Blue Hydrogen: a key stepping stone on the path to a green energy future | Energy and Resources | Deloitte Netherlands

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Hydrogen: a key stepping stone on the path to a green energy future

Hydrogen technology may offer answers to long-term energy transition challenges

With carbon reduction goals threatening to move beyond our reach, we need realistic, interim solutions that can lever industries on the path to decarbonisation. And we need them now. Can the current exciting developments in hydrogen energy systems be the missing link?

When it comes to power supply, renewable doesn’t necessarily mean reliable

While essential, the transition towards a carbon-free economy brings certain challenges. Large-scale investment in solar parks and offshore wind farms in the Netherlands and other markets is a hugely positive step forward. But, with our growing dependence on variable renewable energy (VRE) sources, more variable generation requires a more flexible power system, including coupling of the power sector with other industries. What happens when there’s not enough wind or sunshine? Or too much, for that matter? As an energy carrier that can be stored in large quantities, hydrogen – and ultimately green hydrogen technology in particular – may hold the answer to increased volatility in the power supply. Hydrogen produced through renewable power can serve as a conduit for storing large amounts of energy produced during sunny or windy days. Stored-up power can later be used in sectors such as heavy industry and transport that are difficult to electrify directly.

Expanding the business case for hydrogen as an energy source will require further advancement in electrolyser technology

Steam methane reforming and coal gasification account for the bulk of hydrogen production today. Of the little amount produced via electrolysis, most is made using Alkaline (ALK) electrolysers, very few of which run on renewable energy. Though less mature, proton exchange membrane (PEM) electrolyser technology may eventually deliver greater flexibility and compatibility with different electricity markets than ALK systems, as well as a wider operating range. For example, PEM electrolyser operators can supply hydrogen directly to customers (for industry, mobility or injection into the natural gas grid), while still being able to provide ancillary services to the energy grid. PEM routes are also more efficient – producing on average 58 kilowatt hours (kWh) of electricity for every kilogramme of hydrogen (kg H2) used, versus the 51 kWh per kg H2 offered by ALK electrolysers.

The main drawback of PEM technology so far has been their relatively high cost of use. Based on 2017 data provided by the International Renewable Energy Agency (IRENA), the total average system cost of PEM electrolysers is €1,200 per kWh, compared with an overall CAPEX of €750 per kilowatt hour for ALK technology. However, these costs are falling rapidly: according to IRENA’s projections, by 2025, the overall CAPEX of PEM systems will have fallen to just €700/kW.

More important, however, will be reducing the carbon footprint of hydrogen routes

Here, we need to see a faster transition from so-called ‘grey’ hydrogen routes, which rely on fossil fuels (typically natural gas). In the 1995 Green Hydrogen Report, the US Department of Energy described green hydrogen, made by solar- and wind-energy-driven electrolysis, as “a critical and indispensable element of a decarbonised, sustainable energy system.” A quarter-century later, green routes represents barely a fragment of the wider hydrogen economy. Worldwide, natural gas (48 percent), oil (30 percent), and coal (18 percent) are the core hydrogen energy sources, with the remaining 4 percent delivered via electrolysis. Having so far been limited to a few pilot projects, green hydrogen comprises just a small portion of this final percentage. Important, sure, but far from the silver bullet many may have been hoping for.

Due to the increasing availability and cost-effectiveness of renewable power sources, the next 20-30 years should bring a tipping point where green hydrogen routes start to become competitive. But we are not at this point yet. Until then, we need a workable interim solution that can accelerate the decarbonisation process.

Between grey and green, blue hydrogen could be the missing link

With their continued reliance on fossil fuels (typically natural gas), blue hydrogen routes are not exactly carbon-free, but – thanks to modern carbon capture and storage (CCS) technology – their footprint is relatively small compared to traditional hydrogen processes. Through CCS, CO2 generated through steam reforming of natural gas or coal gasification, is captured and stored under the seabed or repurposed in different ways.

One of the world’s largest blue hydrogen programmes is taking shape right now, on the doorstep of Deloitte’s Rotterdam office. In the Port of Rotterdam, 16 Dutch-based partners – from energy producers to end users – are working on H-Vision: a feasibility study exploring the large-scale production and application of blue hydrogen in the Rotterdam industrial area. The endgame may be green, but by offering local industrial producers a competitive alternative to standard fossil-fuel energy routes, the study aims to speed up the decarbonisation of the Dutch economy. Specifically, the project partners have set an ambitious CO2-emission-reduction target of three megatons per year by 2025, rising to six megatons annually by 2030. This represents a significant contribution to the Netherlands’ wider carbon reduction goals.

Rather than merely a stop-gap, H-Vision is being positioned as a stepping stone in the country’s green energy transition. This is because any ‘blue’ infrastructure or installations built in Rotterdam can one day be easily converted for use with green hydrogen.

This kind of flexible pathway offers a blueprint for other industries to follow

Accounting for about 22 percent of global carbon emissions, the transport sector is a key battleground in the transition to a low-carbon society. Green hydrogen can offer long-term answers: namely extended driving ranges and rapid refuelling versus the time it takes to charge today’s electric vehicles (EVs). In Asian markets, such as Japan and China, the demand for hydrogen vehicles is steadily growing, and Deloitte is working with smaller companies to help scale up the potential application of this exciting technology.

Yet, in most countries, hydrogen-cell-based mobility is some years away from being a mainstream solution (the Netherlands only has a handful of hydrogen vehicle fuelling stations nationwide). For such locations, supporting the transition toward electric vehicles must take priority. Again, existing, non-green hydrogen routes may offer an immediate path ahead. In the UK, alternative energy innovator, AFC Energy, is developing the world’s first electric vehicle charger based on hydrogen, enabling EVs to be recharged with power generated by a hydrogen fuel cell. As we wait for pure hydrogen-powered vehicles to become market-ready, blue hydrogen could help accelerate the mobility sector’s transition to carbon-free alternatives.

This kind of flexible problem-solving will be a crucial driver of the energy transition over the coming years. We don’t necessarily know what advancements or challenges the future will bring, but with futureproof hydrogen projects, we can help provide a robust business case for crucial alternative energy investments. We can increase the appetite of the private sector and wean our economies off tried-and-tested, yet ultimately unsustainable, energy practices.

More information?

To learn more about pricing and overall trends in wind power and renewables, please see the Deloitte reports, Global Renewable Energy Trends, and a market approach for valuing onshore and offshore wind farm assets

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