HYDROGEN FOR A CLEANER FUTURE
While industry analysts agree that green hydrogen could supply up to 25% of the world’s energy needs and become a $10 trn addressable market by 2050, innovation is still an evolution stage. Mitsubishi Power is one of the few global companies driving inno
Global economies are increasingly turning carbon neutral. While some economies want to get there by 2050, the Middle East region is now counting on green hydrogen to leapfrog to a net
30 carbon neutral economy.
No time has the possibility of hydrogen to abate climate change become so apparent than today. A super-versatile energy carrier with exceptional energy density more than twice that of natural gas, hydrogen is soon becoming mainstream.
“It is clear today than ever before that hydrogen is the key enabler for the decarbonisation of every economy,” says
Dr. Emmanouil Kakaras, EVP NEXT Energy Business, Mitsubishi Heavy Industries, EMEA.
“This is important specifically for the electricity sector, but also for all the other sectors of the economy that need to be decarbonised.”
In a recent interview with Utilities Middle
East about the future of hydrogen, Dr. Kakaras says that the technology is already on the takeoff path and that the next ten years would see an influx of hydrogen projects.
“In the next decade, starting from 2025 for the first mover projects and then by 2030 onwards, that will be the decade of hydrogen where it will be commoditised and then rolled out massively.”
Dr. Kakaras’ optimism is premised on the pace at which hydrogen technology is evolving, the growing business case for it, along with national strategies tailored to drive the momentum around hydrogen.
As the world’s most abundant and lightest element, hydrogen has a wide range of industrial applications, from refining to petrochemicals to steel manufacturing.
It is also a rich source of energy, far more efficient than other fuels. Hydrogen demand has been increasing at a steady pace over the past four decades, giving rise to blue and grey hydrogen besides green hydrogen, which is produced by renewable energy.
The problem is that traditional means of producing hydrogen generate large volumes of CO2. Fortunately, advances in electrolysis technology and the falling cost of renewable energy are enabling the mass production of green hydrogen, which is environmentally sustainable.
These developments have altered the calculus for hydrogen and created a significant opportunity for countries to boost economic growth and move away from fossil fuels.
According to Dr. Kakaras, the key components of the technology for hydrogen production and utilisation are already available. To achieve the desired results, it would only need scaling and de-risking.
“So, because the basic technology is already there, it just needs to be brought up to the commercial scale and to follow the introduction one by one in sectors that present the most attractive business case,” says Dr. Kakaras.
“Today in different regions of the world, we are far beyond the pilot stage. We are at the stage where we are looking for the business case of the first mover projects of industrial scale. And I
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expect investment decisions in the next couple of years for the full scale project…..and not just pilots or demonstration projects of the megawatt scale, but full scale projects one after the other at an industrial scale.
“And for that, we need to have not only the technology, but also the business environment that will enable such decisions to be taken. And this is exactly where we are right now.”
Developments in various electrolysis technologies over the past decade, specifically Polymer Electrolyte Membrane (PEM), have increased system efficiencies to nearly 90%, and the operational lifetime of the process is approximately 80,000 hours, according to a PWC report.
Dr. Kakaras points out that the original belief
32 was that decarbonisation would happen with the massive introduction of renewables, but says that is not enough due to limitations on the electricity system.
He says that decarbonisation, to the extent that today’s society is envisaging, cannot happen without hydrogen.
But hydrogen will need to be cost-competitive for it to be an integral part of the overall strategy towards decarbonisation.
Green hydrogen production costs have fallen by 40% since 2015 and are expected to fall by a further 40% through 2025, according to PWC.
It is estimated that new and cheaper materials will reduce the overall capital cost of PEM equipment, lowering the capital cost per kilowatt (kW), currently between $800 and $1,400, to as little as $200/kW by 2050.
Electricity represents a large share in the operating costs of electrolysis processes, accounting for nearly 50% for PEM electrolysis, assuming electricity prices of 4.5 cents/kilowatthour.
However, it is expected that the installation of more low-cost solar photovoltaic and wind power plants globally over the next decade will produce the required electricity for less than 2 cents/kWh according to the prices of recent tenders.
Yearly additions to electrolysis capacity, along with larger average project sizes, are also creating larger economies of scale and a reduction in project capital costs.
“To become competitive, you have to bridge
a certain cost gap between today’s situation and what the situation will be in 10 years,” says Dr. Kakaras. “It’s always the same with new technologies that you need for a kind of de-risking for the investors to take the decision in the first mover projects.”
“In Europe, we are relying predominantly on the pricing of the CO2 on the emissions trading system. This pricing alone is today not enough to sustain the transition from a grey economy or a fossil based economy to a green economy.
“There is still a funding gap that needs to gradually be covered by means of guaranteed revenues, of contracts for difference in the pricing and a series of measures that will give certainty to the investor to make an investment.
“And with time, the funding needs of these projects will be reduced so that they will soon meet grid parity. That means they will compete with the current state of the fossil economy without the need of any further subsidies.”
Dr. Kakaras says that this is the very standard procedure that was witnessed when renewables were introduced 20-25 years ago, and today this source of energy has proved to be fully competitive in comparison to others means of power generation.
According to a report by DNV-GL, the economic viability of green hydrogen will be feasible due to the increasing penetration of wind and solar power in coming years. DNV GL’s Energy Transition Outlook forecasts that solar PV, wind energy and hydropower will account for 80% of global electricity production in 2050. The study states that as this capacity increases, “opportunities to utilise its low-cost electricity are becoming feasible to avoid curtailment: initially conversion into heat then daily battery storage and eventually conversion into green hydrogen”.
Dr. Kakaras points out that the prerequisite for hydrogen to become an economically viable energy carrier are two-fold. Firstly, the prospect of increasing times with low-cost electricity caused by an oversupply of available energy due to the sharp rise of renewable energy sources. Secondly, use cases for hydrogen applications are expected to be in support of low-carbon options.
“If those parameters are set, the production of hydrogen from electricity can compete with natural-gas based hydrogen production and provide a viable commercial business option for numerous applications, starting with industrial hydrogen feedstock.
“Remember that solar power comes only in the peak hours of solar intensity in the daytime. So as the need for energy storage increases, this will kick up speed for hydrogen projects. So, although today it may appear that this region is lagging behind a bit in comparison to Europe, in terms of project rollout, I think the local conditions will favour as a convergence.
“And at the end of the day, green hydrogen will also be an export commodity from this region in one form or the other. So that’s where everything is going to end up. It’s the oil and gas sector that will take over green hydrogen at the end of the day in their own efforts for decarbonisation.”
On the policy level, Dr. Kakaras says that there are ambitious targets for decarbonisation in different parts of the world.
“Europe has revised their own targets by 2030, where we are now talking about being fit for fifty five, meaning having 55% decarbonisation by 2030. So, from a political point of view, we have the target setting. We need to have now the instruments for de-risking investments and enabling first movers to take investment decisions,” says Dr. Kakaras.
Early this year, Abu Dhabi announced the creation of the Abu Dhabi Hydrogen Alliance that aims at making the UAE’s capital a trusted leader on low-carbon and blue hydrogen in emerging international markets.
The UAE has also signed a series of agreements with countries that are already established in
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hydrogen technology, such as Japan, to help fast track it’s a hydrogen economy in the region.
Dr. Kakaras says that the government-togovernment approach being taken by the UAE is a very prudent measure that will lead to transfer of knowledge and experience.
But he says that for such deals to be more meaningful, they should be in position to promote collaboration at scale.
“The challenge of the region is to deliver green hydrogen at scale” says Dr. Kakaras. “And
34 to deliver green hydrogen at scale, you need a competitive production scheme, which means technology. But you also need off-takers.”
“So, I think UAE is on one side an off taker, but Western or developed economies like the Japanese or the European countries, which are more or less relying on primary energy imports, will take the next step and extend the energy mix to accommodate green hydrogen produced in that region. That’s the challenge that we will be looking at because we will have green hydrogen consumed onsite in the region.
“I can foresee, for instance, the big industrial consumers in the steel and alumina sectors utilising green hydrogen locally to have green products like green steel, like green alumina produced in that region.
“And the next step will be that the oil and gas business takes over hydrogen as an export commodity to markets that are already established. So that’s a kind of path that green hydrogen will follow from this region to the rest of the world.”
Dr. Kakaras however says that there is need for more bold decisions that would yield bigger projects, such as the recently announced NEOM green hydrogen project announced by Saudi Arabia last year.
The $5bn world-scale green hydrogen-based ammonia production facility will be powered by renewable energy and will be equally owned by ACWA Power, Air Product and NEOM. The project also will produce green ammonia for export to global markets.
“Project developers are all around the region, but for the time being, tangible projects are in small scale, say 5MW to 20MW of electrolyser capacity, which is the first level,” says Dr. Kakaras.
“NEOM was a very impressive decision and there is a rollout around that. And of course, the rollout of NEOM goes together with the off-takers of the green hydrogen or green ammonia that might be produced. So our expectation is to see more projects maturing.”
Early this year, Mitsubishi Power said it was developing a 40-MW class gas turbine that can directly combust 100% ammonia under an initiative that responds to heightened global decarbonisation ambitions, as well as Japan’s recent roadmap for ammonia fuel.
The Yokohama–headquartered power equipment firm, a subsidiary of Mitsubishi Heavy Industries (MHI), says it is targeting commercialisation of the novel ammoniacapable gas turbine, which will be derived from its H-25 series, “in or around” 2025.
The company has also made a series of announcements that by 2025 it will have 100% hydrogen readiness in the large scale industrial gas turbines.
“That is a sign that the industry is committing themselves towards the zero carbon electricity generation,” says Dr. Kakaras. “Because at the end of the day, using hydrogen as an energy storage and bringing back electricity on the basis of carbon free gas utilisation in the gas
turbines or in engines or whatever, is the proof that carbon free electricity can happen. That’s the name of the game. And for that, we are very proud that we are contributing with our technologies. And I think that the industry as a whole is following that direction.”
Financing for green hydrogen projects is also expected to improve in the coming years. This will be at the back of the European Union (EU) Taxonomy, which is considered a key too to accelerate the energy transition that will allow economies to meet their climate neutrality goals by 2050 through sustainable investments.
“So I think the development in the production of green hydrogen technology and the provision of evidence from our site, the equipment manufacturers, that the projects are feasible and realistic is very supportive to the financial closure of such projects,” Dr, Kakaras points out.
“To this end, we have already established partnerships with other major partners. For instance, we have a big partnership in Hamburg, we have partnerships in the U.K. and we have partnerships in place in the US where we go hand-in-hand with our partners.
“And I am saying partners and not customers, and we go hand in hand to the financial institutions to offer the evidence and the security needed for the bankability of the project. We are right now at the time that we have to convince financing institutions on specific projects that these projects are really bankable. And for that, you need two things, solid technology, and we take our part to guarantee that. And a solid business case in terms of an offtaker agreement from an end user, or from an industry.”
“If these two elements are there, we together with our partners, have convincing arguments and I think that in the year to come, we will be hearing more and more of the maturity and the final closure of such types of projects,” says Dr. Kakaras.
Dr. Kakaras says that it is inevitable for the Middle East to embark on hydrogen because it has more energy supply than any other region.
“Otherwise there will be no business case for more PVs or gas turbine projects and so on,” says Dr. Kakaras.
“It’s the only feasible solution for the oversupply. That is why I find this region so attractive and it’s the reason I am visiting the region so often to boost this carbon free energy supply.”
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