Blue hydrogen may well be more expensive than green H2 by 2030, as some analysts predict, but large volumes of the blue variety — produced from natural gas with carbon capture and storage (CCS) — might nevertheless still be needed, Shell’s top hydrogen executive explains in a Recharge podcast.
Paul Bogers, vice-president, hydrogen, at Shell, argues that the power sector will need an awful lot of renewable energy to decarbonise, so there may simply not be enough wind or solar power available to produce green hydrogen on top of that.
“Decarbonising power needs to happen first… electricity demand is going to double at least by 2050. So if then, on top of that, a significant proportion of that electricity also needs to go towards green hydrogen production, you’re making that challenge [of decarbonsing the power sector] much harder,” he explains.
“Ramping up [of] the hydrogen demand side might be pushed back if you don’t take early opportunities also to look at blue hydrogen in the near term.”
Bogers believes that the nascent hydrogen economy would be better served by “small [amounts of] green [hydrogen now], then big blue, and then absolutely massive green as a potential sequence, rather than a linear choice of, is it one or the other?”
Gniewomir Flis, senior hydrogen analyst at German think-tank Agora Energiewende, tells Recharge’s Power Station podcast that a recent Agora study found that green hydrogen will be cheaper than blue by 2030 — therefore “the investment window for blue hydrogen assets closes by 2030, maybe earlier, depending on the level of support for renewable hydrogen”.
“Blue hydrogen has to be scaled in this decade, otherwise it doesn’t make financial sense,” he added.
“I do agree that there is opportunity for blue hydrogen, and I would especially like to see it combined with industrial clusters, where there are big off-takers, but where there's also opportunity to spread the cost of carbon capture and storage infrastructure.
“If you’re going to scale blue hydrogen, I would say you have a decade to do it. And after that, there isn’t a societal license... [and] there isn’t an investment case.”
Bogers adds that the first large-scale blue hydrogen industrial clusters could be up and running by 2025 in the UK, “so still within that window [of opportunity]”.
He also believes that CCS investment “in some countries” will move “more quickly than we thought originally”, while conceding that “you won’t find social acceptance for carbon storage everywhere around the world”.
But how would blue hydrogen be financed, given that it is basically cheap unabated grey hydrogen — which currently accounts for about 98% of the hydrogen sold globally — with added cost?
“If nothing changes and there is no credible price on carbon, of course, blue will always be more expensive than grey because it is an additional step you have to take just to take care of the emissions,” says Bogers. “But I think with a sufficiently high carbon price, blue and grey will start to compete quite quickly — as long as governments have a coherent mechanism in place. I think that will take care of itself.”
He adds that he doesn’t believe the carbon price alone will be high enough to make green hydrogen cost-competitive with grey, implying that he believes blue will remain cheaper than green — even though blue hydrogen producers would still have to pay a carbon price because not all of the emissions from the steam methane reformation process — the most common process to produce hydrogen from natural gas — can be captured.
But Flis believes that with carbon prices on the EU Emissions Trading Scheme steadily rising, it may already be too risky to build a new grey hydrogen plant without CCS.
“I think we’re at this point where if you wanted to make a new investment in a steam methane reformer, or an autothermal reformer [a similar more expensive technique that enables a greater proportion of the CO2 emissions to be captured], I feel like a new plant with carbon capture would be cheaper than a new plant without carbon capture. And those remaining grey [hydrogen] plants… will just keep on getting more expensive to operate with time [ie, as the EU ETS price rises].
“But on the other hand, we can incentivise [CCS] retrofit, or we can incentivise technologies that will beat [blue and grey hydrogen] in the long run. So if we keep supporting renewable hydrogen, eventually renewable hydrogen will push out any grey technology.”
Both Flis and Bogers agreed that carbon contracts for difference — in which green hydrogen users get a compensatory payment from the government if the carbon price is not high enough to make green H2 cheaper than grey — would be a good mechanism to clean up the hydrogen sector.
While Bogers says that Shell is “equally excited about really large scale green hydrogen plays”, such as its NortH2 and Aquaventus offshore-wind-to-H2 projects, he is calling on governments not to rule out the use of blue hydrogen — as some environmental campaigners and renewables groups are calling for.
“I think it's really important to think about a holistic kind of set of policies,” he says. “We've seen mandates work in some sectors and not in others and… I think as long as [the overall policy] hangs together, you can get to the same point in many different ways. I think our perspective is that often if you don't over-constrain the problem, or you don't define that this is the one solution that we we'd like, you end up with a better end product and you normally get there faster because it allows innovation.”
This debate about blue hydrogen was one of many topics discussed by Paul Bogers and Gniewomir Flis in the Recharge podcast, The Future of Hydrogen: Demand and Supply, which was sponsored by Shell.
Other topics include:
-The future roles for hydrogen in cars and trucks
-Whether hydrogen should replace natural gas in heating
-The pros and cons of EV battery swapping
-The speed of the carbon capture and storage (CCS) build-out and its impact on blue H2
-The potential impact of carbon pricing and other policy levers such as carbon contracts for difference
-The role for regional industrial clusters to stimulate early clean-hydrogen demand
-The role of China in the commercialisation of clean hydrogen
-The potential impacts of gigawatt-scale projects such as the giant Shell-led NortH2 and AquaVentus offshore wind-to-hydrogen schemes, and the 67GW HyDeal Ambition project.
To listen to Paul and Gniewomir’s insights into these topics — as well as finding out more about Shell’s hydrogen strategy — tune in to our Power Station podcast via the link above or on Spotify, Google Podcasts or Apple Podcasts.