Energy Minister, Angus Taylor has set Professor Finkel the objective of working out how to produce hydrogen for $2/kg. How hard can it be? Let’s look at some of the chemistry and economics involved.
Let’s first look at blue hydrogen, that is, hydrogen that is manufactured by steam reforming natural gas or some other hydrocarbon (let’s simplify this to methane for argument’s sake) and then the carbon dioxide is captured and stored.
The reforming equations are:
CH4 + H2O => CO + 3H2
CO + H2O => CO2 + H2
So, one mole of methane will produce four moles of hydrogen and one mole of carbon dioxide; and I’m going to need two moles of water. If I remember high school chemistry and my old periodic table hasn’t changed, that means I need 2 kg of methane and 4.5 litres of water and I will produce 5.5 kg of (old mate) CO2.
At $10/GJ and 55.5 MJ/kg, two kilograms of methane is going to cost $1.11 (just for the gas). That leaves $0.89/kg to cover the cost of reforming and to cover carbon storage or re-use. Let’s say that it costs $0.50/kg to cover the water, opex and capital recovery of reforming (I have no idea, but it I need a number); this leaves us with $0.39/kg of H2 or $0.071 per kg of CO2.
Let’s now look at CCS costs. Can we store or reuse CO2 at $71/tonne? The Global CCS Institute’s 2017 Cost Update indicate CCS costs in the order of $US25/tonne (say $35AU) for fertiliser production (the first step of which is steam reforming methane into hydrogen) and mature CCS technology. Even if the cost of CCS is double this amount, we still come in at just under $2/kg.
So yes, it seems plausible that blue hydrogen could be produced from natural gas with CCS for less than $2/kg.
What about Green Hydrogen, that is, hydrogen that is electrolysed directly from renewable power (thus avoiding the need to store CO2)?
The Siemens Silyzer 200 will produce 225Nm3/hr (i.e. 18.8 kg/hour) from a 1.25 MW skid; hence we are looking at a power draw of 66 kWhr/kg. So, if I use the same $0.50/kg cost for water, opex and capital recovery (again a bit of a guess, but at least it’s a consistent guess), then we have $1.50 to pay for 66 kWhr. This means I have to buy power at not more than $22.72/MWhr to achieve the $2 target. Unfortunately, no one is making money selling power at $22.72/MWhr.
Let’s try again. A quick Wikipedia search says that at 100% efficiency, you need 39.4 kWhr/kg. This is governed by the fundamentals of chemistry, so you just can’t do any better than this. At this efficiency you can afford $38/MWhr. Again, a value well below the most optimistic current new entrant cost of power for a renewable project.
So, to predict the outcomes of Professor Finkel’s assignment, it appears (at first glance) that blue hydrogen produced by steam reforming methane and using CCS for less than $2/kg appears plausible.
Green hydrogen; however, is going to need a few more dollars to underwrite new renewable generation installed purely for hydrogen production.
Maybe there is a case for $2/kg green hydrogen produced from distressed mid-day solar; but, it’s probably not as strong a case as the argument for battery storage as a time shifting tool.
That’s not to say that green hydrogen is only worth $2/kg; Professor Finkel’s previous work (The National Hydrogen Strategy) indicates a diesel parity of $11.21/kg, so there is hope for green hydrogen, particularly where there is a geographical/distribution advantage (for example in areas of high quality renewable resource where there is no natural gas) or where there is surplus pre-existing renewable capacity (I will talk about the wonderful nature of distributed renewable hydrogen as a transport fuel in a future blog). However, for bulk export to East Asia, it appears that blue is likely to be more competitive than green.
The above analysis is based upon a number of assumptions, third party information and rapidly changing variables. The analysis is provided to provoke thought and debate and should not be relied upon by anyone for any purpose other than discussion. Arche Energy disclaims all liability to all persons in relation to this analysis.
If you have better information in relation to the assumed costs of water, opex and capital recovery for steam reforming or electrolysis, please feel free to contribute.