Carbon Capture Will Make Fossil-Sourced Hydrogen 2.5–9× More Expensive
Over the past months, CleanTechnica has been looking in depth into the current round of hype around hydrogen and formulating a policy for its coverage on the site. The current hydrogen hype has been covered from the angle of oil and gas funding of the PR in Europe, and from the perspective of the industry trying to get governments to build a massive new infrastructure for delivery of hydrogen made from coal and gas with the promise that it will be low-carbon in the future.
The use of hydrogen as a heating fuel for home and businesses was addressed as well, with the clear requirement once again for massive new infrastructure expenditures and higher operating costs compared to simply electrifying those requirements brought out. The current global hydrogen market’s 55% use in oil refineries was addressed as well, leading to the assumption that the actual amount of hydrogen consumed annually would actually drop.
This led to CleanTechnica‘s publisher, Zach Shahan, publishing a summary piece pointing out that the current round of hydrogen hype is a money grab by the fossil fuel industry, investors are being duped and consumers fooled by the promises are being duped into thinking climate action isn’t necessary.
What’s been missing from this so far is an end price of hydrogen assessment when carbon capture and sequestration are bolted onto the gas and coal processes that produce “gray” and “black” hydrogen. And the assessment isn’t pretty for them.
Presently, hydrogen’s spot price is about $0.80 per kg, or $800 per ton. The cost of carbon capture at flue and sequestration end to end are estimated at $108 to $335 for gas and $97 to $297 for coal, assuming process costs for H2 plants are similar to process costs for generation plants. It’s a reasonable approximation. This is aligned with the expensive physics of carbon capture and sequestration.
Gas and coal effluents are different compositions, so process costs are different. Note that these are costs, not prices, so there will need to be an adder for profit, and 10% is reasonable.
That suggests the following end prices for delivery of hydrogen from fossil fuels.
At minimum, the cost of blue hydrogen will be about 2.5 times the cost of black and gray hydrogen. CCS advocates claim costs will come down, but this is not new technology. We have been capturing CO2 at flue for industrial processes for at least 140 years. We’ve been pumping it underground for 50 years, after first extracting it with natural gas. The chemistry and technologies are well understood, so claims of cost reductions are just that, claims.
Let’s look at the other side of the equation. What will it cost to create hydrogen using proton exchange membrane (PEM) electrolysis using renewable electricity? This is almost entirely a function of the price of electricity, and is expected to be done in periods of over production of wind and solar. By about 2030, both wind and solar are expected to have costs per MWh of around $20 USD unsubsidized based on very well establish cost reduction curves. Those are the wholesale prices they will be able to offer in power purchase agreements to utilities, and we are already seeing prices that low in the best resource areas with limited or no subsidies, so it’s evidently achievable. In peak periods, electricity will be available in that range, with utilities using demand-side stochastic processing including industrial and storage uses to soak up the extra rather than turn down generation. Better to make a little profit on $20 per MWh electricity than no profit, so the markets will find uses for cheap electricity.
Electrolysing hydrogen using PEM technologies from water requires 48.75 MWh of electricity per ton. At $20 per MWh, 10% capital and operating costs, and a 10% profit, that turns into about $1,180 per ton of H2.
Do you notice a difference between the price of hydrogen from gas or coal, and the price from renewables? That’s right, the price of green hydrogen is going to be lower than the lowest cost of fossil-fuel sourced hydrogen. The vast majority of cases will be much more expensive because the best case for gas-sourced hydrogen is simply that, the absolute best case. The median price of actually blue hydrogen from gas is likely to be in the range of $3,000 USD per ton, almost 3 times the price of green hydrogen. The median price of actually blue hydrogen from coal will be worse, closer to $5,000 USD per ton.
The only way that fossil-fuel sourced hydrogen can compete is if the taxpayers pick up all of the costs of capturing and storing the CO2 from hydrogen manufacturing. Why would we do that? Even if excess electricity is priced at $40 USD per MWh, green hydrogen will still be cheaper.
87% of hydrogen that’s used for something other than oil refining is used for ammonia manufacturing. 85% of all hydrogen is manufactured at the site where it is used due to the expensive of storing and transporting a slippery, diffuse and highly reactive gas. Ammonia plants are very big. They are in places that aren’t convenient for storing CO2 and have no CO2 pipelines for the 8-20 times mass of CO2 that they are currently creating. No one is going to build thousands of miles of pipelines from these plants to sequestration sites.
The bad news is that the cost of ammonia is going to go up as one its primary feedstocks, hydrogen, is going to increase in price. That’s a roughly $80 billion USD annual market. Ammonia is manufactured from roughly one volume nitrogen to three volumes of hydrogen in the Haber process. Nitrogen is 78% of the air, so the Haber process just gets it cheaply from the atmosphere. It’s not the expensive part of the process, so the majority of material costs are hydrogen. Expect ammonia to increase in price by roughly 50% as a result of this. That’s actually a reasonable increase compared to the cost increases that would come from using fossil-fuel sourced ‘blue’ hydrogen.
Right now hydrogen fuel cell vehicles are already paying a massive premium for hydrogen fuel. Almost all of that fuel is coming from black and gray hydrogen, another bait and switch effort by the fossil fuel industry. The true costs of hydrogen for transportation are coming into focus, and it’s just another nail in the coffin for that use case. Similarly, hydrogen as a grid storage technology looks increasingly unlikely, the more I assess the numbers and reality of the space.
The big growth area in hydrogen will be proton exchange membrane (PEM) electrolyzers, and they’ll mostly be sitting at ammonia plants, plugged into the grid and getting low-carbon electricity from wind and solar.