Morals And Money Will Escalate
The Pace Of The Hydrogen Economy
By Ken Silverstein on Oct 15, 2019
During the presidency of George W. Bush and in the early 2000s, Americans started to learn more about the hydrogen economy — or the ability to generate electricity and to drive vehicles using pure and clean hydrogen molecules. At the time, it seemed like a hazy concept but today, it is becoming clearer.
The hydrogen movement is alive today. Hydrogen, in fact, has several practical uses that include using it for heating/cooling, a feedstock for industry, transportation and to make electricity. But the cost of producing green hydrogen from renewable energy sources remains too high. And thus, a key question is what will drive investment in new technologies that will bring down the cost of clean hydrogen production.
“You can do it by political will, which I’m not a fan of. Or, you can do it by mass intelligence in which money follows money,” says Daniel Breckheimer, who is in private finance with Finaport in Zurich. “With all the destructive or game changing businesses that I have seen or read about in my career, this is always involves a grass root and brilliant mind — somebody who manages to breakthrough. Nobody, for example, believed in the millions of personal computers 40 years ago.”
Breckheimer, who participated in a panel discussion moderated by this reporter and hosted by Enapter last week in Bangkok, goes on to say that the green energy movement follows the transition to personal computing. To that end, he adds that there is a huge need for decentralized power generation and delivery, energy storage and clean hydrogen production.
To be clear, electrolysis is used to create an electric current to split apart hydrogen and oxygen from water. To do this, it requires an energy source. If clean energy resources are used in this process, it is called “green hydrogen.” Right now, most hydrogen is produced by steam reforming of natural gas, which is called “grey hydrogen.” If the resulting CO2 releases are captured and buried, it is referred to as “blue hydrogen.”
Given the current the rate of technological advancement, some experts say that “green hydrogen” won’t achieve grid parity for 20 years. But Enapter believes that through disruptive tools, that timeline will occur much quicker and perhaps within 5 years. Right now, the cost to produce green hydrogen from solar power is four times that of the price of gasoline. The goal is therefore to reduce the cost from roughly $4 to $8 a kilogram to $1 to $1.50 for the same unit.
Is 2026 Doable?
To illustrate, solar panels are used to generate electricity which is used in an electrolyzer to create hydrogen. That gas is then stored in a tank before it is used to make clean fuels, to generate clean electricity or as a feedstock for industry. The cost drivers of hydrogen are the electrolyzer, compressor, storage tank and fuel cells. A lot of investment has already gone into fuel cells. The major hurdle to creating cost-effective green hydrogen is the electrolyzer, which needs to be scaled up.
“The price of solar production has dropped by 85% over the last 10 years and that will go lower a little bit more. But I think we have to also accept that it’s kind of bottoming out,” says Girana Anuman-Rajadhon, a lawyer in Bangkok who specializes in solar projects and project finance, during the panel discussion.
While her comments refer to utility scale solar projects that connect to the grid, she notes that decentralization will occur in global regions where it is difficult to construct a centralized generation and delivery mechanism: Southeast Asia and Sub-Saharan Africa, to name two. But Anuman-Rajadhon goes on to say that, by 2026, the electrolyzer will get mass produced and “we would be able to produce pure green clean hydrogen at $1.29 a kilogram.”
In 2018, 72 million tons of pure hydrogen was produced. Almost 99% of that was fossil based, says Prakash Sharma, head of markets for Wood Mackenzie’s Asia Pacific unit. That has created a huge carbon footprint, necessitating the need to make hydrogen from solar and wind. He says that “grey hydrogen” produced from fossil fuels now cost $1-$3 per kilogram and that for renewable or green hydrogen, such prices are $3-$4 a kilogram and in some cases, they are notably greater.
To bring down the cost of green hydrogen, he says that mass production is required. Another way, is to put a price on fossil fuel production such as a carbon tax – one that is high enough to expedite the flow of capital into green technologies.
To be sure, the move to “green hydrogen” won’t be easy. That is because the shale gas revolution has meant an abundance of natural gas at cheap prices. And Pongsak Luarngchindarat, in business development for BIG in Bangkok, says that it is the most practical method to produce hydrogen in Thailand. If the natural gas has to be transported across the ocean in the form of liquefied natural gas, however, it will eventually lose those cost advantages. And if clean energy produced and delivered onsite becomes more common, then that will advance the cause of green hydrogen.
“Let’s combine morals and money,” says Breckheimer, with Finaport. “I believe in the market forces and I believe in the smart brains that will combine to drive those markets. I believe in the creative power of business as opposed to regulations.”
Grey hydrogen production is here but the prevalence of green hydrogen creation is coming. The potential is enormous and some investors see it. The goal now is to mass produce the electrolyzers, fuel cells and batteries used in that process, all to escalate the growth of the green economy while also scaling back the effects of climate change.