22 - 23 September 2020 • The Pavillon Vendôme • Paris

THE COLOURFUL WORLD OF

HYDROGEN PRODUCTION

WRITTEN BY
DR JOHN MASSEY,
Managing Director, Grey Cells Energy Ltd

www.worldhydrogencongress.com
 CONTENT

Abundance is not the same as accessibility 3

Black 3

Blue 4

Green 4

It’s the economics, stupid 5

Blue hydrogen depends on gas prices, carbon

capture costs and carbon policy 5

Green hydrogen depends on electricity markets

and technology 6

Future costs and predictable costs 6

Carbon capture: the big unknown for blue hydrogen 7

Potential red lights to green hydrogen 8

Why not both? 8

References & further reading 9

www.worldhydrogencongress.com
 Abundance is not the same as accessibility

It’s common to be told that hydrogen ‘is the most common element in the universe’,
as if that in itself is sufficient reason to build future energy systems around it.

However there are problems with the statement. Hydrogen isn’t the most common
element in parts of the universe we can reasonably access, for example the earth’s
crust (where by mass it’s only 0.15%). And even in more obvious, concentrated and
accessible sources such as surface water (H2O, after all), we don’t have hydrogen
floating about in its elemental form.

So we can’t just drill for it or mine it, as we do with other ‘primary’ fuels. Annoyingly,
hydrogen is found strongly bonded to oxygen, carbon and other elements - and it
takes quite some effort to produce the hydrogen gas that we want.

There are many ways to separate hydrogen from its compounds. I won’t cover them
all here, since many excellent reviews already exist (I’ve referenced one example at
the end). Instead I’ll briefly compare current production with the most commonly
discussed routes to ‘clean’ hydrogen.

Black
The International Energy Agency (IEA) estimates that 75% of current hydrogen
production is by separating it from natural gas, using steam methane reforming
(SMR). Another 23% of current hydrogen production uses coal as the feedstock,
particularly in China. In producing hydrogen from hydrocarbons, the clue is in
their name: as well as hydrogen, we are also left with carbon. That’s fossil carbon
and, released as CO2, it leads to huge climate-changing emissions from hydrogen
production.

I’ve heard this dirty hydrogen production referred to as both ‘black’ and ‘grey’. Most
current focus on how to clean up hydrogen production centres around two other
options: ‘blue’ and ‘green’

www.worldhydrogencongress.com 3
 Blue

Blue hydrogen essentially takes black hydrogen production and adds a step,
to ensure that the carbon – at least most of it – doesn’t get emitted to the
atmosphere.

That means the challenges of growing blue hydrogen have little to do with
hydrogen production. Instead they have everything to do with carbon capture and
storage (CCS). Or its more recent cousin: carbon capture and utilisation (CCU).
Currently, only about a half of one percent of hydrogen production involves the
capture of carbon.

Green
Green hydrogen doesn’t utilise a hydrocarbon compound as the source for
hydrogen. Instead it splits hydrogen away from oxygen, by zapping water with
electricity: a process called electrolysis. So there’s no carbon to worry about. Of
course crucial to denoting this as ‘clean’ is a requirement that we haven’t just
shifted carbon emissions to the production of the electricity used in the process –
this must be from renewable sources such as solar or wind.

Currently, only about a tenth of a percent of hydrogen production uses electrolysis.

It’s my experience that low carbon ‘purists’ view green hydrogen production with
much more enthusiasm than they do blue!

Partly this is because CCS cannot capture all of the fossil carbon emissions
associated with steam reforming. But it’s common to hear objections to the fact
that blue hydrogen production continues – indeed grows - demand for fossil
methane. Unsurprisingly, traditional gas producers back many announced large-
scale blue hydrogen plans.

Even to decarbonise current hydrogen production, there’s huge scope for clean
hydrogen production growth. Even more so if we want to grow the total hydrogen
market.

So what factors will determine whether clean hydrogen production is blue or green,
or both?

www.worldhydrogencongress.com 4
 It’s the economics, stupid!

Reporting numbers on costs is something of a fool’s errand: you can read five
reports or talk to five different experts… and find ten different numbers! Which
then age quickly. Start talking about future costs, with all the assumptions and
uncertainties involved, and it’s harder still.

Nevertheless, cost competitiveness will clearly be crucial in determining how future

hydrogen is produced. So it’s worth reviewing the factors influencing hydrogen
costs going forwards.

To start, here are a couple of statements we can hopefully all agree on:
• Blue hydrogen production is more expensive than black, because it’s basically
the same production process, but with the extra costs of CCS/CCU.
• Green hydrogen production has been more expensive than black, otherwise it
wouldn’t be a measly 0.1% of the current market.

Let’s look at some numbers to back these statements up and explore how they
might evolve. The numbers aren’t mine, so feel free to disagree with them!

Blue hydrogen depends on gas prices, carbon capture

costs and carbon policy
The IEA reckon that (black) hydrogen produced from natural gas costs about $1
per kg in the US, a little lower in the Middle East, but more like $1.7 per kg in Europe
(where gas is more expensive). Add CCS and those numbers jump by about 50%, so
the lowest costs come in at around $1.5 per kg. (As a sanity check, IRENA arrive at
similar minimum ‘blue hydrogen’ costs).

As with current hydrogen production, blue hydrogen is heavily dependent on the

costs of the natural gas feedstock. So countries or regions with different natural
gas costs will see different blue hydrogen production costs. Expect blue hydrogen
to be more expensive in gas-importing countries. Depending on transport costs,
they might become hydrogen importers instead.

Secondly, since fossil fuel prices are historically quite variable (and prone to
‘shocks’), blue hydrogen production brings with it those same future price risks.

Thirdly, to favour the production of blue hydrogen over black requires some
mechanism which values captured carbon above the cost of capturing it: a high
carbon price is the obvious one.
www.worldhydrogencongress.com 5
 Green hydrogen depends on electricity markets and
technology
The costs of hydrogen by electrolysis mainly depend on electrolyser cost and how
often it operates (its ‘full load hours’); along with the costs of the electricity it uses.
When an electrolyser is used infrequently (less than 30-40% full load hours), capital
costs can dominate; for better-utilised equipment, electricity costs contribute most
to the cost of green hydrogen.

In places with the lowest solar and wind power prices, IRENA suggest current
green hydrogen costs range from $2.7 to $3.3 per kg; double the lowest cost blue
hydrogen production. At less favourable electricity prices, green hydrogen costs
rise substantially: IRENA estimate to between $4 and $7 per kg using typical wind
and solar prices. (Another sanity check: BloombergNEF suggest green hydrogen
costs range from $2.5 to $6.8 per kg).

Not everyone agrees with these numbers - I’ve seen claims that electrolysis can
be competitive with black hydrogen today. I’m not here to dispute such claims, but
suffice to say they usually depend on specific (and rare) sets of assumptions and
circumstances: very cheap electrolysers fed with very cheap electricity, set against
very high-priced gas prices and carbon penalties.

Future costs and predictable costs

Costs today are less important than their direction of travel. Remember, over 98%
of the current hydrogen market is yet to be ‘cleaned’, even before we add any new
hydrogen demand. That won’t happen overnight.

One thing analysts can agree on is that green hydrogen costs will go down. As
electrolyser demand grows, so mass manufacturing and ‘learning curves’ will drive
unit capital costs down. Renewable power costs will continue to fall too.
In my view, cost certainty is another important consideration for both hydrogen
producers and buyers.
While blue production based on fossil fuels will be subject to feedstock price
volatility, many sellers of renewable electricity will be more than happy to provide
buyers with long-term fixed-price power purchase agreements (PPAs), which help
them finance capital-recovery-dominated power plant investments.

As the major share of the cost of green hydrogen, stable electricity prices mean
stable hydrogen costs. That long-term cost certainty could provide green hydrogen
with a market advantage, even when its short-term cost looks uncompetitive.

www.worldhydrogencongress.com 6
 Carbon capture: the big unknown for blue hydrogen

There are plenty of proposed blue hydrogen projects, from the Netherlands
(‘H-vision’) to northern England (‘H21’) to Australia (Latrobe Valley). Many have bold
aims of large scale. However it’s important to remember that scaling up carbon
capture and storage remains a key uncertainty.

CCS is neither new nor a ‘quick win’, as a quote from a UK parliamentary briefing
makes clear:

Though commercially unproven in the UK, CCS has been identified

since the early 2000s as a method of reducing UK CO2 emissions.
However, CCS has been slow to develop... Although much of the associated
technology is now well-developed, costs of deployment appear to be high
and there is little policy incentive to capture and store CO2…
There are currently few examples of commercial CCS plants globally.

In particular, carbon capture and storage comes with considerable infrastructure

requirements: not just in the carbon capture but in the logistics of transportation
and sequestering. The economics of these are highly location dependent.

Many European blue hydrogen proposals are based around the North Sea, aiming
to use existing oil and gas infrastructure, and storing carbon in depleted oil and
gas fields. This approach should minimise the costs of CCS. It also appeals to
existing oil and gas players, repurposing assets that otherwise risk being stranded.
Having been paid for years to extract carbon from beneath the sea, perhaps the
opportunity now exists to be paid to bury it there instead!

An alternative to large-scale carbon storage is a variety of emerging carbon capture

& utilisation solutions (CCU). Fossil carbon is not permanently sequestered, but
instead finds commercial value in a variety of uses from carbon fibre and graphite
to construction materials and chemicals. There is much discussion over the extent
to which CCU delays the emission of carbon, rather than removing it from the
biosphere. It remains to be seen how quickly and on what scale CCU gains traction.
Nevertheless, the approach of giving carbon a commercial value rather than relying
on carbon prices could be attractive for kick-starting business cases for blue
hydrogen.

www.worldhydrogencongress.com 7
 Potential red lights to green hydrogen

It would be remiss not to mention barriers facing green hydrogen too.

Firstly, the scale of electrolysis is small at the moment. The average size of
electrolyser additions from 2000 to 2009 was just 0.1 MW. This increased more
recently, to around 1 MW over the last five years. That’s still relatively tiny.
The next few years will see multiple projects in the 10’s of MW range. For example
at a refinery in Denmark, Shell plans a 20MW electrolyser by around 2022/23 – with
potential expansion plans as large as 1,000 MW further into the future. So scale-up
is happening.

However here’s a quote to bear in mind when we think about scale (from the IEA):

Producing all today’s hydrogen output from electricity would result in

an electricity demand of 3,600 TWh, more than the total annual electricity
generation of the European Union.

Similarly, water requirements are not trivial: to produce all of today’s hydrogen by
electrolysis would require over 600 million m3 of the stuff. (Based on 2017 figures
that’s equivalent to the freshwater demand from almost 8 million UK inhabitants).
Sitting here in a UK winter, water supply can be easy to take for granted. It could be
a serious resource constraint elsewhere.

Why not both?

Certainly, we will see both blue and green hydrogen.

Green hydrogen might be the purists preference, but lower costs combined with
increased policy support for CCS (to meet newly-legalised net-zero targets) will
in some places favour blue production. Elsewhere, particularly for smaller-scale
and direct-use hydrogen projects, green hydrogen will be quicker, easier and less
financially risky to deploy.

In short we will see segmentation of clean hydrogen production methods, with

competition based on location-specific input costs, scale targets and infrastructure
and logistics requirements.

As so often, one size rarely fits all.

www.worldhydrogencongress.com 8
 WRITTEN BY DR JOHN MASSEY
Managing Director, Grey Cells Energy Ltd

John has a long association with Green Power Global as a

co-founder and ongoing associate trainer for the Green Power
Academy. He will be presenting the ‘Fundamentals of the Hydrogen Economy’
masterclass at the upcoming World Hydrogen Congress in Paris on March
23rd 2020. He provides training and SME consulting on market assessment
and business planning in renewable power and low-carbon energy systems.

Opinions expressed in the article are his own.

OPTIONAL REFERENCE & FURTHER READING LINKS

1. The many possible routes to hydrogen production are excellently summarised in this Royal
Society report (link to pdf): https://royalsociety.org/~/media/policy/projects/hydrogen-
production/energy-briefing-green-hydrogen.pdf

2. The IEA’s “Future of Hydrogen” report to the government of Japan in June 2019 is summarised
and can be downloaded from here: https://www.iea.org/reports/the-future-of-hydrogen

3. IRENA’s report “Hydrogen: a renewable energy perspective”, from September 2019: https://www.
irena.org/publications/2019/Sep/Hydrogen-A-renewable-energy-perspective

4. A Bloomberg article summarising BloombergNEF’s green hydrogen costs, from August 2019:
https://www.bloomberg.com/news/articles/2019-08-21/cost-of-hydrogen-from-renewables-to-
plummet-next-decade-bnef

5. A summary on Shell and Everfuel’s announcement of an electrolysis project, initially 20MW,

at one of Shell’s refineries in Denmark: https://energywatch.eu/EnergyNews/Renewables/
article11774407.ece

6. A research briefing on carbon capture, from November 2018, can be downloaded from here:
https://researchbriefings.parliament.uk/ResearchBriefing/Summary/POST-PB-0030

7. The proposed ‘H-vision’ project for blue hydrogen in the Netherlands: https://www.deltalinqs.
nl/h-vision-en

8. The ‘H21’ project, a comprehensive and large-scale hydrogen vision for the north of England,
including blue hydrogen production: https://www.h21.green/

9. Hydrogen and CCS in the Latrobe Valley, Australia: https://www.globalccsinstitute.com/news-

media/latest-news/hydrogen-and-ccs-showcased-in-the-latrobe-valley-during-national-science-
week

10. A claim that green hydrogen may already be cost competitive (even with conventional, black
production): https://energypost.eu/renewable-hydrogen-already-cost-competitive-says-new-
research/

11. Some European water statistics: https://ec.europa.eu/eurostat/statistics-explained/index.

php/Water_statistics

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