Hydrogen from renewable power
Author: IRENA - International Renewable Energy Agency
Pages: 50 + 2
Format: PDF A4
Publication date: 6 September 2018
The global energy system has to undergo a profound transformation to achieve the targets in the Paris Agreement. In this context, low-carbon electricity from renewables may become the preferred energy carrier. The share of electricity in all of the energy consumed by end users worldwide would need to increase to 40 % in 2050 (from about half that amount in 2015) to achieve the decarbonised energy world envisaged by the agreement.
However, the total decarbonisation of certain sectors, such as transport, industry and uses that require high-grade heat, may be difficult purely by means of electrification. This challenge could be addressed by hydrogen from renewables, which allows large amounts of renewable energy to be channelled from the power sector into the end-use sectors.
Hydrogen could therefore be the missing link in the energy transition: renewable electricity can be used to produce hydrogen, which can in turn provide energy to sectors otherwise difficult to decarbonise through electrification.
These include the following:
- Industry: Hydrogen is widely used in several industry sectors (refineries, ammonia production, bulk chemicals, etc.), with the vast majority of it being produced from natural gas (see Figure 4). Hydrogen from renewables could replace fossil fuel-based feedstocks in high-emission applications.
- Buildings and power: Hydrogen from renewable sources can be injected into existing natural gas grids up to a certain share, thereby reducing natural gas consumption and emissions in end-use sectors (e. g. heat demand in buildings, gas turbines in the power sector). Hydrogen can be combined with carbon dioxide (CO₂) from high-emission industrial processes to feed up to 100 % syngas into the gas grid.
- Transport: Fuel cell electric vehicles (FCEVs) provide a low-carbon mobility option when the hydrogen is produced from renewable energy sources and offer driving performance comparable to conventional vehicles. FCEVs are complementary to battery electric vehicles (BEVs) and can overcome some of the current limitations of batteries (weight, driving range and refuelling time) in the medium to high duty cycle segments.
Hydrogen produced from renewable electricity – achieved through an electrolyser – could facilitate the integration of high levels of variable renewable energy (VRE) into the energy system.
- An electrolyser is a device that splits water into hydrogen and oxygen using electricity. When electricity produced from renewable energy sources is used, the hydrogen becomes a carrier of renewable energy, complementary to electricity. Electrolysers can help integrate VRE into power systems, as their electricity consumption can be adjusted to follow wind and solar power generation, where hydrogen becomes a source of storage for renewable electricity. Thus, they offer a flexible load and can also provide grid balancing services (upwards and downwards frequency regulation) whilst operating at optimal capacity to meet demand for hydrogen from industry and the transport sector or for gas grid injection.
- The built-in storage capacity of downstream sectors (e. g. gas infrastructure, hydrogen supply chain) can serve as a buffer to absorb VRE over long periods and allow for seasonal storage.
- Hydrogen from renewable electricity could create a new downstream market for renewable power. It has the potential to reduce renewable electricity generators’ exposure to power price volatility risk, in instances where part or all generation is sold to electrolyser operators through long-term contracts. This may or not may be possible depending on market configuration and regulations.
Key hydrogen technologies are maturing. Scale-up can yield the necessary technology cost reductions.
- The hydrogen sector is building upon decades of experience with an array of established global players and mature technologies and processes.
- Proton exchange membrane (PEM) electrolysers and fuel cells are approaching technical maturity and economies of scale. Commercial deployment has started in several regions of the world (e. g. Japan, California, Europe). Energy companies, industrial gas companies, original equipment manufacturers for vehicles, and other industry stakeholders have positioned themselves and established advocacy groups (e. g. the Hydrogen Council) to take advantage of this potentially large and rapidly growing market. They aim to make the best use of existing infrastructure (e. g. the gas grid) and to prepare for hydrogen from renewables potentially to partly replace the energy supply and revenues that are now based on oil and gas.
- Initial efforts could focus on largescale applications, so as to rapidly generate economies of scale with minimal infrastructure requirements, and on sectors where hydrogen from renewables stands out as the best-performing option to meet climate targets and comply with local emissions regulations. Such applications include large-scale industry (e. g. petrochemicals, steel) and medium to heavy-duty transport (medium to large passenger vehicles and commercial vehicles, large fleets of buses, trucks, trains, maritime, aviation, etc.).
- Electrofuels (e-fuels, liquid fuels produced from renewable power) can replace fossil fuels without the need to change end-use technologies. This might be complementary to biofuels and potentially important for specific sectors (e. g. aviation).
A policy and regulatory framework to encourage the appropriate private investment is critical. Such a framework could consider the following:
- The adoption of technology-neutral instruments aimed at final consumers (e. g. emission restrictions, mandates for renewable energy content in industry) to trigger hydrogen demand in a structural way and justify investment in infrastructure, while addressing concerns related to carbon leakage. In addition, financial support instruments (e. g. capital expenditure subsidies, tax rebates and waivers) are necessary to cover the initial cost premium relative to incumbent technologies.
- The introduction of long-term gas grid injection tariffs, take-or-pay contracts, participation of electrolyser operators in the ancillary services markets, schemes allowing exemption from electricity grid charges and levies, and de-risking instruments to encourage market uptake to support infrastructure and hydrogen deployment.
Hydrogen offers added possibilities to tap high quality renewable energy resources, including those located far from end-user demand. Once produced, hydrogen (like liquefied natural gas) can be transported as a global commodity unconstrained by grid connections.
Broadly, hydrogen from renewable electricity is most likely to achieve cost-effectiveness through high electrolyser utilisation rates combined with low-cost renewable electricity. Yet outcomes should be assessed carefully for each possible production site. Large scale, off-grid hydrogen projects directly connected to solar and wind farms in high resource locations may provide low-cost, 100 % renewable hydrogen. However they will have lower electrolyser utilisation rate due to the nature of solar and wind resources, which would increase hydrogen cost. Meanwhile, close-to-demand, grid connected production facilities can maximise the utilisation rate of the electrolyser and minimise logistic costs, but might not have access to such low electricity prices, and from 100 % renewable electricity supply.