Is hydrogen the fuel of the future?
Hydrogen is the primary energy source for sending rockets into space and powering the International Space Station. On earth, it’s being heralded by some as a key piece to the problem of decarbonizing the energy sector. Can hydrogen follow the path of other space-age energy technologies developed by NASA – such as solar photovoltaics and LED lighting – and make the leap from the final frontier back to the modern car, home, or electric utility?
Hydrogen can be used as a carbon-free energy source whose only byproduct is ordinary water. It can be an alternative to gasoline for cars and buses or an alternative to jet fuel for planes. It can also be used as a substitute for carbon-emitting methane gas to heat homes, power industrial processes, or even generate electricity.
However, there are many challenges to integrating hydrogen into the modern energy landscape. Hydrogen can be too expensive for many applications, and there are technological challenges that need to be addressed. Further innovation is required before hydrogen can be effective at scale.
The existential threat of climate challenge and the potential of hydrogen as a clean energy carrier have prompted many organizations and governments to create initiatives to accelerate the adoption of hydrogen in the energy sector. Many have set goals for bringing down the cost of producing hydrogen. Some have established mandates for hydrogen use. Others have already funded pilot projects which use hydrogen to heat homes and power vehicles (see an example from National Grid).
In the United States, the recent Inflation Reduction Act (IRA) includes an incentive for hydrogen production of up to $3/kg, significantly reducing the cost barrier for considering hydrogen as an option for carbon-free energy. Many applications that previously were cost-prohibitive could now be viable, but how can these opportunities be identified, and how could we plan for them? What is needed to evaluate a prospective investment in hydrogen infrastructure?
The following four questions must be asked when considering any hydrogen investment:
What is the end-use application for hydrogen?
What is the value of using hydrogen for this application?
How will the hydrogen be produced?
How much will it cost?
Identify the end-use application
The first step in planning for an investment in hydrogen infrastructure and assets is identifying the end-use application or service that hydrogen is providing. As the saying made famous by Amory Lovins goes: “People don’t pay for energy, they pay for hot showers and cold beer. They want comfort and mobility.”
Understanding the service provided by hydrogen – whether it be carbon-free electricity or combustive heating, seasonal electricity storage, carbon-free mobile transportation, etc. – will guide you to understand what the magnitude of demand for that service is and how that demand may change over time.
Quantify the value of the application
Quantifying the value of hydrogen is challenging. How much will end-users be willing to pay for hydrogen? What is the impact on emissions? The answers to these questions may be very different depending on the use case.
One must also consider what, if any, service provider would be replaced or altered from incorporating hydrogen. For example, blending hydrogen into the natural gas network will displace costs and emissions from methane gas. Using hydrogen for transportation right now would displace mostly gasoline but, in the future, it would likely displace electricity production used to power electric cars. The energy sector is extremely interdependent and any significant change in market share for a particular service could have ripple effects that shift the landscape of the industry. Anticipating these implications is particularly important for any large capital investments in infrastructure.
In many cases, it is prudent to perform a sensitivity analysis in which the value of an investment is analyzed under multiple scenarios to account for uncertainty in future energy sector conditions. Answering all these questions in detail is extremely complex and requires robust tools, accurate data, and experienced professionals in both engineering and economics.
Determine how the hydrogen will be produced
There are many ways of producing hydrogen, and the best process may vary from project to project. Which method is best for the application you are planning for? Are there any technical constraints for the use case identified regarding production, transportation, or consumption of hydrogen? Are there any incentives for producing hydrogen that a certain production method would qualify for? Can you ensure that the selected production method will qualify for those incentives?
In the United States, IRA hydrogen production tax credit eligibility is at stake based on the CO
2 emission intensity from hydrogen production. If a project plans to use “green” hydrogen produced exclusively from carbon-free electricity to qualify for the tax credit, the variable nature of the renewable electricity sources used to make hydrogen must also be considered. Is that variability in energy input compatible with the electrolyzer or other technology used to produce the hydrogen? Is hydrogen storage required to make this method of production compatible with the use case?
Many questions arise throughout this planning process, and any answer may warrant revisiting other questions and/or assumptions. Any part of a project taken for granted in the planning process could lead to a failed project.
Examine the potential cost
Finally, the total cost of hydrogen production can be estimated once all the operational and service-related constraints have been identified. A proper evaluation of the costs and benefits of any major energy investment is only possible if all the above questions are properly addressed.
Of course, assumptions and simplifications must be made along the way, and the size and scope of a project should ultimately dictate the level of detail needed in the analysis. Capital investments totaling hundreds of millions of dollars that will affect energy infrastructure for decades warrant the best possible answers to each of these questions.
Is hydrogen the future of the energy industry?
Hydrogen could very well be the fuel of the future: a carbon-free energy carrier powering a share of the energy transition. The extent of hydrogen’s impact remains to be seen.
In the 20th century, it took humanity to the moon and back. Some of its technological companions from that journey have already reached practical maturity and widespread adoption in the energy sector.
The first step to integrating hydrogen into that mix is to take a step back and plan with rigor.
If you need help with Hydrogen Integration, contact us!
encoord is focused on helping the energy industry plan for change. Our customers strive to understand the impacts of new technologies and regulatory realities, and they need help to discover the economic and operational challenges they present. We help them by providing SAInt, an integrated planning tool for modeling electricity and gas networks. Using SAInt, our customers can understand the synergies and interdependencies between the two networks. This enables them to plan for hydrogen integration effectively.