1. Hydrogen Now to 2030:
Opportunities and Limits in a
Circular Carbon Economy
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31. Policy recommendations
• Countries are now focusing on hydrogen related policies, some recommendations.
• Start with analysis by learning, go out there and access the existing infrastructure in detail. Figure out how you need to plus it up in
a way that suits your region, estimate the costs so you may pay for it. And then you are going to produce some blue in some region,
and you are going to do some green in the other region, so analysis of hydrogen production based on location will be required. We
strongly recommend engaging local communities now. These are going to be big projects and understanding local constituencies and
frontline communities particularly traditionally damaged communities is extremely important.
• Mostly contracts are now in form of bilateral agreements, with analysis it can be found which agreement suits best to a nation with
respect to infrastructure. Then start building the transmission lines and electrolyzers, and start building pipelines, dedicated storage
for green and blue hydrogen. We specifically recommend the focus on ports. Ports are important because it is here where heavy-duty
industries are, transportation occurs and where most importantly shipping takes place. And ports have specific needs in terms of
infrastructure and retrofits.
• It is important to create market aligning incentives, tax credits, grant and contracts for hydrogen production like in UK and feed in
tariffs like in Europe. In use side perhaps swapping in combustion engines and using fuel cells, providing subsidies for using
hydrogen in heavy industries like steel and chemical industries and support manufacturing like for fuel cells. This will enhance the
speed and use of hydrogen.
• From macropolitical aspect, standards matter. We need to start setting life cycle analysis (LCA) by which hydrogen is measured so
that everyone around the world is using the same metrics. The international maritime organization (IMO) is very important for
making standards for shipping fuels and safety. And finally, we will move away from bilateral agreements, ideally towards sectoral
agreements (like within the steel sector or chemical sector or the shipping sector) as a way to get standards and trade moving forward.
And finally, we will enter in a commodity market (like LNG and oil markets are today).
32. • Operational licensees
• Economic license
• Regulatory license: the industry needs to have meaningful and efficient regulatory setting.
• Safety and technical standards, training required.
• Market design mechanisms.
• Certification is another important thing a lot of people are talking about globally. For example,
consumer around the globe imported hydrogen from overseas and need to be aware on how hydrogen
was made. Social licenses are very important because we need trusted communities and consumer
relationships, shifting toward zero carbon hydrogen production requires a complete culture shift. The
infrastructure needs.
President Bident invites 40 world leaders to lead “Leader’s Summit” on climate change issue. Countries include china, japan and republic of South Korea.
Quarter of the global GHG emissions that are already paying carbon taxes or are subject to some type of trading system to internalize the externalities/emissions the fossil fuels generate.
Chile as a small country is playing its part by committing to be carbon neutral by 2050 as per Paris agreement. We are phasing out all are coal capacity by 2040 and developing our renewable energy capacity very quickly. Historically, our main source of energy consumption (about 70% of our energy consumption) relied on power generation through imported coal, and we are transitioning very quickly. This year we will start operation of over 6 giga watts of renewable energy projects that makes 25% of our installed capacity in our green/total renewable energy capacity. And we will have 70% green by 2030 and a total of 100% green by 2050.
The essence of our plan is to use that clean and cheap electricity to replace fossil fuels across our economy with electricity in transportation with electric mobility. In industries and heating in homes. But this plan has one missing link, which is that how do we reduce emission? Which is very hard to electrify/abate in some sectors. And there is where green hydrogen plays an essential role.
Mckinsey and company estimate that by 2050 between 7-24% of final global energy demand will be supplied by green hydrogen specially in ground transportation, shipping and aviation and some industries including steel production which are very hard (as I said) to electrify. So, without green hydrogen we will not be able to reduce the GHG emissions enough. And we launched our very own green hydrogen strategy last year 2020.
In this slide Mckinsey and Co. (which is our advisor in this strategy) and are following the Electrolyzer projects that are being developed in different countries. And what this graph shows is that in dec 2019 there were about 13 giga watts of projects being developed that would be operational by 2030. In June 2020 there were 28 giga watts and in dec 2020 it went up to almost 44 giga watts, which means that in a year the capacity of electrolyzer developments in different countries have tripled. And this is very important because as we increase the installed capacity of electrolyzer, we will be able to reduce the cost of producing green hydrogen which is our main barrier to communize/use it massively.
Why Chile? Because we have the best RE on the planet as stats say. As you can see our solar pv capacity factors are about 37%, wind (onshore) is about are above 75% and offshore below 75%. Not only the quality of resources but quantity also. We can produce over 1800 giga watt of capacity to produce green energy which about 70 times the size of our greens today. So, we will be able to use these resources at home but also through green hydrogen and its derivatives, we will be able to export these green resources to the world and that is the essence of our strategy.
Mckinsey estimates that we will be able to produce green hydrogen at below 1.5 dollars/kg by 2030. And the price is very low which will compensate the fact that we are a distant country. We want to be the cheapest producers of hydrogen and top three global exporters of green hydrogen.
To build international coalitions. We have natural resources, a very sophisticated electricity market, deep sophisticated financial market, but we need international coordination. The international partners that act as off-takers of hydrogen and its derivatives, in developing engineering and technology for operating the projects.
Next 10 years will be decisive and in point to have 1.5-degree temperature reduction target, we must get 50% reductions in next 10 years. So, to achieve these targets hydrogen will play an important component of a circular carbon economy that focuses on reduction of GHG emissions through efficiency and conservation or substitution of fossil fuels with renewable power, the reuse of CO2 and much more.
How H2 is made?
Fossil fuel and water combines at input and forms carbon dioxide and H2 called as gray hydrogen. The CO2 produced mostly goes in the air and oceans. It does not have to be that way if you capture that hydrogen and store it in deep geological formations that is sometimes referred to as blue hydrogen. There is another way of hydrogen production referred to as green hydrogen in which zero carbon electricity goes in either from variable renewable like solar and wind or from hydro power or even from nuclear power and in output comes out green hydrogen. And last way of making hydrogen is through biomass feedstock (municipal wastes/solid wastes/agricultural wastes) here goes in biomass and water and comes out co2 and hydrogen called as bio hydrogen. And even if that goes in the air, we have quite a low carbon footprint but can be eventually captured and stored.
If hydrogen is produced via electrolysis, so some studies suggest that the emissions related to this production phenomenon is very close to that of emissions from fossil fuels and some studies also say are greater than fossil fuel emissions (coal production).
High level of technical readiness of these technologies, they are commercially available today. Blue hydrogen and green hydrogen. (proton exchange membranes and alkali electrolyzers) even biomass gasification is quite mature.
Many technologies are on their way. There is much potential to reduce cost through innovation. There is great potential to add new pathways to production. Which means innovation policy is very important as other policies in getting these technologies to market.
Getting these technologies to market, they need to be shipped. For e.g. To get from chile to japan is complicated, one can send it as liquid hydrogen. However, it looks like it will be cheaper and easier with some other fluid for e.g., ammonia or by combining hydrogen with CO2 to make xero carbon methanol. These both fuels are not only combustion fuels but used in fuel cells too. Also fuel cells are very efficient than most internal combustion engines. And, because you are not burning anything you get a lot of environmental and health benefits. For e.g., no Sulphur, particulate or NOx emissions.
Clean hydrogen/blue hydrogen can be used in a broad range of industries displacing fossil fuels. It can be used in industrial processes for a source of heat or reductant. It can be used in fuel cells or in gas turbines to produce electricity to power vehicles or power grids.
The hydrogen council estimates that the demand of hydrogen could be as much as 500 million tons/year by 2050. And it can result in 6 million tons of abatement in that year alone.
Today 120 million tons of hydrogen is produced each year. And about 98% of that hydrogen is produced through oil or gas. Remaining 2% is produced by electrolysis. And 0.3% is produced using renewable powered electrolyzers. 0.4% is produced by fossil fuels using carbon capture and storage. So, summing it up 99% of hydrogen produced today is emission intense contributing to 830 million tons of carbon dioxide emissions in the atmosphere. So clean hydrogen production is very critical today.
blue hydrogen is available, and it is mature to kick start the rapid scale up. And has been operating at large scale for decades now. But green/renewable hydrogen is also advancing but with slow pace.
The price of clean hydrogen is competitive with conventional alternatives. The graph shows that clean hydrogen production using methane reformation or coal gasification using carbon capture and storage is the cheapest method for hydrogen generation.
The significant differentiating factors between blue hydrogen and green hydrogen are the requirements of electricity and land. For e.g., considering the Asian renewable energy hub project, it will use 97 terawatt hours of electricity generated by renewable generation covering 5750 square kilometers of land to produce the same quantity of clean hydrogen from coal or gas using carbon capture and storage would require between 3-7 terawatts of electricity and 17 square km of land assuming 500 km long pipeline to transport the carbon dioxide to the injection site. So, the hydrogen production is location specific and is selected according to location. Another constraint is the poor space of geological storage of co2 required for the production of blue hydrogen.
The estimated global c02 geological storage capacity is certainly more than sufficient for carbon capture and storage to play its full role under any emission abatement scenario.
Considering a hypothetical case where 530 million tons of hydrogen produced is green hydrogen, this would require 29000 kwh of renewable or nuclear power which is more than the total global electricity generation in 2018, from all sources the quantity of near zero emission electricity if dispatchable could theoretically completely replace all fossil fuel generation capacity resulting in a global zero emission system at least at the point of generation.
This chart compares the emissions abatement achieved by renewable electricity to produce hydrogen which then displaces combustion of natural gas to the emissions abatement achieved to the same quantity of renewable electricity if fed directly into a power grid displacing fossil fuel generation is about 3 times as much abatement is delivered if the power is renewable electricity is used directly as electricity to displace natural gas combined cycle generation and it its displacing a lignite generation you would deliver about 8 times as much abatement using that renewable power directly as power in the grid.
The costs are higher as the green hydrogen technologies are relatively newer but we are seeing profound reductions in renewable costs and profound reductions in electrolyzer costs.
For this monte carlo analysis was carried out by looking at different rates, grid costs to see how costs will project by 2030. They are location specific. But one important thing to consider is the costs of grid average vs renewables, the renewables become cheap enough. But it can be estimated that the green hydrogen will be cheaper in some markets.
Costs not only include electrolyzer project costs but also include additional costs of building power systems and transmission lines. And these transmission costs are a substantial addition to the system costs.
Geographically the areas with greater capacity factors (wind and solar) and cheaper hydrogen production are different from areas of greater demands, so shipping is the only option and here conversion of hydrogen into ammonia for easier and cheaper shipping will help.
