Renewable hydrogen to undercut gas on price, but not the answer for transport | RenewEconomy

Renewable hydrogen to undercut gas on price, but not the answer for transport

Report says renewable hydrogen could beat out gas on power generation – but it’s not the answer for low-carbon automotive transport.


Renewable hydrogen has the potential to slash the global greenhouse gas emissions of fossil fuel power generation and industry by more than one third, at a cost competitive with natural gas, new research has found – but it’s not the answer for low-carbon automotive transport.

Bloomberg New Energy Finance’s Hydrogen Economy Outlook, published Monday (US time) finds that with large-scale geological storage and the right policies in place, renewables-produced hydrogen could be used to replace natural gas in both dispatchable power generation and industrial applications.

The report – just the latest in a raft of studies talking up the potential of green hydrogen – finds that solar and wind-based hydrogen could be produced for $US0.8 to $1.6/kg in most parts of the world before 2050, putting it on par with current gas prices on an energy-equivalent basis.

The cost could be even lower in renewables-rich and spacious countries like Australia, the report says, where hydrogen could be produced from solar and wind farms that might otherwise be curtailed, stored and transported back to a generator at a cost between $8-14/MMBtu by 2050.

“Hydrogen is promising and powerful because it can be used for so many things,” said the report’s lead author and BNEF’s head of industrial decarbonisation, Kobad Bhavnagri.

“Renewable energy has paved the way to carbon-free electricity. But to meet net-zero emissions targets, we need to go beyond electricity and have carbon-free fuels. That is the role for hydrogen,” he said.

“In the years ahead, it will be possible to produce it at low cost using wind and solar power, to store it underground for months, and then to pipe it on-demand to power everything from ships to steel mills.”

But – and there are quite a number of buts – there would first need to be the right policies, roughly $US150 billion in subsidies, a carbon price, and a massive investment in infrastructure for hydrogen to achieve this sort of potential.

At this stage, the report notes, storing and moving hydrogen remains challenging – and for it to become as ubiquitous as natural gas would require “a huge, coordinated program of infrastructure upgrades and construction.”

And they mean huge. According to the research, three to four times more storage infrastructure would need to be built at a cost of $US637 billion by 2050 to provide the same level of energy security as natural gas.

Storing hydrogen in large quantities will also be a significant logistical challenge, the report adds, with low-cost, large-scale options like salt caverns known to be geographically limited, and the use of alternative liquid storage technologies cost prohibitive.

As for government policy, for hydrogen to gain use, this will be critical, Bhavnagri says.

“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 roll-out of around $150 billion of subsidies over the next decade,” he added.

“That may sound daunting but it is not, in fact, such a huge task – governments around the world currently spend more than twice that every year on fossil fuel consumption subsidies.”

And if the right supporting policies are critical to green hydrogen making it to the meainstream, so too is carbon pricing.

“Even at $1/kg, carbon prices or equivalent measures that place a value on emission reductions are still likely to be needed for hydrogen to compete with cheap fossil fuels in hard-to-abate sectors,” the report says.

“This is because hydrogen must be manufactured, whereas natural gas, coal and oil need only to be extracted, so it is likely always to be a more expensive form of energy.

“But if the required policy is in place, up to 34% of greenhouse gas emissions from fossil fuels and industry could be abated using hydrogen – 20% for less than $100/tCO2 (Figure 7).”

As for transport, the report notes that in this sector the use of renewable hydrogen would most likely be limited to ships and heavy trucks.

“Long-haul, heavy-payload trucks …could be cheaper to run using hydrogen fuel cells than diesel engines by 2031,” the report says.

“But the bulk of the car, bus and light-truck market looks set to adopt battery electric drive trains, which are a cheaper solution than fuel cells. In our view, the fuel cell vehicle industry will also be the most expensive sector to scale up, requiring $105 billion in subsidies to 2030.”

The promise of hydrogen as the final piece of the puzzle for a renewable energy future has many ardent disciples, most notably in Australia the nation’s chief scientist, Alan Finkel.

His National Hydrogen Stratgy, released in November 2019, highlighted the enormous opportunities for Australia in pursuing “green” hydrogen exports, based around the country’s enormous potential for wind and solar power.

But it also raised concerns that hydrogen production could end up being a prop for Australia’s struggling coal power industry – concerns Finkel has done little to allay after using a February National Press Club address to argue for coal and gas to be used in the production of hydrogen, to provide an easier pathway to establish a hydrogen industry.

Another report, published by the Hydrogen Council in January, forecast that the cost of renewable hydrogen production could halve over the next decade, putting Australia is in prime position to become a leading global supplier of a green fuel that would beat even “unabated” fossil fuels.

And just this month, mining industry majors Anglo American, BHP, Fortescue and Hatch joined forces to “de-risk and accelerate” the production of renewable hydrogen for the resources sector and other heavy industries.

Beyond the research and analysis, there is no shortage of projects in the pipeline, either. In South Australia, construction is underway on an $A11.4 million, 1.25MW renewable hydrogen electrolyser at the Tonsley Innovation District in Adelaide, that is expected to start production around mid-2020.

The project is the first Australian demonstration project of its scale and size – with small quantities of renewable hydrogen produced and blended into the local gas distribution network from next year. Another electrolyser project is in the early stages of development in Brisbane, at a BOC gas facility, and in New South Wales a government-backed UNSW project will pilot a hydrogen energy storage system.

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