Hydrogen has a central, yet mostly invisible, role in today’s global economy. Its primary uses are in the manufacture of ammonia for agricultural fertilizer, in the refining process for transport fuels, and in numerous chemicals used in a wide range of products. Most of today’s hydrogen is made from processing natural gas and is termed “gray hydrogen” due to the fossil-based feedstock. However, new uses for hydrogen, especially “green hydrogen” made by splitting water via electrolysis, are emerging to help support the decarbonization of the energy system while leveraging growth in available renewable electricity. Since the potential of green hydrogen as an energy carrier in a low-carbon world is significant, let’s consider why now is such a promising time, what lessons we can learn from adjacent fields, and how momentum can be maintained so that green hydrogen can truly come of age.
Why Now: The Influence of Renewable Electricity and Cross-Sector Decarbonization
As costs continue to decline and decarbonization continues to accelerate, renewable electricity is set to become the largest primary energy source by the middle of the century. While direct electricity usage is highly efficient and applicable to most uses in buildings, not all energy uses are either feasible to directly electrify or ready for direct electrification today, particularly in transport and industry. Additionally, electricity is not as readily stored as conventional fuels, which use chemical bonds to store energy at high density.
Low-carbon hydrogen, including green hydrogen, is well positioned to contribute. Its energy density can help decarbonize applications where large amounts of energy need to be moved in space, such as transport, or in time, such as seasonal storage to mitigate fluctuations in energy demand and supply. Additionally, since electrolysis can easily take advantage of variable renewable electricity, producing green hydrogen can help provide power sector load flexibility on shorter timescales by absorbing varying levels of electricity. Finally, new large, flexible loads such as electrolysis are critical to continue decarbonization and innovation in power generation and integration.
Key Lessons: Modularity and Economies of Scale
The growth in solar PV has been aided by the ability to deploy projects at kW to GW scales; the use of battery energy storage has been accelerated by applications across consumer electronics (Wh), electric vehicles (kWh, with 4-5x growth per light-duty vehicle in the past 10 years), and stationary energy storage (initially MWh, now often GWh). The industry’s initial approach to smaller projects and factories 10 to 15 years ago—coupled with support mechanisms such as the investment tax credit for solar, renewable deployment targets, and electric vehicle incentives—reduced the overall capital initially needed, while increasing the experience needed for expanded manufacturing and project development. The ability to secure project financing initiates a virtuous circle of more projects alongside increased manufacturing capacity as products are adopted more frequently and at larger scale. Both solar PV modules and battery cells have benefited from these economies of scale, with current costs representing over 90 percent and 80 percent cost reductions for PV and batteries, respectively.
For green hydrogen, electrolyzers represent a similar opportunity for cost reductions through increasing project sizes and manufacturing scale. While green hydrogen costs more than gray hydrogen today, recent electrolyzer cost declines suggest cost competitiveness is achievable with continued deployment and subsequent growth in manufacturing, similar to that seen for PV modules and batteries.
What’s Next: Maintaining Momentum
The current environment of announcements and initial projects at scale for green hydrogen reminds me of the enthusiasm experienced in the energy storage community in the United States during the early 2010s. This excitement built on (1) the growth in renewable generation, which itself was due to stable support and demand growth, (2) significant American Recovery and Reinvestment Act investments in demonstrations for new technologies and applications, (3) market rule changes that enabled more effective participation by storage, and (4) the accelerating intersection of the electric power and transportation sectors. For similar gains to be experienced by green hydrogen to truly come of age, the following aspects are vital.
First, available, timely, committed support during R&D and nascent deployment phases is central to solving critical challenges related to ever-increasing technology and project scale. This point was illustrated by renewable generation technologies and will also be needed for green hydrogen. These activities encourage development at the level needed to accelerate technology and product adoption by effectively managing risks, which then drives commercial financing and economies of scale. For green hydrogen specifically, this includes supply, demand in all relevant sectors, and infrastructure; prompt collaboration among all parties will be needed to realize the potential for green hydrogen.
Second, growing supply and demand in concert with one another helps ensure sufficient, continuous investment at relevant scales. Given the drop-in nature of green hydrogen for today’s fossil-based hydrogen as chemical feedstock, these applications will initially support the development of green hydrogen demand while new, larger demand options are being built. These include direct use of hydrogen for heavy-duty transport, use of hydrogen as a fuel in the power sector for managing large-scale seasonal fluctuations in renewable electricity generation and consumption, and new uses within industry. This can include both very high temperature heat and feedstock for novel process technologies to make low-carbon fuels and chemicals. At Shell, we are focused on providing hydrogen for mobility as well as hydrogen for industry. For industrial applications, we are leveraging our own hydrogen demand to initiate market growth and collaborating with industry partners to develop end-to-end solutions. To illustrate, the largest polymer electrolyte membrane electrolyzer in Europe recently began operations at Shell’s Energy and Chemicals Park Rheinland; the project is part of the Refhyne European consortium focused on producing green hydrogen that can be used to decarbonize hard-to-abate sectors. See Shell starts up Europe’s largest PEM green hydrogen electrolyser | Shell Global.
The rationale and potential for low-carbon hydrogen are here today, and the choices and progress made in the next few years will set the course and pace for green hydrogen to indeed come of age.
Senior Principal Science Expert (Electrification, Integration, & Storage)
Principal Technology Advisor – Electric Power
Shell International Exploration & Production