Hydrogen, the most abundant element in the universe, has long been hailed as a key to a carbon-free economy. Until now, the widespread adoption of hydrogen produced with clean energy sources, a.k.a. ‘Green Hydrogen’, has been withheld due to the general assumption that it could not be implemented profitably. However, economists at the Technical University of Munich (TUM), the University of Mannheim and Stanford University have now been able to show - based on the market situation in Germany and Texas - how flexible production facilities could make hydrogen technology a vital component in the sustainable energy transition.
Since its discovery in the 17th century, hydrogen has been used for a wide range of applications, from fertilizer production to fuel cells for cars, thus making it a highly versatile gas. Today, most of the hydrogen consumed is produced using fossil fuels (mainly natural gas or coal) through the process of ‘steaming’, which converts methane into hydrogen and carbon dioxide. However, hydrogen can also be produced without carbon emissions by using water in the process of ‘electrolysis’, which converts electricity into hydrogen and oxygen. This process of using power to create hydrogen is known as power-to-gas. It should be noted that this process is (still) relatively inefficient as it causes a significant loss of power both during production and conversion.
So far, a key challenge for power-to-gas technology has been its non-competitive image. During Solarplaza’s webinar on the economics of hydrogen, Gunther Glenk of the Chair of Management Accounting at TUM stated that his new study, together with Professor Stefan Reichelstein, a researcher at the University of Mannheim and Stanford University, demonstrated the feasibility of zero-emission and profitable hydrogen production.
The concept requires facilities that can both produce hydrogen and feed power into the grid. These combined systems - which are not yet commonly used - have to be able to respond optimally to the fluctuations in renewable power output and prices in power markets, giving the system operator the possibility to sell the energy or convert it at any point in time. In Germany and Texas, the market situation allows for hydrogen to already be produced at costs that can compete with fossil fuel facilities, up to certain production output levels.
The growth of renewable energy generation capacity could provide a solution for hydrogen’s power loss problem. In times of excessive power generation, redundant electricity could be absorbed to produce hydrogen and store it for moments when prices are favorable enough to convert it back to power. This way, excess wind and solar energy can be used to produce hydrogen.
Hydrogen has the advantage that it can be stored on a large scale, similar to how natural gas is stored today, in tanks, pipelines or caverns, for example. That not only allows hydrogen to be stored for months at a time, but also ensures reliable power supply for periods with limited wind and solar power generation. Additionally, it allows countries to import electricity from other continents or other areas where there are better renewable energy sources present (i.e. places with higher levels of solar irradiation). This could mean that, for example, Japan could import hydrogen energy from Australia or Europe from Saudi Arabia.
For transportation purposes, hydrogen appears to be a suitable replacement for fossil fuels, especially in long-range applications such as ships, trains or trucks. According to Glenk’s study, hydrogen can already be implemented for medium and small-scale use, for example, to power a fleet of forklift trucks on a factory site. In terms of industrial applications, hydrogen is already being used in the production of ammonia and could be used for the large-scale production of steel, chemicals and electronics by 2030, assuming that renewable power and electrolyte costs follow their current downward trend.
Glenk’s study concluded that the main drivers of the economic viability of renewable hydrogen production are real-time operation and optimal relative capacity sizes. “Power utilities can become hydrogen suppliers for industry,” says Glenk. “Manufacturers, meanwhile, can get involved in the decentralized power generation business with their own combined facilities. That way, we can develop a climate-friendly and intelligent infrastructure that optimally links power generation, production and transport.” Furthermore, he notes that the numerical findings of his study have shown that renewable hydrogen is already competitive with medium-scale fossil fuel hydrogen supply. In the coming decade, it is also expected that renewable hydrogen will become competitive on the scale of large-scale supply.
Ultimately, hydrogen offers new business models for companies in various industries. Despite the significant loss of power, hydrogen’s abundance and environmental friendliness could prove to be essential for the energy system of the future. Nonetheless, it is clear that further research is needed regarding the production and conversion of hydrogen, which could lead to higher efficiency, lower costs and improved applicability.
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