Breaking Down the Barriers to Success in Hydrogen Projects
Challenges in Meeting the Demand for Hydrogen
Over the past five years, there has been a surge in proposals for Green and Blue Hydrogen projects in Australia. Technically, these projects are sound and feasible. However, despite their promise, a puzzling trend has emerged: many of these projects are stalling or getting halted altogether. What is causing this setback in an industry that appeared poised for growth?
Supply is Not the Issue
Various supply schemes have been proposed, including Blue Hydrogen produced from natural gas with carbon sequestered as CO2 and Green Hydrogen generated through the electrolysis of water using renewable sources like solar, wind, or hydroelectric power.
The Missing Piece – Demand
Numerous applications for Hydrogen have been proposed, from powering Fuel Cell Electric Vehicles (FCEVs) including cars, trucks, and trains to serving as a precursor for ammonia or methanol, which can be used in fuels, fertilizers, or petrochemicals.
Hydrogen could find application in power generation, particularly in Asian countries like Japan and South Korea, as well as in serving as a feedstock for Green Steel plants. Australia and Japan have collaborated on a demonstration hydrogen shipping run from Victoria to Japan to test the feasibility of hydrogen transportation.
No ambitious hydrogen supplier has secured a sales contract to underpin their projects thus far. What is holding back the hydrogen-consuming industry?
The Energy Cost Conundrum
At the 2022 AFR Climate and Energy Summit, Saul Griffith drew attention to a relatively unexplored issue with green hydrogen—it’s remarkably energy-inefficient. While modern batteries offer an overall efficiency of 90% or better in storing solar energy, hydrogen lags behind at less than 40% efficiency.
|Energy Storage Costs||Battery Solution||H2 Solution|
|Conversion to DC AC Supply||Power Reception, Inverter||Power Reception, Inverter|
|Storage||Battery Packs||Electrolysis Plant Purification Plant Compression unit Storage Containers Transport and Transfer|
|Energy Loss||Round trip loss – 10%||Round Trip Loss – 60%|
|Supply||Power Supply Inverter||Fuel Cells for conversion to Power Or Engines for combustion (70% energy loss)|
Hydrogen’s key advantage as an energy store is its longevity; it doesn’t lose charge over months like batteries do. However, while the cost of storing energy in hydrogen is cheaper than in equivalent batteries, that cost hasn’t yet offset the energy loss incurred during hydrogen production.
The Profit Challenge
The high energy cost directly impacts profit drivers. For hydrogen to gain rapid and widespread industrial and commercial adoption, businesses must find it more profitable than existing energy sources. Currently, that’s not the case. As Saul Griffith points out, why convert your solar power into hydrogen and lose half of the energy before it powers your vehicle or AC units when direct solar offers 95% efficiency and solar-to-batteries-then-use exceed 90% efficiency with fewer moving parts and safety concerns? Few individuals and businesses are willing to pay a significant premium for hydrogen-based power.
Historically, energy transitions have been driven by inherent profit drivers, whether it’s the reliability of supply, lower capital or operating costs, or ease of use. The advent of modern energy sources of coal, oil, natural gas, LNG and nuclear fission were all driven by strong profit and operating advantages over the incumbent sources. Think diesel power trains vs wood fired steam versions or steam powered ships vs sailing ships.
The only precedence for the world’s industries absorbing an additional cost to transition on behalf of climate has been the elimination of CFC refrigerants to protect atmospheric ozone. And why was that possible? Because in large part no country’s economy was based on producing CFCs, the cost impact was marginal and CFC users were able to easily pass the cost onto end consumers.
Hydrogen needs to demonstrate a clear commercial advantage over incumbent fossil fuels or battery alternatives to drive uptake. And one that is palatable to end consumers, the energy consuming public.
Safety and Regulation
Safety is a significant concern with hydrogen, as it is inherently more dangerous than natural gas. Hydrogen can self-ignite when leaking, is prone to detonation, burns with a clear flame, and can easily permeate solid materials. As the industry matures, safety and regulation standards for hydrogen manufacture should be developed, similar to existing standards for storage, piping, transport, and fuel dispensing. It’s worth noting that current electric vehicles (EVs) are not without safety issues, primarily related to fires, which are expected to improve with advancements in battery chemistry.
Navigating the Hurdles
For hydrogen to thrive it must demonstrate a clear commercial advantage over fossil fuels and battery alternatives. How can this be achieved? Here are some potential pathways:
- Government incentives, such as CO2 penalties or subsidies, like those offered by the USA via the Inflation Reduction Act.
- Technological breakthroughs in hydrogen production and storage that improve round trip efficiency, closing the gap with batteries.
- Development of robust safety standards and technical solutions that make hydrogen as safe, or safer, to handle than petrol (gasoline) or battery charging.
- Mass adoption of fuel cell vehicles to create economies of scale and drive infrastructure development.
- Maintaining a competitive advantage over battery-based transport.
- Implementing strict city regulations on air quality that favour hydrogen (or electric) solutions over diesel-fuelled transport for trucks, buses, and trains.
- A shortage of battery metals that increases the cost of FCEVs, home batteries, and grid batteries, making hydrogen-based solutions more attractive.
- Development of a close to zero-cost energy supply to negate the impact of energy losses in producing hydrogen. The Nuclear Fusion promise.
BE&R’s view on further considerations
Here is an overview of the challenges related to hydrogen projects, specifically in the context of blue and green hydrogen:
- Availability of Carrier Ships: The availability of carrier ships is a critical factor for transporting hydrogen, especially for export or long-distance transportation. The demand for carrier ships may outstrip the shipbuilders’ capacity to construct them. This can pose a logistical challenge for the efficient transportation of hydrogen to markets.
- Finding Skilled Personnel: Hydrogen projects require specialised knowledge and expertise in handling hydrogen production, storage, and transportation. Finding individuals with prior experience in these areas can be challenging, as the hydrogen industry is still evolving.
- Regulatory Approvals: The production and distribution of hydrogen involve new technologies and processes. Consequently, obtaining regulatory approvals and navigating the regulatory landscape can be complex. Regulators may not have established guidelines or standards for certain aspects of hydrogen production, which can lead to delays and uncertainty in project development.
- Supply Chains for Electrolysers and Hydrogen Equipment: The production of green hydrogen often relies on electrolysis technology, which requires specialised equipment such as electrolysers. Establishing reliable supply chains for these components can be challenging, particularly when there is a surge in demand for green hydrogen projects. Ensuring a stable supply of electrolysers and other hydrogen-related equipment is crucial for project success.
- Customers Receiving Facilities: To bring hydrogen to end-users or customers, there must be facilities capable of receiving, storing, and utilizing hydrogen. This includes not only industrial facilities but also infrastructure for hydrogen refuelling stations in the case of hydrogen for transportation. Developing a network of facilities that can handle hydrogen safely and efficiently is essential for the widespread adoption of hydrogen as an energy carrier.
In summary, these challenges represent key considerations in the development and scaling of blue and green hydrogen projects. Addressing these issues effectively is essential for the growth of the hydrogen industry and its role in the transition to a more sustainable energy future.
The path to a hydrogen-powered future is filled with challenges, but with the right combination of innovation, regulation, and market incentives, the industry can overcome these hurdles and realize its full potential.
Let’s start this conversation and explore the possibilities together. How good can hydrogen efficiency get, and how can we get there?
Green Hydrogen, chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2020/Nov/IRENA_Green_hydrogen_policy_2020.pdf, International Renewable Energy Agency (IRENA), 2020.
Saul Griffith – https://www.afr.com/companies/energy/an-investment-opportunity-the-likes-of-which-we-ve-never-seen-20221012-p5bp77, October 2022.
The difference between green hydrogen and blue hydrogen, https://www.petrofac.com/media/stories-and-opinion/the-difference-between-green-hydrogen-and-blue-hydrogen/, Petrofac, 2023.