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Hydrogen is often described as the champagne of green energy – scarce and expensive, to be deployed only on special occasions.
But there are huge swathes of the global economy that will need hydrogen fuel in order to decarbonise, from aviation and shipping to steelmaking, fertiliser production and industrial heating.
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That’s why the race is on to create the prosecco of the energy transition – a cheap, green source of hydrogen that has all the sparkle of the real thing.
Electric Hydrogen is the world’s first green hydrogen “unicorn” start-up, with a billion-dollar valuation built on the promise of new technology that can unlock ultra-cheap green fuel. Is it too early to toast their success?
Why do we need green hydrogen?
While green electricity will be the workhorse of a net zero world, powering everything from cars to home heating, it can’t do everything. Factories, aeroplanes, ships and heavy industries all need energy-dense fuel, and hydrogen is the only low-carbon option to rival fossil fuels.
When it is burned, hydrogen produces only water. It is powerful and clean, but only if you make it in the right way. Most of the time, hydrogen is made by splitting methane (CH4) into carbon dioxide (CO2) and hydrogen (H2). It’s a carbon-intensive process that means for every kilogram of “grey” hydrogen produced, approximately 10 kilograms of CO2 are emitted into the atmosphere.
Hydrogen can also be made by using renewable energy to split water molecules into hydrogen atoms and oxygen in a process known as electrolysis, but only around 1 per cent of global hydrogen is made this way. Scaling up production of this “green” hydrogen will be critical for the global transition to net zero emissions. “It’s impossible to run a net zero world without quite a lot of green hydrogen,” says at Imperial College London.
But here’s the snag: green hydrogen is expensive, around triple the price of hydrogen made using methane. Until green hydrogen is cheaper, or companies are subsidised to use it, there’s little chance it will take off.
Is cheap green hydrogen on the horizon?
Raffi Garabedian spent eight years working to lower technology costs in the solar industry as chief technology officer of US company First Solar. He’s hoping to repeat the trick with hydrogen, driving down the cost of electrolysis far enough to make green hydrogen a mainstay of industry around the world.
Electric Hydrogen’s invention is a new, improved electrolyser – the bit of kit that splits water into hydrogen. Alongside his co-founder David Eaglesham, Garabedian set about redesigning a traditional proton exchange membrane (PEM) electrolyser from the ground up. The focus, he says, was on increasing the current density – the amount of power that can run through the electrolyser – to boost output.
There are different ways to make green hydrogen, but PEM electrolysers are the most promising because they are easy to ramp up and down in response to a fluctuating power supply, making them perfect for using surplus renewable electricity. But the membranes inside PEM electrolysers, which separate the anode, where oxygen is collected, and the cathode, where the hydrogen gas is generated, are expensive.
Improving the current density of a PEM electrolyser means you can produce more hydrogen in each cell, says Garabedian, reducing the overall price per unit. “For a given cell and the price of making it, if you can double the current density, you double the productivity, and you reduce the cost by a factor of two,” he says.
Garabedian says Electric Hydrogen has improved the current density of its electrolyser by a factor of five, thanks to better membranes, materials, coding and manufacturing processes. “That means our electrolyser is really cheap,” he says.
He envisages Electric Hydrogen’s electrolysers forming a large chemical-style plant churning out industrial quantities of green hydrogen. Its 10-megawatt electrolyser will be deployed in plants in 10 stacks, capable of producing 45 tonnes of hydrogen per day. This would be enough t o make 900 tonnes of green steel a day. Garabedian says the cost of the factory kit amounts to $750 per kilowatt of hydrogen manufacturing capacity, about half the cost of competitor products.
But the cost will have to fall a lot further to reach Electric Hydrogen’s goal of producing hydrogen at $1.50 per kilogram by the end of the decade, a target that would put green hydrogen at price parity with hydrogen produced using methane and carbon capture, known as blue hydrogen.
Garabedian is confident that this goal can be delivered. “We are on a learning curve that is much more technology-driven than scale-driven,” he says. “So, I’m very confident we know how to go down that learning curve quickly.”
Challenging headwinds
But powerful electrolysers aren’t the only hurdle to cheap green fuel.
To make cheap green hydrogen, you need cheap electricity. The price of renewables has fallen rapidly over the past two decades, and green power is now dirt cheap in some parts of the world where wind and sunshine are plentiful. The problem is, those parts of the world – in Chile or Namibia, for example – don’t have nearby industry to make use of the hydrogen. So, you might have bargain hydrogen production next to a solar farm in the Atacama desert, but no customers nearby to use it.
Garabedian argues that moving molecules is easier than moving electricity to where the demand lies, but it’s an extra expense, warns Shah. “I think probably you might be better off accepting a slightly higher cost and making it closer to where you need it,” he says. “Certainly, that’s going to be one of the trade-offs in the business model and how you might operate a hydrogen system.”
Cheap green hydrogen also relies on cheap financing. A spike in inflation has pushed interest rates up in many countries, increasing investment costs for new projects – especially capital-intensive schemes such as new hydrogen production sites.
Policy uncertainty also hasn’t helped investor confidence. In the US, the Biden-Harris administration has outlined the rules governing a new tax credit for hydrogen production, but the upcoming presidential election means “Projects are taking a long time to move forward,” says Garabedian. He says he has a string of customers interested in purchasing electrolysers, but many are waiting for more clarity on US federal policy before placing their order.
The problem, according to Shah, is that while many countries have introduced incentives for hydrogen producers, there is little support to encourage the storage, transportation and use of green hydrogen. “They [governments] are not creating good policy support for people who want to use green hydrogen,” he says.
As a result, investor enthusiasm for hydrogen is cooling. The value of some hydrogen stocks has tumbled. German electrolyser firm Enapter, for example, has seen its stock price drop 66 per cent in the past year, while UK firm ITM Power has seen its stock value drop 92 per cent since January 2021.
Garabedian is undeterred. “If you go back two years, there was a tonne of hype, and everyone thought hydrogen was going to fix everything,” he says. Cooling investor sentiment is a sign the hype is being replaced by “serious project developers” willing to move the industry forward, he says.
Against these headwinds, is cheap green hydrogen possible by the end of the decade? Electric Hydrogen’s goal of $1.50 per kg by 2030 is possible, says Shah, but requires “quite a lot of things going right at the same time”.
