US green hydrogen may become cost-competitive with blue hydrogen within just over a decade, depending on the availability of curtailed renewable generation, according to a new report by consulting firm ICF.

Pairing either curtailed or negatively priced electricity with electrolysers can keep the process cost-competitive with hydrogen produced through steam-methane reforming (SMR) plus carbon capture and storage, says the report.

Green hydrogen can be powered with dedicated renewables assets in areas where there is a great deal of this type of generation, such as Texas and California, according to report co-author Mike McCurdy, director of fuels and power at ICF.

$3/kg – Cost of US green hydrogen production in 2020

McCurdy adds that curtailed renewable energy—where the costs are zero or even negative—can be used in areas where there is ample renewable energy but not enough grid transmission. “We have clients looking at electrolysis in such areas,” he says.

Texas has more installed wind power than any other US state, while California often has excess solar power during the day.

ICF projects that green hydrogen powered with curtailed renewable energy will cost the same as blue hydrogen by 2032 and the same as grey hydrogen by 2050, and that green hydrogen made with dedicated renewable power assets will also be at parity with blue by about 2050.

The consultancy estimates that green hydrogen produced using solar power and electrolysis had a production cost of about $3/kg in 2020. The overall cost of hydrogen last year came to $1.60/kg with electrolysis using curtailed energy. Its model also estimates that blue hydrogen cost about $1.30/kg and that grey hydrogen produced via SMR cost roughly $0.70/kg.

As technology costs come down for green hydrogen, the cost of renewable energy will emerge as a more important driver—as shown in the cost differential between no-cost curtailed energy and dedicated renewable energy, the authors say.

Hydrogen is most promising for hard-to-transition sectors of the economy, including certain industrial processes and heavy-duty transportation, and in the gas and electricity sectors, thanks to its ability to repurpose existing infrastructure such as natural gas pipeline networks, salt cavern storage and gas turbine power plants, the report continues.

Energy storage and backup power

Hydrogen could also be used for energy storage instead of diesel generators and as backup power for large data centres, according to co-author Heidi Larson, managing director of technical advisory at ICF.

Microsoft successfully tested the use of hydrogen fuel cells to power data centre servers in Utah in February.

Gas turbine plants could be run on a natural gas/hydrogen blend with modifications, Larson continues. 

“A hydrogen strategy is a way to extend the useful life of natural gas infrastructure assets” Larson, ICF

One of the issues facing Texas when its grid nearly collapsed because of unprecedented low temperatures in February was that gas at some wellheads liquefied and then froze. Hydrogen’s lower liquefying and freezing temperatures would have avoided this problem, McCurdy notes. 

Existing fossil fuel infrastructure can play a major role in hydrogen storage and distribution, the report continues, noting that studies have indicated that natural gas transmissions lines have the technical capability to accommodate up to 50pc hydrogen, while distribution lines can accommodate up to 20pc. It is plausible that transmission pipelines may eventually transport 100pc hydrogen using existing lines with limited modifications.

As decarbonisation advances, investors are concerned that natural gas assets could become stranded, according to Larson.

“A hydrogen strategy is a way to extend the useful life of that asset,” she notes.

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Author: Ros Davidson