservative 270 Mt (3X) to an aggressive 900 Mt (10X). So why is there such a large gap if green hydrogen is the energy source needed for hard-to-abate applications? Mainly because there are 10 significant “pieces” of the puzzle that must come together to produce green hydrogen at the scale needed.
1) Renewable Generation Electricity Capacity - Green hydrogen must be derived through electrolysis which is highly energy intensive. For hydrogen to be green the process must be electrified using a sustainable source (hydro, wind, or solar). How much? The electricity required by 2050 for decarbonized electrification and green hydrogen production of 900 Mt (10X) is estimated to be 130,000 TWh – around 5X today’s total electrical supply of 27,000 TWh. By 2050 using the 900 Mt (10X) green H2 assumption, 30% of electricity use will be dedicated to producing clean hydrogen and its derivatives, such as e-ammonia and e-methanol.
2) Electrolyzer Capacity – Once there is sufficient renewable generation, the capacity of electrolyzer plants needs to match. According to Bloomberg NEF, today’s global electrolyzer capacity of 300 MW must grow to 3000 GW by 2050 to meet clean hydrogen demands of 900 Mt (10X). IEA estimates that every month from January 2030 onwards, three new hydrogen-based industrial plants must be built.
3) Total Cost of green hydrogen – Green hydrogen is fundamentally tied to the cost of renewable electricity, the cost of clean water, CapEx cost of electrolyzer plants, the efficiency of the electrolyzer plant, and finally the cost of storing and transporting the green hydrogen. Today, green hydrogen can cost around €2.5-€5/kg, making it significantly more expensive than the fossil fuel alternatives. Levelized prices need to fall to €1.5/kg by 2050 and possibly sub-€1/kg, to make it competitive with natural gas. However, there are incentives from governments around the world to bring the price down. In the US part of the Inflation Reduction Act created new provisions for clean hydrogen. Under the law, clean hydrogen plants in 2023 can receive a production tax credit up to $3 per kg of hydrogen, for the first 10 years of operation through 2032.
4) Electrolyzer cost – the total installed costs of a GW scale industrial electrolysis plant is currently around 1400 €/kW for Alkaline electrolyzer technology and 1800 €/kW for PEM electrolyzer technology. These need to drop at least 50% by 2050 for green hydrogen to be cost-competitive. However, CapEx improvement plans cannot be a tradeoff resulting in reduced electrolyzer efficiency or durability.
5) Electrolyzer efficiency – Today’s efficiency hovers around 50%. To meet the cost targets, the consensus in the industry is that efficiency needs to continuously improve and be at 75% by 2050. This is a major engineering challenge, plus there is efficiency degradation every year as well.
6) Water Supply – Fresh or clean water must be used in electrolysis. Ocean or salt water (sometimes called seawater) cannot be used. Clean water can be aggregated from collecting rainwater or from a process called desalination. Desalination using reverse osmosis is another very energy-intensive process that also outputs brine (salt-dense water) as a byproduct.
7) Storage – Ideally, electrolysis plants should be located in areas that have abundant renewable electrical power and fresh water. Consumption in the future will likely be places like marinas for ships/vessels and airports for long-haul planes as well as strategic places in the electrical distribution system at the turbine or areas requiring grid stabilization. This means compression, storage, and transportation will be needed. Hydrogen does not degrade over time and can be stored indefinitely. In a gaseous form, it can be stored in ways: pressurized steel tanks and underground reservoirs or salt caverns (for large capacity). Hydrogen can also be liquefied. This would deliver about 75% higher energy density than gaseous hydrogen (stored at 700 bar), But it would waste the equivalent of 25%-30% of the energy contained in the hydrogen to liquefy.
8) Transportation Grid - Moving gaseous hydrogen from the place where it is derived to the place where it will be used is not a straightforward process. There is no piping infrastructure like there is with oil and natural gas pipelines or distribution grids. Because hydrogen is such a small and potentially combustible element, constructing a pipeline is quite challenging.
9) Demand side efficiencies - Just like miles per gallon affects how much fuel a car uses, all applications using electricity or hydrogen need to be made more efficient. A massive effort is required to modernize the existing stock of inefficient assets (buildings, mobility, industrial facilities, and machines, etc.), for higher efficiency or adapt to fun on hydrogen.
10) Funding - In total, investments could amount to almost $15 trillion between now and 2050 – peaking in the late 2030s at around $800 billion per annum1 for 900 Mt (10X). Of this, about $12.5 trillion (85%) relates to the required increase in electricity generation, with only 15% (peaking at almost $150 billion per annum in the late 2030s) relating to an investment in electrolyzer, production facilities, and transport and storage infrastructure. This investment must be coordinated between private-sector action and national and local governments.
The 10 “pieces” of the puzzle that must come together are significant. As with all puzzles, if a single piece is missing, the puzzle is ruined and the 3X scenario would be more likely than the 10X. We have no choice but to put this puzzle together and in this case, we must have all of the pieces in order to meet decarbonization targets and have green hydrogen play its critical role in the effort to halt global warming.
1) ETC - Making the Hydrogen Economy Possible: Version 1.0 April 2021 Accelerating Clean Hydrogen in an Electrified Economy