Hydrogen Webinar Recap

Yes, Green Hydrogen May Be the Battery of the Future.

With the war in Ukraine, energy security has become as hot of a topic as decarbonization. Hydrogen, and specifically green hydrogen from water electrolysis, is one potential solution being pursued. In last week’s webinar, we spoke with three green hydrogen experts about what’s going on and where the industry is headed: Raffi Garabedian, Gniewomir Flis, and Marty Neese.

Expert Panelists

• Raffi Garabedian is the Co-founder and CEO of Electric Hydrogen, which is creating a new generation of electrolyzer technologies. Raffi is a serial deep-tech entrepreneur and former CTO at First Solar, where he spent a dozen years developing solar panel technology and witnessed the radical change of solar from a niche industry to a major part of the energy landscape.
• Gniewomir Flis (Energy Revolution Ventures) has done extensive research on the economics of hydrogen for Agora Energiewende, Aurora Energy Research, and Liebreich Associates. He’s helped map the learning rates in electrolyzers and done leading work on future hydrogen costs.
• Marty Neese is the CEO of Verdagy, a green hydrogen company innovating water electrolysis technology for the very large-scale production of green hydrogen. Marty served as COO of SunPower for almost a decade, and later also founded a company to recycle the kerf waste from the solar industry. He has been on the board of Ballard Power Systems since 2015.

We are incredibly grateful to our panelists for sharing their expertise and perspectives with us and the community!

Summary

Below are some of the key questions discussed. The biggest challenge of this webinar was that it was just one hour!

Where is hydrogen used today? The vast majority of hydrogen is used in industry, particularly heavy industry. Oil refineries use hydrogen for hydrotreating, hydrocracking, and desulfurization. The second-largest application for hydrogen is making ammonia, a primary component of fertilizer. There are also smaller use cases, including hydrogenation of fats for the food industry (Twinkies!). A TINY amount is used as a transportation fuel for cars and buses.

A note on fertilizer: With natural gas prices spiking even before the conflict in Ukraine, there were concerns about a fertilizer shortage in Europe. Green hydrogen is often framed as being all about decarbonization, but it also has major implications for improving energy security.

What is green hydrogen? Green hydrogen is made by using renewable energy to split water into oxygen and hydrogen in an electrolyzer. While the result is the same hydrogen molecule, the hydrogen comes from water instead of natural gas or coal (in which case, it is called grey/brown/black hydrogen — the color scheme is rather confusing).

If hydrogen is produced by an electrolyzer running off the electricity grid, it’s not necessarily “green hydrogen” because the electricity likely came from burning fossil fuels. This doesn’t mean we should never run electrolyzers off the grid. Our panelists pointed out that it’s hard to ensure (and verify) that the electricity used to run electrolyzers came from “green” sources. There is debate whether credits count, or if the green electrons have to be time-synchronized (e.g. Google’s efforts on 24/7 decarbonization). While it’s easy to get mired in life cycle analyses (LCAs), at some point, it’s important to just get technologies scaled.

Ideally in the future, electrolyzers will be synced with renewable sources or run on renewable energy sources “behind the meter.” The cost declines in new solar and wind will continue to drive reductions in the cost of green hydrogen, as long as the electrolyzers can be run off intermittent power. There is of course a trade-off between electricity cost and capacity factor (how much of the day the electrolyzer operates).

Green hydrogen is a solution to decarbonizing many hard to abate sectors like steel, shipping, and transport, and to provide seasonal energy storage. When there is excess electricity on the grid, it can be used to make hydrogen. This hydrogen can theoretically be shoved into a cavern and used later, e.g. during a week-long wind lull. (Having a battery sit idle most of the time isn’t economical, but once hydrogen is produced it can be stored for long periods at little cost.)

How much green hydrogen is produced today? Basically, not much.

What is the size of the hydrogen market? The world currently produces about 90 megatonnes (Mt) of hydrogen per year, mostly from natural gas and coal. Gniewomir’s analysis of the published scenarios for decarbonization by 2050 shows that the median projection for hydrogen use is five times this— about 500 Mt per year, and some are even higher. To translate this into dollars, green hydrogen could become anywhere from a $250 billion to a $1 trillion per year market.

Another interesting point: To replace the fossil fuel-derived hydrogen used in the fertilizer industry today, it would take a terawatt (TW) of power and electrolyzers. For context, a terawatt is roughly the amount of power generated by the US grid. The challenge, and the opportunity, are immense.

Why now? What needs to happen for green hydrogen production to ramp up? In the past, CAPEX (the cost of building electrolyzer projects) has been prohibitive, as has energy pricing and the availability of renewables. Because of this, hydrogen has mostly been generated from natural gas in the US.

Today, all three of these elements are improving significantly. We can produce renewable energy at decent capacities at a low enough cost to produce green hydrogen with viable pricing. The CAPEX of hydrogen production is also coming down thanks to technological innovation from companies like Electric Hydrogen, Verdagy, and others.

Policy can also be a driver. In Europe, there is a much greater push for net-zero and being carbon neutral by 2050. To support the build-out of the electrolyzer industry, European subsidies for green hydrogen projects are on the order of $10 billion per year.

What is happening with green hydrogen in Europe? The EU has plans to develop 40 GW of green hydrogen capacity by 2030 within its member countries. While the individual country plans don’t yet add up to 40 gigawatts (GW), there are some significant private projects in the works. Notably, the “HyDeal Ambition” is a megaproject backed by a consortium of 30 companies aiming to reach 67 GW of electrolyzer capacity by 2030. The UK is also planning to develop 5 GW of hydrogen electrolyzer capacity.

There is also interest in spreading European electrolyzer technology to other parts of the world where electricity from renewables is cheap and importing the hydrogen produced.

What does green hydrogen need to cost to compete in the market? While our panelists expect that green hydrogen will be pulled into markets by geopolitical forces and the desire to decarbonize, all recognize that, in the long term, subsidies aren’t the answer.

There will be stratification by end-use, and we are still in the early innings. For instance, costs will differ for customers with different scale and purity needs, e.g.

• Lab-scale systems to produce small quantities of hydrogen
• Bus depot for 100 buses
• Decarbonizing a steel plant
• Seasonal energy storage

There will also be stratification of pricing based on geography. Hydrogen produced by large steam methane reformers in Texas (perhaps the cheapest place to produce hydrogen in the world) costs about $1.25 per kilogram of hydrogen to make (with fluctuation). The cost to produce hydrogen in Europe is much higher because natural gas is much more expensive. The price to produce hydrogen in Japan from liquified natural gas is VERY expensive. So the price at which green hydrogen is economically competitive really depends on where you are in the world.

What are the business models for green hydrogen? This is currently TBD. The answer will likely depend on the use case and application and access to capital. The players with the lowest cost of capital will be best positioned to own and operate electrolyzers. Many different models have evolved in the solar industry and it’s likely that the green hydrogen space will see something similar.

One thing that is certain: to grow and scale these technologies in a meaningful way, it’s going to take partnerships around the world. In Europe, they’ve seen a lot of strategic partnerships to assemble massive projects. These are led by companies like Orsted, ArcelorMittal, Shell, and Repsol, and include the off-taker or hydrogen user as well.

How will the war in Ukraine affect hydrogen development? Southern Ukraine has great solar, wind, and wine. They have an ammonia terminal from the Soviet era that they were hoping to utilize with one of these hydrogen projects. This war will certainly impact some hydrogen project development plans. We may also see an acceleration of Europe’s hydrogen plans, either domestically or in supporting projects abroad.

Which electrolyzer tech(s) will win? Our two representatives of electrolyzer companies chivalrously “waved the Swiss flag.” Our panel in general agreed that different electrolyzer technologies will have their own niches (with the exception of photochemical water splitting).

Where will we be in ten years? Our panelists’ predictions: 100 GW of electrolyzer capacity will come online in the next ten years, and the cost of green hydrogen will be 80% lower.

Prime Movers Lab invests in breakthrough scientific startups founded by Prime Movers, the inventors who transform billions of lives. We invest in companies reinventing energy, transportation, infrastructure, manufacturing, human augmentation and agriculture.

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