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1 Download the report: Outlook for Hydrogen Cédric Philibert, Renewable Energy Division, International Energy Agency Green Hydrogen for the Chilean Energy Transition, Santiago de Chile, 4 September 2018 IEA

2 The emergence of low-cost renewable power is a game-changer Average auction prices by commission dates Hybrid solar and wind full load hours adjusted for overlap Source: IEA, Renewables 2017 Source: Fasihi & Breyer, 2017 Capacity factors of combined wind and solar power exceeds 50% in vast areas, often remote from large consumption centers, potentially delivering huge amounts of power at less than $30/MWh 2

3 Renewable power can replace fossil fuels in many uses Building s Heating Cooking Lighting Transports EVs H-rich fuels Power plants Industry Steam Force Electrolysis Feedstock, process agents, fuel Beyond current uses, renewable electricity can replace fossil fuels in direct uses in buildings, industry and transports, directly or through electrochemistry/electrolysis 3

4 Different ways of producing hydrogen Steam methane reforming /Coal/oil gasification - dominant CH 4 + 2H 2 O CO 2 + 4H 2 heat Electrolysis of water coming back with renewables? 2H 2 O O elec 2 + 2H 2 Methane splitting with green power - emerging CH 4 C + 2H elec 2 Over 95% of hydrogen today is produced from fossil fuels with large CO 2 emissions 4

5 Direct electrification can take several forms in industry Electro-magnetic technologies for heating, hardening, melting Heat pumps/mechanical vapour recompression Cheap resistances in boilers or furnaces taking advantage of cheap surplus power when available Electric technologies can prove cost-competitive when they are twice as efficient, thus filling the cost gap with direct fossil-fuel use and helping integrate more renewables 5

6 Green hydrogen from water electrolysis can compete Assumptions: Capex electrolysers 366/kW in + 30% install. +20% Opex; lifetime 30 y; WACC 7%; efficiency 70%; H 2 from NG reforming based on gas prices in Europe (SDS -WEO 2017) Cost of hydrogen from electrolysis for various electricity price and load factors USD/kg H 2 10,00 8,00 6,00 4,00 2,00 0,00 Load factor of electrolysers, in full load hours equivalent USD 30/MWh USD 70/MWh NG-based USD 0/MWh 2040, with CCS 2025, with Current, CCS no CCS Beyond 50% capacity factor the cost of electricity dominates the cost of hydrogen from electrolysis; With surplus electricity the cost of hydrogen increases rapidly if load factors fall below 3000 FLH 6

7 Green hydrogen emerging as new option for multiple uses 200 Costs of hydrogen at various natural gas and electricity prices H2 USD/MWh Natural Gas Price (USD/GJ) Electrolysis USD 70/MWh 4000 FLH NG reforming+ccs NG reforming + $ 140/t CO2 NG reforming Electrolysis USD 30/MWh 4500 FLH Low electricity costs and sufficient capacity factors are required for hydrogen from electrolysis to compete with natural gas reforming with CCS 7

8 Most relevant areas for green hydrogen use Greening ammonia for its current industrial uses Refineries (contribute to cleaning fuels) Direct iron reduction in steelmaking NH 3 as a fuel (shipping, balancing power plants, industrial furnaces) H 2, CH 4, and synthetic HC as electro fuels Enhancing biofuels production 8

9 Ammonia: the other hydrogen, and a low-hanging fruit N 2 NH 3 Feedstock fertilizers & other industries Fuel H 2 Carrier of H 2 for, e.g., iron & steel Ammonia is much easier to store and transport than hydrogen gas Ammonia may have multiple uses in industry as feedstock and fuel 9

10 Transports electro fuels to complement electrification Direct electrification is much more effective Real range needs should be considered carefully Hydrogen gas not easy to deliver and store On-road electrification is an option for long haul Trolleybus and tramways excellent city options Ammonia identified as a good option for maritime Hydrocarbons likely to remain needed for aviation Best in volumetric and gravimetric densities Hydrogen-enhanced biofuels the preferred option? Fuel PtP efficienc y CO 2 from air PtP efficiency CO 2 from fumes CH 4 27% 31% MeOH 27% 32% DME 23% 28% NH 3 35% NH3 PEM NH3 SOEC 29% 39% Direct electrification efficiently drives the change in transport 10

11 Electrifying buildings with heat pumps, but Electricity and natural gas demand for heat in the U.K. Electrification of heat can help short term integration of renewables, but may aggravate the seasonal imbalance of the power demand. Green gases may be called to help 11

12 Exploiting cheap RE will require massive trade Source: Japan s Energy Carriers Program, 2017 Japan is considering liquefied hydrogen, organic hydrides and Ammonia as possible energy carriers from Australia and Middle East to Japan with a growing preference for ammonia 12

13 Storing H 2 and NH 3 Storage Tank cap. Density (Kg/m 3 ) Vol. densit y (MJ/l) Cost ($/GJ) 182 d. LH 2 (-253 C) 900 t H bar 90 t* H bar LNH 3 (-33 C) 60 kt NH bar 270 t * In tanks. Can be much more in salt caverns 13

14 Transporting H 2 and NH 3 Trailer trucks: CH 2 : 48 GJ; LH 2 : 553 GJ; NH 3 : 600 GJ 1610 km pipelines Efficiency Cost ($/kg H 2 ) H % Carrying capacity 1,207 MW NH %* ,251 MW 14

15 Green ammonia from NG reforming vs. water electrolysis /t NH Producing green ammonia from renewables can compete with NG reforming with CCS in areas with excellent resources delivering low cost electricity with high capacity factors 15

16 Low carbon NH 3 and H 2 energy options compared with NG Costs of energy (lvh) in hydrogen from various sources and in natural gas Assumptions: Electricity price for imports from best resource areas 25/MWh 4500 FLH; local electricity price 55/MWh 4000 FLH; gas prices in Europe by 2040 USD 7.9 Mbtu ( 6.4 GJ) as in SDS: /MWh (lhv) CCS Reform Dehydrogenation Transport Opex Capex ammonia Capex electrolysers Electricity Natural gas If NH 3 is needed for industry or long term energy storage, imports from best resource areas are cheaper; if pure H 2 is needed for industry or fuel cells, SMR w. CCS is cheaper 16

17 Chile Where to produce green ammonia? Solar only? World best resource, PV 3000 FLH PV + CSP, PV + PSP Water available thanks to mining industry Electricity could be brought to the coast Sales of oxygen as by-product to mining industry Wind predominant. Exceptional resource Possibility to combine with stranded hydropower? Electricity cost may not be higher than in the North Better use of electrolysers and ammonia plant Ammonia to be shipped to Central/North Chile, & exported Chile has exceptional Renewable resources for producing green hydrogen and ammonia 17

18 Policy options Carbon pricing would improve competitiveness Risks of job losses for heavily-traded commodities At some point, border-tax adjustments, standards, mandates Global sectoral agreements? Procurement of green materials could help jump-start deployment Private by Business-to-Consumer companies, public for infrastructures Public support/decision needed for R, D&D, and infrastructure Network effects and learning through mass deployment needed Thorough analyses should help reduce the risks associated with picking the winners A new era of international collaboration is required to foster global decarbonisation of industry 18