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17 Jun 2019

Hydrogen by pipe: is it hype?

As far back as the 1870s the energy potential of hydrogen was being recognised. In his novel ‘The Mysterious Island’, the visionary author Jules Verne wrote, “water will one day be employed as fuel, that hydrogen and oxygen which constitute it, used singly or together, will furnish an inexhaustible source of heat and light, of an intensity of which coal is not capable.”

Now, almost 150 years later we are starting to realise that maybe he was on to something.  It is possible that hydrogen offers a route to the decarbonisation of our energy systems and this is becoming increasingly attractive to policy makers and the energy industry for a number of reasons.

What are the benefits of hydrogen?

Primarily, hydrogen emits zero carbon when burned and so could be considered a zero carbon energy source, depending on how it is produced.  It can be used as a replacement for natural gas in a number of applications including power generation, industrial feedstocks and process heat and domestic heat and cooking. It can also be used with fuel cells to decarbonise transport. In short, it can help to decarbonise those sectors where a total electrification solution could be extremely difficult and expensive to achieve.

The energy industry has grasped the potential of hydrogen and many projects are underway to investigate its production and use. These projects vary in scale from investigations on blending hydrogen with natural gas in existing networks, hydrogen CCGTs, small stand-alone electrolysers to the grand ambitions of the  H21 project in the North of England. For gas producers and network companies, hydrogen provides a possible answer to the existential threat of an all-electric world.  If natural gas can be converted into hydrogen with little or no carbon emissions, then the existing gas networks could be repurposed to deliver hydrogen to provide heat to industry and homes.  Hydrogen can also be stored in many of the existing natural gas storage facilities and this could allow a form of seasonal storage that renewables alone cannot provide.

For industry, hydrogen offers a route to decarbonisation that otherwise could be extremely costly and difficult.  It offers an alternative to electrification – which for some may not even be feasible – and to the installation of carbon capture at individual plants. Green or blue hydrogen can also decarbonise many industrial feedstocks e.g. ammonia production and demonstration projects are investigating the use of hydrogen to decarbonise steel production.

For the electricity and renewables industry, converting power to hydrogen allows excess renewable electricity to be used instead of being curtailed and this gives additional value and revenue for renewables. It also raises the possibility to use hydrogen as a storage medium for electricity. Excess electricity can be used to create hydrogen at times of low demand or price, which can then be stored and converted back into electricity when demand or price increases.

So, what’s the issue?

It seems hydrogen could solve all our energy problems! In reality, there are many issues that need to be considered before embarking on a pathway to hydrogen deployment. Firstly, the hydrogen supply chain including production, transport and storage will need to be significantly expanded to meet potential demand. But without certainty that this demand will emerge, the risks are significant.

Secondly, there are issues with each of the hydrogen production methods.  Grey hydrogen is not low carbon and so has little role to play in a decarbonised energy environment.  Blue hydrogen needs CCS, and although this is a proven technology, we are not yet at a stage where it can be deployed economically at scale. Green hydrogen is the most expensive of the production methods and will need very low electricity prices and reductions in the costs of electrolysis to make it a reality. Pyrolysis is not yet proven to be able to work at scale and be competitive with the other production methods. However, if hydrogen is the solution to decarbonising the difficult sectors of residential heat, industrial heat and the heavier end of the transport sector then these issues will need to be overcome. Pöyry’s analysis carried out recently for our study Fully Decarbonising Europe’s Energy System by 2050 compared a zero-carbon gas pathway against an all-electric pathway and examined the potential role for hydrogen for the heat, power and transport sectors. In the zero-carbon gas pathway, hydrogen demand is expected to grow significantly in these three sectors to reach over 2,000 TWh by 2050.  We also examined the different production costs of hydrogen and found that hydrogen production costs from methane reforming were consistently lower than hydrogen produced by electrolysis.

This is because by 2050 a flexible demand side (made possible by millions of electric vehicles) and high levels of interconnection mean that there is generally an absence of many very low electricity price periods, which otherwise would support hydrogen production from electrolysis at lower cost than from methane reforming.  Subsequently methane reforming is the dominant source of hydrogen production. However, production from electrolysis has a higher share in some regions in Europe with very high renewable penetrations and less system flexibility (e.g. Iberia/Italy).

The figure above shows the potential growth in hydrogen demand by sector to 2050 from our zero-carbon gas pathway and shows the significance of the heat and transport sectors in driving this demand growth. The figure below shows the relative split of hydrogen production between SMR/CCUS and electrolysis in the same pathway.

What is the future of hydrogen in the energy mix?

The potential is clear, but the route to realising this potential is uncertain. There are numerous barriers that will need to be overcome which include creating a business case, acceptance of CCS, public acceptance of hydrogen in the home as well as proving the safety case for hydrogen. If these barriers can be overcome then possibly we can exploit Jules Verne’s ‘inexhaustible supply of heat and light’.

Contact information

John Williams
Senior Principal, Pöyry Management Consulting