Faiez Sallie
Globally, interest in hydrogen as an alternative to fossil fuels is soaring. Making the transition is complex, however. Let’s look at the important questions to consider and how to successfully navigate the complexities to ensure viable project development and outcomes.
There is huge and growing momentum around hydrogen (H2). The Hydrogen Council is a good barometer for the exponential interest in exploiting H2 as an energy carrier. Formed in 2017, this global CEO-led initiative already has 109 members. These energy, transport, industry, and investment companies collectively have total revenues of more than $23.2 trillion and employ more than 6.5 million people worldwide.
The United States, Australia, Canada, Chile, China, Finland, Germany, Japan, the Netherlands, New Zealand, Norway, Portugal, Russia, South Korea, Spain, and the UK among others have established R&D programs, hydrogen vision documents, roadmaps, and strategies.
In the US, the Fuel Cell and Hydrogen Energy Association released its “Roadmap to a US Hydrogen Economy” in October 2020, while the Department of Energy published its “Hydrogen Program Plan” in November 2020. With appropriate steps, the DOE estimates that H2 could add up to $140 billion a year to the US economy by 2030, and as much as $750 billion a year by 2050. US employment in the hydrogen space could be increased by up to 700,000 jobs by 2030 and up to 3.4 million jobs by 2050.
The main drivers
Key drivers for the accelerating attention being afforded to H2 include these:
- Enhancing long-term energy security
- Decarbonizing multiple sectors and limiting greenhouse gas emissions and global warming
- Improving climate resilience
- Reducing air pollution
- Improving future competitiveness
- Lowering capital costs and improving efficiencies associated with technological innovation
H2 has a unique set of properties that make it an attractive alternative to fossil fuels. It is odorless, colorless, can be generated from renewable sources, has a high specific energy density, and on combustion it releases only water.
As an energy vector, it enables sector coupling and deep decarbonization of sectors that are difficult to decarbonize, such as transportation. For example, the use of batteries only for long-haul trucking is problematic because the vehicle must carry the weight of the battery at all times. Hydrogen weighs far less, with the weight decreasing as the fuel is used. The use of green H2 generated with solar photovoltaic power, followed by liquefaction, storage, and final use in long-haul trucks, is a more effective form of decarbonization.
The falling cost of renewable energy, together with the falling cost of electrolyzers and the future scaling up of production, will make green H2 more viable in the medium to long term, compared with the “gray” hydrogen based on steam methane reforming that is common today. From 2010 to 2019, the cost of renewable energy from solar photovoltaic energy, onshore wind, and offshore wind declined by 82%, 39%, and 29% respectively.
“Blue” H2, combining steam methane reforming with carbon capture and storage, can assist as a transitional lower-carbon pathway in the US. Major oil and gas companies can use their gas reserves sustainably by following the blue hydrogen route. As the levelized cost of green hydrogen falls, market demand will increase.
A complex space
The US has a plethora of energy sources that can be used to generate H2. Key considerations, which can be affected by project location, include the type of primary or secondary energy source, cost, availability, accessibility, and capacity factor. The choice of generation technology or pathway is critical, and is driven by issues such as the level of decarbonization required, hydrogen purity requirements, technology readiness level, Capex and Opex costs, post-installation service levels, trade-offs, local or regional incentives and initiatives, and load factors. Achieving high economies of scale will lower the unit cost of hydrogen, particularly for “green” hydrogen based on electrolysis.
The type of project — standalone, hybrid, integrated, hub, centralized or distributed (for power), local, regional, national or international — together with hydrogen quantity and distance to client will have a strong impact on the delivered price to clients.
Compliance with federal and state laws is a must. Many states have incentives and/or tax credits for green or clean projects and these needs to be checked for applicability. Understanding and managing public perception is key. Early understanding of the landscape, and informed approach and engagement, will be critical to the project schedule and success.
Safety
H2 has a unique mix of chemical properties. Compared with methane, H2 has a large flammability range (between 4% and 75%, or seven times higher), a relatively low density relative to air (0.07 or eight times lighter), a low detonation initiation energy (1 gram TNT or 1,000 times lower), and a maximum burning velocity (2.7meters per second or six times higher).
As a result, it has a propensity to leak, form flammable clouds, ignite, and explode. H2 is also one of the smallest molecules and it can cause embrittlement in certain types of pipelines and materials.
Safety and risk management must be the priority: safety in design, safety in procurement, safety in construction, and safety in operation and asset management.
Important questions to consider
In the course of developing a H2 project, there are important strategic and economic questions to answer:
- Are the drivers for the project understood by all stakeholders?
- Are the options that have been generated, during optioneering, aligned with the identified drivers?
- Has end-to-end technology integration and optimization been completed?
- Would hybrid power sources and bi- or tri-generation H2 approaches add value?
- Where multiple options exist, has out-of-the-box thinking been applied?
- In terms of safety, have all risks been considered within appropriate frameworks? And have they been mitigated?
- How can existing local or regional infrastructure — such as gas networks, power grids, and decommissioned facilities — be leveraged and/or repurposed to support the project?
- Is there value in partnering with other H2 generators or demand offtakers to increase overall capacity or improve aggregate demand, for example?
- Can the project be included in a hub or port to improve the overall viability by sharing infrastructure, co-locating demand and supply, or improving H2 delivery logistics?
- Is the project “bankable”?
- How does the project affect the company’s carbon footprint and management strategy?
- Have all regulatory, policy, and permitting issues being considered and addressed?
- Is the proposed facility future-proofed?
Next steps
Project viability and success can be improved by holding framing and alignment sessions with internal and external stakeholders during project development, focusing on drivers and approaches. All external projects or opportunities that may be complementary, synergistic, or leveraged should also be examined, as should the policy and regulator landscape. A thorough risk analysis should be conducted.
Mott MacDonald has over 100 years of experience and can provide front end loaded, multisector integration and optimization services to assist you to decarbonize, cut costs, reduce risks, and successfully navigate the energy transition.
Faiez Sallie is Global Practice Leader and Business Development Director for oil and gas in Africa. With nearly 30 years of experience across various industries, he combines a background in chemical engineering with business, commercial, and legal principles to deliver a quality service to clients.