Power-to-Hydrogen and Hydrogen-to-X: Which markets? Which economic potential? Answers from the literature

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1 Power-to-Hydrogen and Hydrogen-to-X: Which markets? Which economic potential? Answers from the literature M. Robinius, L. Welder, S. Ryberg, C. Mansilla, M. Balan, F. Dolci, R. Dickinson, R. Gammon, P. Lucchese, N.D. Meeks, A. Pereira, S. Samsatli, J. Simon, O. Tlili, S. Valentin, E. Weidner

2 Context (1/2) Big change in progress: - Increasing demand for energy in the world caused by globalization and the economic growth of emerging countries; - Increasing share of renewables in the energy mix, especially in the electricity mix; - Need for constraints on greenhouse gas emissions, including CO 2 reduction in the energy sector; - Need for limiting local air pollution; - Deregulation in the energy sector, allowing new challengers to enter the market (although not encouraging the building of new infrastructure); - Requirements of energy security and reliability; - Increasing decentralization of power networks due to the growth of local generation. 2

3 Context (2/2) Hydrogen can be part of the picture: - Hydrogen production: The characteristics of hydrogen production through electrolysis make it possible to quickly adjust the power consumption: electrolysers can reach full load operation in a few minutes, even a few seconds. Accordingly, hydrogen production appears a promising new means to contribute to electricity system management, in a context of increasing share of intermittent renewables. - Hydrogen use versatility: hydrogen can be injected into the natural gas grid, directly or as a constituent of synthetic methane. Such pathways lead to consideration of an integrated energy system with interconnections between the energy carriers. 3

4 The Task 38 of the IEA HIA Power-to-Hydrogen and Hydrogen-to-X: System Analysis of the techno-economic, legal and regulatory conditions Over 50 experts from 34 organizations in 15 countries Major objectives: - To provide a comprehensive understanding of the various technical and economic pathways for power-to-hydrogen applications in diverse situations - To provide a comprehensive assessment of existing legal frameworks - To provide business developers and policy makers with general guidelines and recommendations that enhance hydrogen system deployment in energy markets 4

5 What is Power-to-Hydrogen? The Power-to-hydrogen concept means that hydrogen is produced via electrolysis supplied with low-carbon and/or low-cost electricity Electricity supply can be either: On-Grid Off-grid or hybrid systems With particular attention devoted to: Provision of services to the grid Characterization of hydrogen relevance for energy storage Hydrogen-to-X implies that the hydrogen supply concerns a large portfolio of applications: Transport: hydrogen for fuel cells Green gas (either through methanation or not) Industry (refinery, steel, ammonia, synfuels, etc.) Re-electrification (towards the power grid or for remote areas) 5

6 Literature review: methodology - Co-construction of a document database: > 200 items gathered - Review process into 2 main steps: - A first level analysis to sort out the most interesting studies and collect the main facts and figures of the studies, including: - The context of the study and general issues: date, type of document, geographical scope and time horizon; - Which PtH HtX pathways are dealt with and is the issue of grid services addressed?; - Generic results: key issues/bottlenecks identified in the study, general perspective for the pathway - A 2 nd level analysis (upcoming): focus on the documents that were selected after the first step screening and compare in more details: - The underlying assumptions: e.g. power prices, CAPEX and OPEX; - The results: e.g. hydrogen production cost, compared to target/market. 6

7 Literature review: main features (1/3) - Power-to-Hydrogen Hydrogen-to-X: An issue not only addressed by academics, but many in-depth analysis for local contexts 7

8 Literature review: main features (2/3) - More than half the studies related to a regional context - A broad regional coverage: 16 regions identified 8

9 Literature review: main features (3/3) - Over 75% of the studies issued during the last 5 years - Time scope: from mid-term to long term (2050) 9

10 Literature review: main results - Results related to the local context: difficulty to draw generic conclusions - 3 major potential markets emerge from the literature review: - The transportation sector (Hydrogen-to-Fuel, HtF); - The injection of hydrogen into natural gas networks, either directly or as synthetic methane synthesized via a methanation step (Hydrogen-to- Gas, HtG); - The power generation sector (Hydrogen-to-Power, HtP). - The other markets (hydrogen-to-industry and hydrogen-to-heat) are less covered by the studies 10

11 Literature review: main results Transport sector Driver: decarbonization - Need for decarbonization of the transport sector = very strong incentive for producing low carbon fuel to improve air quality and reduce GHG emissions - In the long term: the CO 2 emissions of hydrogen-fuelled vehicles could be 75% lower than for equivalent diesel vehicles - In the short term, the use of green hydrogen (i.e. hydrogen produced by low-carbon pathways) in refineries is a promising option for reducing the GHG intensity of established transport fuels Economics - Hydrogen could be competitive with taxed gasoline in 2030 if produced with tax-free electricity and competitiveness could be achieved with taxed electricity in HtF pathways already compete with low carbon fuels. 11

12 Literature review: main results Injection in gas networks Market potential - Overall potential, economic feasibility, and limitations still need to be assessed diligently - While the production and injection of synthetic natural gas is more expensive than employing pure hydrogen, the former path can utilize existing infrastructure with almost no modification whereas, in the latter case, hydrogen injections are currently limited to values (depending on various factors) between 2-10% Economics - Commercial competition is out of reach for synthetic methane blending, in particular in comparison with potentially low carbon options such as biomethane. - To become competitive, direct injection of hydrogen from electrolysis would need low power prices along with tax exemption in order to foresee this pathway becoming competitive by

13 Literature review: main results Injection in gas networks (cont.) Hydrogen to interconnect energy carriers - To improve profitability, multimodal operation is frequently suggested. For example, participation in the heat market would improve the business case, selling oxygen and providing ancillary grid service would improve economics, or elsewhere an integral smart gas system is proposed. - The smart gas systems, which are designed in a style similar to electrical smart grids, thereby profit from increased flexibility and efficiency through multiple fuels and outputs. In particular, the option to deploy hydrogen or synthetic natural gas as alternative energy carriers to electricity transmission is often highlighted. 13

14 Literature review: main results Power-to-Hydrogen to support renewable integration - The balancing of the electricity grid is increasingly challenging as the installed renewable energy capacity is increasing. New measures that go beyond increasing transmission and distribution capacity and flexible generation or consumption will need to be introduced to manage the grid as the level of renewable energy sources is increased. In this context, hydrogen systems are part of the global discussion on energy system modernization - Other factors include the development of policies that encourage the deployment of Power-to-Hydrogen components and the ongoing development of industry standards. Regulations in support of such policies could be developed to limit the carbon intensity of energy services and products, thereby favoring low-carbon pathways with the electricity, transport, and heat sectors. 14

15 Conclusion - Low-carbon hydrogen (i.e. that produced through low-carbon pathways) can be used by many energy-consuming services. It has a potential role to play in the electric, gas, transport, and industrial sectors. - Although business cases are tightly linked with local circumstances, three major markets emerge from the literature: transportation, injection of hydrogen into the natural gas grid, and power generation. - Mobility is expected to be the first market to be penetrated. - Profitability for HtG pathways is likely only possible when considering subsidies/premiums. Competitiveness is a challenge for synthetic methane blending. - The ability to provide grid services could even be a game-changer for some business cases. - Other key enablers for hydrogen system deployment include support policies and the establishment of standardization. 15

16 Contact: 16

17 Four years / two phases 1/ General survey of existing studies on technoeconomic and business cases, existing legal frameworks and macro-economic impacts, including demo/deployment projects 2/ Detailed specific case studies, based on detailed targets defined during the first phase, together with elaboration of legal and regulatory conditions, policy measures, and general guidelines for business developers and policy makers as well as public and private financial mechanisms and actors 17

18 Task 38 partners Today: 50 participants from 35 organisations are involved in the Task, representing 15 countries Tomorrow: Different actions are in progress to further widen the geographical scope of the partners, with a special focus on Asia and emerging countries 18