Cost downtrend to spur rollout of hydrogen as energy fuel
Published Jun 29, 2023 04:08 am
Cost downtrend to spur rollout of hydrogen as energy fuel
By MYRNA M. VELASCO
THE HAGUE – Significant cost downtrend and further improvements in technological innovation are warranted before hydrogen could gain headway for commercial rollout into markets, according to multinational energy giant Royal Dutch Shell. In an interview, Peter Wood, chief energy adviser of Royal Dutch Shell emphasized that in the company’s current ‘Archipelagos Scenario’ delving on energy security concerns on the aftermath of the Russia-Ukraine war and the coronavirus pandemic, “hydrogen is slow to take off, because it is very expensive at the moment and it is not evident that people will yet pay for it.” Based on numbers drawn from markets, it was cited that the current cost of hydrogen is still at prohibitive $5 to $10 per kilogram, which is in the equivalent of $50 per million BTU (British thermal unit) for gas pricing. For this emerging technology to turn cost-competitive on the pockets of consumers, Wood indicated that the price must go down to the level of $1.0 per kilogram, “which is the number a lot of people are targeting; and it would be nice if it’s a little bit under that – or within that kind of range.” Shell is currently building a 200-megawatt electrolyzer in Rotterdam in the Netherlands, touted as the biggest facility of this kind in Europe once it gets on commercial stream; and this is seen paving the way for hydrogen gaining traction as innovative technology that will permeate energy markets. At this stage, Wood conveyed that their company is “marketing hydrogen and finding out who’s prepared to pay for it – and what they’re going to use it for…the promise of hydrogen are potential applications in very heavy transport – potentially road and marine transport, then in industries or use it as an ingredient to make other things, green ammonia, methanol or other chemicals, so it’s a kind of building block in the energy system.” He, nevertheless, reiterated that the niggling industry question is “how quickly it is going to grow? First, for hydrogen to be economically viable at scale, costs need to fall significantly – it has to fall by an order of magnitude.” Speedy ramp up of renewable energy (RE) installations could also be key in the commercial viability of hydrogen, because electricity generated from intermittent solar and wind when they are not yet needed can be channeled into the electrolyzer, producing hydrogen then as a form of storage. And when RE generation dips, such hydrogen can be converted back into electricity through fuel cells, hence, adding immediate power supply into the system. Wood further qualified that in Shell’s ‘Sky Scenario’ or a study that tackles challenges in energy markets, the original projection had been quicker incursion of hydrogen into markets because the assumptions had been that “costs reduce at a faster pace and innovation drives down cost – not only the hydrogen electrolyzers but also hydrogen electricity.” But with all the geopolitical and economic challenges confronting the world as integrated in the ‘Archipelagos scenario’ of the company, Wood noted that “those things happen much more slowly – costs would just gently fall and the premium for green fuel does not rise quite quickly.” Electrolyzer, in particular, is the system or device that uses electricity to split water molecules into hydrogen and oxygen, and the byproduct of that will be hydrogen. In the production value chain, the cost of electrolyzer and electricity make up 70 to 80-percent of the overall hydrogen price. Shell expounded that in both its Sky and Archipelagos scenarios, “hydrogen becomes the fuel of choice for long-distance heavy freight road transport,” and that the first commercial hydrogen trucks would appear on the road by the latter part of the decade. In terms of demand, the company forecasts that under the Sky scenario, hydrogen growth will be two exajoules (EJ) per year in the 2040s; which is five times compared to the rate factored in into the Archipelagos scenario. “In Archipelagos, rapid growth does not emerge until after 2050. Achieving an annual growth rate of 2.0 EJ would require the equivalent of around 700 250MW electrolyzers every year, with enough renewable energy generation capacity to power them,” Shell stipulated. In the Philippines, power producers have been targeting to retrofit their gas plants into hydrogen, but the possibility seen on this sphere could just be a limited blend of hydrogen in existing gas-fed fleets that would come in the range of 5 to 20-percent. Wood propounded that the greater promise is on the move of turbine manufacturers to eventually roll out new technologies in energy markets that could both run on 100-percent gas and could also switch over to hydrogen if and when hydrogen is already deployed on competitive prices.
THE HAGUE – Significant cost downtrend and further improvements in technological innovation are warranted before hydrogen could gain headway for commercial rollout into markets, according to multinational energy giant Royal Dutch Shell. In an interview, Peter Wood, chief energy adviser of Royal Dutch Shell emphasized that in the company’s current ‘Archipelagos Scenario’ delving on energy security concerns on the aftermath of the Russia-Ukraine war and the coronavirus pandemic, “hydrogen is slow to take off, because it is very expensive at the moment and it is not evident that people will yet pay for it.” Based on numbers drawn from markets, it was cited that the current cost of hydrogen is still at prohibitive $5 to $10 per kilogram, which is in the equivalent of $50 per million BTU (British thermal unit) for gas pricing. For this emerging technology to turn cost-competitive on the pockets of consumers, Wood indicated that the price must go down to the level of $1.0 per kilogram, “which is the number a lot of people are targeting; and it would be nice if it’s a little bit under that – or within that kind of range.” Shell is currently building a 200-megawatt electrolyzer in Rotterdam in the Netherlands, touted as the biggest facility of this kind in Europe once it gets on commercial stream; and this is seen paving the way for hydrogen gaining traction as innovative technology that will permeate energy markets. At this stage, Wood conveyed that their company is “marketing hydrogen and finding out who’s prepared to pay for it – and what they’re going to use it for…the promise of hydrogen are potential applications in very heavy transport – potentially road and marine transport, then in industries or use it as an ingredient to make other things, green ammonia, methanol or other chemicals, so it’s a kind of building block in the energy system.” He, nevertheless, reiterated that the niggling industry question is “how quickly it is going to grow? First, for hydrogen to be economically viable at scale, costs need to fall significantly – it has to fall by an order of magnitude.” Speedy ramp up of renewable energy (RE) installations could also be key in the commercial viability of hydrogen, because electricity generated from intermittent solar and wind when they are not yet needed can be channeled into the electrolyzer, producing hydrogen then as a form of storage. And when RE generation dips, such hydrogen can be converted back into electricity through fuel cells, hence, adding immediate power supply into the system. Wood further qualified that in Shell’s ‘Sky Scenario’ or a study that tackles challenges in energy markets, the original projection had been quicker incursion of hydrogen into markets because the assumptions had been that “costs reduce at a faster pace and innovation drives down cost – not only the hydrogen electrolyzers but also hydrogen electricity.” But with all the geopolitical and economic challenges confronting the world as integrated in the ‘Archipelagos scenario’ of the company, Wood noted that “those things happen much more slowly – costs would just gently fall and the premium for green fuel does not rise quite quickly.” Electrolyzer, in particular, is the system or device that uses electricity to split water molecules into hydrogen and oxygen, and the byproduct of that will be hydrogen. In the production value chain, the cost of electrolyzer and electricity make up 70 to 80-percent of the overall hydrogen price. Shell expounded that in both its Sky and Archipelagos scenarios, “hydrogen becomes the fuel of choice for long-distance heavy freight road transport,” and that the first commercial hydrogen trucks would appear on the road by the latter part of the decade. In terms of demand, the company forecasts that under the Sky scenario, hydrogen growth will be two exajoules (EJ) per year in the 2040s; which is five times compared to the rate factored in into the Archipelagos scenario. “In Archipelagos, rapid growth does not emerge until after 2050. Achieving an annual growth rate of 2.0 EJ would require the equivalent of around 700 250MW electrolyzers every year, with enough renewable energy generation capacity to power them,” Shell stipulated. In the Philippines, power producers have been targeting to retrofit their gas plants into hydrogen, but the possibility seen on this sphere could just be a limited blend of hydrogen in existing gas-fed fleets that would come in the range of 5 to 20-percent. Wood propounded that the greater promise is on the move of turbine manufacturers to eventually roll out new technologies in energy markets that could both run on 100-percent gas and could also switch over to hydrogen if and when hydrogen is already deployed on competitive prices.