Green hydrogen: why batteries are a key part of the picture
Renewably produced or ‘green’ hydrogen is on everyone’s lips right now. On Google, for example, searches for ‘green hydrogen companies’ have risen by 350% in the last five years. It’s hardly a surprise.
As we gradually shift electricity production over to renewable sources such as wind and solar, it’s becoming obvious that there are major sections of our economy, from aviation to heavy manufacturing, that cannot be addressed through electrification.
This means they will be hard to power with renewable energy. Instead, they will still depend on fuel. However, we can’t carry on using fossil fuels if we are aiming to reduce emissions. So, what can we use instead? Green hydrogen seems to be the answer.
It can be produced from solar or wind power, via electrolysis, and can then be used for multiple applications, from helping to decarbonize heating to powering heavy goods vehicles, or serving as a precursor to other energy carriers such as ammonia or synthetic fuels.
The best bit, or so it seemed when interest in green hydrogen was starting to pick up, is that the gas can be produced with energy that might otherwise be curtailed, such as when wind or solar generation exceeds demand. Curtailment is a real problem on a growing number of grids.
In Denmark, for example, it is said that wind farms often get paid to shut down during windy periods so the grid can accept energy imports from Germany, its larger and richer neighbor. Using this curtailed production to make green hydrogen instead seems like an elegant solution.
It almost sounds like you could get something for nothing. The marginal cost of electricity, for one thing, would be zero. Plus, as noted above, the resulting green hydrogen could feed into any number of markets. However, there is a problem with this picture.
Producing green hydrogen at the moment is expensive. The cost of energy is the biggest determinant of green hydrogen prices, so it would certainly help to have cheap or even free electricity to power the process. Electricity is only one part of the cost equation, though.
As the International Renewable Energy Agency (IRENA) noted in a report last year, “Low electricity cost is not enough by itself for competitive green hydrogen production … reductions in the cost of electrolysis facilities are also needed.”
Today, the capital cost for a large-scale polymer electrolyte membrane electrolyzer range from $700 to $1,000 per kilowatt of capacity. These prices need to go down by about 80% for green hydrogen to become really competitive, IRENA believes.
Electrolyzer cost reductions, however, will only come if there is sufficient demand for the machines. For there to be demand, companies investing in electrolyzer capacity today need to see an adequate return on their investment.
However, if they are relying purely on curtailment to power electrolysis then they are unlikely to get much of a return at all. After all, curtailment may be a problem, but it is still the exception rather than the rule—otherwise wind and solar developers wouldn’t bother building new plants.
Because of the need to maximize electrolyzer capacity, green hydrogen projects will not only not be able to run off curtailed renewable electricity but will likely need dedicated sources of generation. In other words, wind and solar plants used for electrolysis will probably not be used for anything else.
Even then, there is still a question over the economics of the process. In Germany, for example, the average capacity factor of solar farms is around 10%. That is clearly not high enough to sustain a green hydrogen production business.
Offshore wind looks like a better bet, with capacity factors sometimes topping 50%. That still means a wind-powered electrolyzer would be out of operation roughly half the time, though. Clearly, the only way to make the numbers work will be through energy storage.
Adding batteries to wind or solar might not have sounded like a great idea a couple of years ago, because the cost of energy storage would have significantly increased the capital required for the project, thus driving up the levelized cost of electricity (LCOE).
Today, however, battery costs have dropped to the point where they can be incorporated into renewable energy projects without significantly impacting LCOE. In fact, some of the lowest costs now being seen in bids across markets such as the US are for renewable energy projects with storage.
Furthermore, the small additional premium required for battery storage could repay itself rapidly if it allows for significantly increased electrolyzer utilization. That is why some of the largest green hydrogen projects to date have battery storage as a key component.
One example is Iberdrola’s Puertollano hydrogen plant in Ciudad Real, Spain. The project features one of the largest electrolysis plants in the world, with 20 MW of capacity. Thanks to Spain’s favorable solar conditions, Iberdrola has chosen to power the electrolyzer using PV.
Puertollano is equipped with 100 MW of solar power, but it also relies on a 20 MWh lithium-ion battery system to maximize the utilization of the electrolyzer. This sort of configuration is likely to be the shape of things to come—and on a big scale.
At Iberdrola, for instance, the Puertollano project is just the first step in a plan to develop 800 MW of green hydrogen production capacity. More widely, Spain is looking to install 4 GW of electrolysis capacity by 2030, and Europe is aiming for 10 times that amount.
Using Puertollano as a rough yardstick, that could equate to 4 GWh of energy storage capacity. So, if you are looking to get into the green hydrogen business, now is the time to start thinking seriously about battery suppliers.