Major decarbonization opportunities lie in the production of green hydrogen. However, cutting through the hype to identify the demand, use cases, and technologies that can deliver a thriving green hydrogen industry requires detailed technical and market knowledge.

The production of the promising energy carrier has been categorized as the solution to a range of energy transition challenges, but which generation and production technologies can deliver? What use cases truly stack up? And what are the preconditions that must be satisfied before a compelling case for investments into green hydrogen production can be made? Can the electrolyzer manufacturers scale up fast enough to serve global demand and what are the technology and quality risks?

CEA, as a part of its work with its global customer base has assessed green hydrogen applications, offtake markets, production technologies and quality risks. George Touloupas, senior director of technology and quality at CEA, delivers these insights in an interactive discussion, moderated by pv magazine specialist editors. Yana Zabanova, a research associate at the Research Institute for Sustainability, discusses the geopolitical/political dimension of hydrogen.

 pv magazine Webinar content:

• Demand and potential use cases for green hydrogen

• Scaling up green hydrogen production: electrolyzer manufacturing  and economics

• Powering up green hydrogen production: how renewable energy couples with electrolyzers in cost effective ways

• Production landscape: which companies are supplying hydrogen electrolyzers that can meet current and future market expectations

• Levelized Cost of Hydrogen drivers: LCOE, utilization and Capex

•  Q&A

Transcript

Introductions

Jonathan Gifford

00:13

The promise of green hydrogen is enormous. From its use in a range of industrial applications and processes through to its potential to provide seasonal storage of renewable energy, policymakers are looking towards green hydrogen as an energy carrier of most significance in our continuing deep decarbonisation of our economies and societies.  

Hello and welcome to this PV magazine Webinar. My name is Jonathan Gifford, and I'm the editor in chief of PV magazine Global. The title of our webinar today is “Greening Hydrogen, The Promise Beyond The Hype”, and it's delivered to you in partnership with Clean Energy Associates. Now, I'm co-hosting this webinar today with Sergio Matalucci. He is the editor of PV magazine Italia, and our hydrogen correspondent.

Sergio, hello, and welcome to our webinar today.

Sergio Matalucci

01:12

Hi, Jonathan, thank you so much for this. I think this discussion is particularly timely, there is plenty of good material about our vision out there. But I think this webinar is particularly well structured, because it will deal indeed with the financial, commercial and geopolitical aspects of the hydrogen sector. Of course, speaking of green hydrogen, there are three key factors: the cost of electricity, the cost of electrolyzers, and the cost of transportations. Especially for electrolyzers, there is a lot of ongoing research, and we have several technologies competing. Speaking out then about hydrogen: I think the key point is to understand what incentives are and how relevant they are for the industry. I think incentives have both a commercial and geopolitical dimension. So once again, this webinar will try to condense available information through our two guests. And I think they're very good.

Jonathan Gifford

02:17

I agree. Thank you for that, Sergio. And, as you said it, you know, early stage technology—the production, the storage, and the transportation, and the use of green hydrogen, particularly produced by renewable energy, so incentives—politics, geopolitics—all plays a role. And we'll be covering that with one of our presentations and in the discussion today. And along with that, there's the economic and financial aspects as well which will be addressed. So Sergio, stick around and join our discussion and presentations from our two speakers today. 

Now to introduce our speakers. Yana Zabanova is a scientific associate with the Research Institute for Sustainability Helmholtz Center Potsdam, otherwise known as the RIFS Potsdam.

Yana, welcome to our webinar today.

03:08

Hello, and thank you for having me. Thank you for making the time and preparing your presentation.

And our second speaker is George Touloupas. He's the senior director, Technology and Quality for Clean Energy Associates, or CEA.

George, welcome.

03:26

Nice to meet you, excited to do this today.

03:29

Yeah, I think it's, as Sergio said, really timely, and it's really nice to be able to take a kind of 360 degree view of the green hydrogen economy policy, and technologies. So thank you very much for sharing your insights. The presentations will begin in just a few moments. Please join me back then. But if you're joining a PV magazine webinar for the first time, here are a few kind of technical tips and how we run these webinars to help you get the most out of them. First of all, please get involved. You've taken the effort to join live, and so send through your questions to our expert presenters at any time. You can use the Q&A tab on this platform. Send through the questions and I'll be feeding them into the discussion, right throughout the event. Please don't wait. We always have more questions than we can get to. So I really encourage you to get involved and get involved early. If you experience any technical problems, you can also contact our tech team who is standing by to help you via this Q&A tab. They're more than happy to help. One really quick tip, if you encounter a problem, refresh the browser that fixes a lot of things right away. One question we always get is whether there'll be a recording of the webinar. Yes, there will, and every registrant will receive a link to the recording so you can watch that back or if you have friends or colleagues who weren't able to attend live feel free to share the recording with them. And the PowerPoint presentations will also be available to all registrants at the end of the webinar. So first of all, as Sergio said, there are multiple aspects to the green hydrogen economy and policy is one of them. We'll address that first in our presentations. Yana Zabanova is joined the RIFS in August 2021 to work on the project of geo politics of energy transformation implications of an international hydrogen economy, otherwise known as GET Hydrogen. She holds more than 10 years experience in public policy research at the European Stability Initiative think tank and the Stiftung Wissenschaft und Politik, the SWP in Berlin, as well as as an independent consultant on energy transitions in Eurasia. She's currently completing a PhD at the University of Groningen.

Yana, welcome to our webinar, and I'll leave the stage to you.

Geopolitical/Political Dimension of Hydrogen  

Yana Zabanova

06:00

Thank you so much, Jonathan, for the introduction. And thank you for having me here today. I would like to share some of the observations on the geopolitics of hydrogen and the what is happening at the moment. Of course, we've all heard about it. But last year, about a year ago, Larry Fink, the CEO of Blackrock famously said that the Russian invasion of Ukraine has put an end to the globalization we have experienced over the last three decades. Now, regardless of whether you agree with Larry Fink or not, we can all, I think, observe that the tone of the discussions and the emphasis has changed from maybe the early 2000s when there was a lot of optimism and a lot of enthusiasm about globalization. And here's a statement from Ursula von der Leyen, the EU Commission president, so hydrogen now in this new geopolitical environment is important not just for decarbonisation, but also for energy security. So she said, the quicker we'll switch to renewables and hydrogen, the quicker we'll be truly independent and master our energy system. And the research done by Kaiser research in Spain says that basically, by 2030, there is potential to replace up to 17% of Russian gas that was imported in 2021, by hydrogen, by green hydrogen. So is Larry Fink right? Do we have a new geopolitical and geo economic order in the making? Let's look back at that to the early 2000s. The liberal international order was really at its height. Interdependence was seen as an asset, as the glue of globalization, as something that reduces conflict potential. Today, the situation is different: interdependence is increasingly viewed as a security risk. There is even the concept of weaponized interdependence. Basically, the idea that states that are important that are located as hubs as nodes in this global networks can weaponize their influence to achieve their strategic goals. Now, this concept has been applied more to finance to digitalization however, I think there's potential that it can be used also, in terms of energy transition. In policy debates, we'll hear a lot about strategic autonomy, resilience, for ensuring our shoring, so the tone is really different today. Now, this comes with potential trade offs, where risk technological fragmentation, in fact, there was research by the IMF that says: Technological fragmentation globally can cost up to 5% of the GDP. There are high barriers to investment. If you want to reconfigure supply chains, let's say away from China, that is costly. And finally, there are efficiency losses. And I think that's really problematic for energy transition, since we have a goal in mind—net zero—and we're already behind schedule, so to say, so can we afford not to be as efficient as we can be? I mean, it's a difficult, difficult trade off, and something that policymakers, I think, stress about. So we do see that key players globally, enter a green subsidiaries. Now the policy priorities are two-fold, right? I mean, you want to promote green manufacturing and technology leadership. So you want to be the innovator, but you also want to scale up and to produce a lot at home. And you also want to secure access to clean and I should say affordable energy to preserve your industrial competitiveness. Case in point Germany, what will happen to Germany's energy intensive industry—steel industry, chemical industry—would be able to remain relevant, and the Germany in the decarbonize and global economy. Now the US response is the Inflation Reduction Act that you all have heard about, for hydrogen offers simple and understandable tax credits of up to 3 USD per kilo that is based on meeting some content requirements, but mainly based on emissions. So the lower the better. And the EU's response, in addition to saying that the Inflation Reduction Act is actually trade distorting and contrary to WTO rules, is the Green Deal investment plan that was announced I think, last late last year with more details this year. And for the first time ever, the EU is really promoting an active industrial policy. It's changing its approach to decarbonisation. Before that's the main instrument was carbon pricing. So the European emissions trading system, and targets or Renewable Energy Target, maybe incentivizing green product consumption. But now there is a clear manufacturing capacity target of 50%. There's the European hydrogen bank, confusingly called the bank, it's not the bank, but it's a vehicle with a 3 billion euro budget. Also now compare it to the inflation Reduction Act, it's much smaller, with the first auctions to take place this autumn, and the fixed premium subsidies actually up to 4 euros per kilo. So bit more than in the US case. However, the EU is a very different political animal, it cannot just it has different institutional setup. And it cannot just afford to just introduce subsidies without thinking about anything else. There are a lot of institutional and legal obstacles and there's importantly, a lack of unity among Member States on what national subsidies should be allowed, or whether they should be maybe Europeanized because this more states the fear that the bigger and more rich states there would be, again, the Frontrunners. Where will the money come from? The EU doesn't tax. Right. So external boring, is that a good idea? Is it a bad idea? There's a lot of contention among Member States. Then the next question, the Global Green division of labor. What does it actually mean to be an renewable, let's say energy transition frontrunner? Now that Venn diagram is actually for renewable energy technologies, wind and solar. And there are three main categories where you can excel. First of course, installers, so deployment of renewables, harnessing your wind and solar potential. Secondly, patent innovators, innovation. And thirdly, manufacturers, those who produce wind turbines, solar PV. And as you see, most actors are good, maybe at one thing, some are good at two, and only a select few are good at all three, and they're the real winners in the energy transition. And we see China, the US Denmark, Germany, Japan, maybe. Now that's for renewable energy technologies. What about hydrogen? I think it's still too early to really have a Venn diagram for hydrogen. But we can look at each of the three categories.

• Innovators: We have this great report, which is quite recent, and we see the EU is leading on hydrogen patents in most categories or close to leading. However, that can change, right? And the contenders are all familiar: EU, Japan, us, Korea and China.

• Installers: Now on the left hand side you see the picture depicting last year, so a year ago. And then we see that Europe is definitely the frontrunner, it has its location for most big, large scale projects announced. And then Asia and North America are about similar, similar sized. However, the situation today and their new data, there's new data from Aurora energy research from April. But first Europe's share, even though it's you're still leading, it's declining slowly. And of course, I think it's linked to the Inflation Reduction Act. And it's very attractive incentives for investors. And also the largest project pipeline capacity increase is in North America. So we see that the scale, the race is very close. But we see North America, with US and its new policy, is slowly moving ahead. However, we have to take these figures with a grain of salt because it's only 1% of projects are actually in construction.

• And finally manufacturers: You see that a lot of the capacity is actually future, its projected. So the current one is located in Europe who will have the figures for ITM power and Sunfire. But in the future, and actually in the close future. China, especially China and Asia are supposed to be the place for the most electrolyzer manufacturing capacity. And that, again, is a race now, who will be read who ranked first, second and third.

And finally, the last aspect I wanted to touch on, we know that a lot of global players like the US and China will probably be hydrogen self sufficient, however, not the EU, the EU wants to import 10 million tonnes of hydrogen and derivatives in 2030. Now how do you structure hydrogen partnerships? And of course, the big prize is Africa. And there's so many unknowns about it. It has this enormous renewable energy potential that's unharnessed. However, if you go to African countries, and if you talk to stakeholders, you see a really a desire, very clear desire to move away from just being resource suppliers to the West as they have been for such a long time, versus really capturing more domestic value in this new green economy. In South Africa, for example, they have a lot of platinum group metals, and so they are interested in domestic manufacturing of hydrogen technologies and establishing this platinum Valley industrial cluster. Let's look at Morocco. Everyone's talking about Morocco and North Africa. Solar, Hydrogen. However, Morocco is also a huge fertilizer producer, but they have to import ammonia to make this fertilizer. Now, if Morocco harnesses its renewable energy to produce green ammonia at home, and to make fertilizer from it, there'll be able to keep more of the volume addition at home, which is more attractive. And so I think any policymaker in the West, especially in Europe, that is interested in obtaining low cost hydrogen inputs from somewhere else have to be aware of this different motivations. And it's a very delicate balance on how you manage it. And with this, I'll end and I'm looking forward to listening to the other presentation and to the discussion later. Thank you very much.

Jonathan Gifford

15:42

And thank you very much, Yana Zaponova, who is a scientific associate with the RIFS at Potsdam. Thank you for taking us through some of those geopolitical and political aspects. Now, Sergio Matalucci is the hydrogen correspondent with PV magazine. So we had some questions sent in advance of the webinar today. Could you go through and see if one is relevant to that last presentation?

Q&A

Sergio Matalucci

16:09

Yes. I mean, Yana was very good at debating the general picture. So the EU, the US and China as the key players, and at the same time, you also mentioned African countries. But our viewers asked us two specific questions that I think you somehow answered to, but we might want to dig a bit deeper, if possible.

First question, what are the countries in Africa and The Middle East that have a green hydrogen roadmap strategy? That's our first relevant question. And somehow, you mentioned also Morocco. And we know that Morocco and Italy are collaborating on hydrogen for fertilizers and so on, but I will let you explain it better, for sure.

And second question. A general take, are developing countries also suitable for this technology? Are developing countries also suitable for hydrogen production, but also consumption for instance?

Yana Zabanova

17:25

Yeah, many thanks for this questions. Regarding hydrogen strategies, I think also you have to keep an eye on because the new strategies are coming out all the time. But I think really, I would say, the frontrunners are the countries with the most developed plans are definately in Africa: Morocco, Egypt, South Africa, Namibia also has a good plan. And there, I wanted to add that: I don't know if it's a problem or not. I know there's a research project going on by Irene, I think the issue is that a lot of this strategies are written by international consultants, which is on one hand is very good, because they have all the experience, on the other hand, sometimes maybe they lack a bit of the knowledge of the local context. So I think one very important challenge is to involve and to actually communicate the knowledge and experience that's been accumulated by policymakers in the west, to local policymakers in those countries to really make them understand what are the values and the benefits they can capture from developing the hydrogen strategy? Because I mean, if a consultant write the strategy for you, without that much local input, I think maybe it's not the way to go. But in the north, in the Middle East, of course, we know Saudi Arabia is very advanced in its project, and others, but again, all the strategies, as maybe being a declaration of ambition, and then we'll have to see to find the offtakers doesn't make sense. And that's, I guess, a huge question for policymakers, but also for working with industry and to understand and really the requirements. And second question was, can developing countries?

19:07

Well, is there room for developing countries to produce hydrogen and eventually also to consume? Because a lot of focus has been on production of hydrogen from developing countries, but is there also room for, for consumption in general, or developing countries suitable for the technology?

19:30

I think it's one of the most important questions, actually, I believe, personally, that you cannot really have a successful hydrogen economy without stimulating domestic demand as well. And I think the sectors that you see, most countries have them too. No, I mean, one example was Morocco. So it makes fertilizer but it has to import ammonia. I mean, that's like such a chance to green this production to capture more value and also decarbonize an important sector of your economy. And I think for South Africa, you can produce like # where with hydrogen and then export direct reduced RNNs instead of hydrogen derivatives. So again, I think you have to look for these opportunities. And you have to, of course, for developing countries do it with investors and with industry. But I think that's definitely the chance that to move a bit further from being just a resource supplier. But it's a very, I mean, I think it's one of the most difficult but most important questions about this whole green hydrogen promise for those countries in the Global in the Global South.

Jonathan Gifford

Okay, thank you very much for that Yana from the RIFS Potsdam. And thank you for your presentation. We have some more questions directed to you. But please stick around for the Q&A session at the end. And then I'll feed those questions into the discussion. But thank you very much.

 

Technical and Economic Aspects Behind Green Hydrogen Production

 

Now our next speaker today addressing more of the technical and economic aspects behind green hydrogen production, green hydrogen projects. And an interesting statistic from Yana was that, you know, Sergio and I know very well, our inboxes are full of announcements, exciting announcements of projects or programs or strategies or schemes pertaining to green hydrogen, but her stat was 1% of them are being realized as projects under construction. Super interesting. George Touloupas from Clean Energy Associates has got some insights into some of these real life projects that are happening and some learnings from the CEA team. George joined the CEA in 2015, and has more than 12 years of experience in technical consultancy, manufacturing, project development and EPC services in the solar industry. George leads CEA’s technology, quality and intelligence teams for PV energy storage and hydrogen. Prior to this, he was the COO and the CTO of Philadelphia Solar, and the Technical Operations Director at Recom. He was also the founder of an EPC company in his native Greece. George, lovely to see you. Thank you for joining. Thank you for preparing this presentation. And the stage is now yours.

George Touloupas

Thank you, Jonathan. Nice to meet you, everybody. Thank you for your attention. And of course, thanks to Yana, and you're very interesting intro. So I have a lot to show you. So we'll dive straight in to the company slide. So very quickly, Clean Energy Associates is a technical advisory and Quality Assurance Company. So we're supporting buyers, developers, stakeholders in general globally, for implementing their PV solar, energy storages, and now also green hydrogen projects. More than 200 people, mostly engineers, and a global footprint, and a sizeable track record.

 

Three areas we're going to be examining, firstly:

1.     Supply and demand

2.     The challenge of scaling up

3.     LCOH analysis, or levelized cost of hydrogen

4.     Q&A

 

SUPPLY AND DEMAND

So first of all, supply and demand: production methods and use cases. So now hydrogen is very abundant, very simple, and very light element. So it’s everywhere, mostly in water, water, 111 grams for every liter. That’s where we love getting it from through electrolysis. And it’s a great energy carrier, because you need to put energy to separate it from oxygen and has a higher energy state when it combines back with oxygen, either through combustion or fuel cells, it gives off this energy and because it’s very energetic, it’s also extremely flammable, very light, very wide flammability. And that’s also challenged on from the safety aspects of it. Now, it’s an energy carrier, right? It’s very dense by weight, which is great. But we said it’s very light. So that means actually, it’s volumetric density is pretty bad. It’s terrible actually. Even if we compress it at 700 bars, and these are very strong containers etc., and very high compression, it’s only 1.25 kilowatt hours per liter as opposed to 9.5 kilowatt hours per litre for gasoline. Now you can try to liquefy it. That’s not easy. It’s very hard. Around 30% losses, energy losses to liquefy it and almost double that. Still, it’s ¼ of gasoline’s volumetric density. So as far as density goes, it is not great. You can see that on the chart, on the right hand side, it’s kind of circled, compressed or liquefied form. And then if you have to take into account the container’s volume, it's even worse, Ie It's heavy. So ammonia Is Ir great candidate for carrying hydrogen. But again, it’s easy to handle, mild compression or cooling, but it has a high energy cost into conversion minus 40% to make ammonia from hydrogen, and then another minus 30% to convert it back if you need it in hydrogen form. If you need an ammonia form, that’s great. So it really depends on the end use. It’s quite a complicated space. As far as supply goes in 2021, 94 million tonnes, mtpa million tonnes per annum, of hydrogen were produced. Almost all of it was from fossil fuel based chemical processes, steam methane, reformer gasification of coal gasification, and it was used in refining. In ammonia production, which becomes fertilizers, vast majority, and also chemicals like methanol, some of it was also used in the steel industry. Now you can see on the bottom right a chart from IEA, that’s the announced pledges scenario, 130 million tonnes by 2030. Around 15% will be coming from water electrolysis, there is a role there for like the dirty variety and also for other ways of making, let’s say, cleaner hydrogen. And the colors kind of indicate the cleanliness. The Green is on the left, it’s water splitting. It’s very simple. And it’s clean. As soon as the electricity that’s feeding the electrolyzers is clean. So that’s super important. If the electricity has high carbon content, then obviously the green hydrogen is not green, the hydrogen is not green. That has a lot of implications, of course, if it’s nuclear energy, it’s pink there is definitely a very low carbon. With natural gas, if you capture the CO2, it becomes blue. Same from coal with coal gasification, CO2 capture ends up in blue. So that’s low carbon hydrogen, and there is a big promotion from especially from oil and gas lobby, we see blue hydrogen consistently, very large share in the IEA projections. However, carbon capture and storage are not really very mature in a massive scale globally. And we also have concerns about methane leaks upstream, because methane is extremely important greenhouse gas. So we vote for green here. And we have to beat the gray, of course, on privacy.

Now very quickly about electrolyzed technology, because I’m going to be referring to these acronyms: alkaline on the left and proton exchange membranes. These are the mature technologies they’ve been around for decades. Alkaline is cheap, is very low cost, easy to scale up, abundant raw materials. PEM is mature, it has higher cost. Again, it’s easy to scale up. But this is tempered by the scarcity of raw material, specially iridium. Now, Anion Exchange Membrane is very promising, but it’s not mature yet. It has potential for low cost. No fancy materials there. Solid Oxide has the greatest efficiencies against not commercial, it must run continuously. It might have application, there are some big projects in the US. But definitely alkaline, and PEM are the ones that everybody’s considering right now. And mass.

Now, okay, we have hydrogen. So what do we do with that? You can do a lot of things including having fuel cell cars, or heating homes and replacing natural gas with hydrogen. And of course decarbonize shipping and aviation. Other industries, like the concrete industry, the steel industry, the aluminum industry, and so on and so forth. High temperature heat, so a lot of things. It’s like the Swiss knife of energy. I forgot to mention energy storage. But maybe it’s not a good idea to do it for everything. This is a very famous chart, the hydrogen ladder by Michael Liebreich, it’s a very nice visualization. So obviously the best thing to do is to decarbonize the existing uses for fertilizers refinery, so hydrogenation, hydrocracking, etc. These are all for refining, methanol production and then move down to shipping. Aviation still. Another chemical use is definitely at the bottom. That’s what you don’t want to do first, maybe much, much later, like hydrogen fuel cell cars or metros and buses. And e-fuels maybe, so there’s a lot of debate about this. But more or less, it’s the right approach, prioritization.

Now looking at scaling up. So we have to look if we can meet the expectations and look at the economics of manufacturing.

EFFICIENCIES OF DIFFERENT TECHNOLOGIES

Okay, well, on that point, I’m going to interrupt you, George, my apologies. But we have a question addressing the, efficiencies, you had the four different electrolyzer technologies? What are the efficiencies of the four different electrolyzer types? Do you have any information on?

31:15

Yeah, there are roughly the same for alkaline, PEM and AEM. So we see is much more efficient, because it’s a high temperature process. So when dynamically it’s it’s much better. But there are also other types of technologies that are very early stage, that promise very high efficiency, like membraneless technologies, or another one from an Israeli startup that is using a batch: it’s doing first hydrogen and then removing the oxygen separately. So it’s a very exciting space. So right now, only Solid Oxide is more efficient, but it’s as a misapplication. It’s also very, very expensive, right. So I will say there is no huge efficiency advantage right now.

32:12

Okay, excellent. Well, thank you George. Sorry for the interruption. But please continue. Yeah.

32:16

And also, you know, efficiency, if they are crisp is very, very, very, very cheap. Efficiency is not critical. If it’s very expensive. It is critical.

32:24

And important, underlying truth. Thanks again.

SCALING UP

Right. So looking at the IEA’s Net Zero scenario, in 2030. In that case, we’ll need 180 million tonnes per annum. And nearly half of it would come from new obligations, like heavy industry, etc. We’ve discussed before. Now, according to this scenario, low emission hydrogen is around 95 million tons. But that includes also the orange, fossil fuels with CCUS (Carbon Capture Utilization and Storage), that’s basically blue. And but two thirds are really the green stuff, because it’s using electricity. So assume it’s green electricity, of course, right. So that would require a capacity of more than 700 gigawatts of electrolyzers. Assuming that they have a 50% capacity factor. So coupled with wind and solar, we don’t expect electrolyzers to run 24/7 because of the variability of renewable sources. Now, counting CEA’s capacity data from expansion, such as our manufacturing expansions, we don’t see more than 270 Gigawatt being installed by the end of the decade. So there will be a shortage because if we count the numbers that will end up being 22 million tonnes per annum instead of 62. So roughly 1/3. So two thirds are missing. So scaling up, speed of scaling up based on what the manufacturer will be able to deliver by the end of decade, doesn’t look great. As far as the net zero goal goes.

Now, looking at our global manufacturing capacity data and forecast, we predict that by the end of the decade USA,EU, and China will have 90% of the market, it will be mostly alkaline. So the pie charts on the right hand side, show the gray and this is alkaline. So alkaline is the most popular technology because of this cost advantage. And to do this forecast, we are conservative so we apply a 60% discount over these announced nameplate expansions. We don’t believe all of this will happen. Again, this is a forecast, it’s a very dynamic sector, it can change very fast. But right now, this is what it looks more likely. Now for the US, there is a lot of PEM being planned. But again, if they have to solve the cost bottlenecks, and also some raw material scarcity, issues they might face when the capacity become very large. On a region by region, you can see that China, top left, is mostly dark gray as alkaline. So its vast majority, they were slow in the PEM, technology, R&D, etc, catching up now, but far better with alkaline, and that’s where they’re betting. And that’s what they’re offering, actually, US is different, it’s mostly PEM, some solid oxide, mainly because some European players are planning some big projects there. And at the bottom, you see Europe and rest of Asia and split between alkaline and PEM. Now that’s the challenge, right? That’s what we shipped in 2022, roughly 1GW, a bit less, and that’s what roughly we need to ship by the end of the decade. So it’s orders of magnitude. That’s very, very ambitious target. And we’re talking about complex systems. So obviously, you can see the electrolyzer stuck in the middle and some equipment that needed to separate the gases from the liquids, etc, and purify them, at the bottom you have to compress, air and compress hydrogen, deionize water, handle the alkaline solution, and then you have to feed it with the right type of electricity at the top. So it’s a complicated system.

COST STRUCTURE

And the cost structure is complicated. So our analysis shows that the system cost that includes the stack, and the balance of plant, is around $330 per kilowatt in 2023. That’s the data we have in China. And around half of it is the stack. So the stack that produces actually, that electrolyzes the water. Now, this Balance of System or Balance of Plant is more complicated than PEM because it uses alkaline solution, which is very corrosive. But overall, the economics look very good for alkaline.

Now, for PEM, it’s almost three times higher. This is coming from the stack, you will see it’s three quarters of the total cost. The high cost of the stack is coming from electrodes, iridium, and platinum catalysts, with the membrane electrolyte assembly, and titanium used in bipolar plates. So because of the nature of technology that separates and moves around protons, protons are extremely acidic. That’s why you need all these very expensive materials. And what this looks like, so here we plotted our own forecast for cost, which are there like the bold dots, and some data points mainly from Bloomberg or others. So we can see that the bottom line, the green bold dots, are what we have for China right now. And forecast by the end of the decade. So there’s a very slow cost reduction curve, because it’s mostly already optimized. A much steeper curve for Western alkalizers, which is the blue, smaller dots. So we see a convergence by the end of the decade. But for PEM, it’s not great, it’s a lot slower, the cost reduction, for both China and Western. So the gap will still be there. So PEM needs to do a much bigger effort to catch up with alkaline.

LCOH

So next, LCOH, Levelized Cost of Hydrogen in currency per kilograms, because that’s what the industry does. But basically kilogram, a unit of one kilogram, is 33.3 kilowatt hours so it can be easily converted: it’s around 3 cents per $1 if you make it in kilowatt hours. Now currently fossil fuel derived hydrogen has the best cost and it’s expected to stay in that range although with worse and very high volatility. It went very high up very much higher up and now it’s coming down it will come down probably. But this is more or less what the green variety needs to breach. So go below two, even close to 1, there is an ambition in the US in one decade, $1 per one kilogram, which is very hard. And it’s a lot of innovation, it’s definitely doable. So but in the beginning, we need a lot of subsidies, a lot of regulation to make things happen for the clean varieties. Now, these are some very interesting sensitivity curves that explain how these three factors influence LCOH work together.

First factor, very important is capex. That’s why we’re talking about alkaline versus PEM capex. When electricity costs, so you have cheap electricity at the profile that you need to have to operate the system. And then the utilization rate, also known as capacity factor, is basically how many hours, full hours right, over the total hours available in a year. Now, if your utilization is high, please look at the top chart towards the right hand side: CapEx doesn’t play a big role. You see over twice the capex and it’s tiny differences from the green to the red line, but in that range in the middle where renewable power will mostly hover. So pretty low utilization rate, CapEx starts making a big difference. And the lower it is, the bigger it is. Even in the middle, middle range. Definitely we will need very low LCOH for having breakthroughs to have pretty low LCOH. I think around $25 per megawatt hour or less is very desirable, even if we have free energy at $0 per megawatt hour. And you can see at the bottom chart, the green line, it’s not free, because you have CapEx and OpEx. Right? Or 20% utilization, the LCOH, which is still 1.6 dollars per kilogram, even with free energy, curtail, let’s say.

42:33

Now LCOH, alkaline versus PEM, this shows the breakdown of the various parts for the LCOH. We’re showing three cases of alkaline projects and one case of a PEM project on the right hand side. The first project is a 5MW project and then goes to 40MW and then to 100MW. There’s a scaling up a factor. So there’s around a 10% reduction just from scaling up that influences of course, chiefly the CapEx and OpEx. Of course, not the cost of electricity. And now for PEM we don’t have data for larger scale projects, because they’re mostly very small data, at least the once we have access to. But still, we see there is a big gap between alkaline and PEM. And I think that’s the main reason that the big developers in these Middle East projects that Yana has mentioned, they’re flocking to by alkaline mostly, and we at CEA are already involved in several very big projects, supporting our clients in sourcing suppliers and sourcing equipment. So it’s a very exciting time to be in this industry. And finally, it’s basically the same analysis but in a very nice, say columnar charts, like three dimensional charts. The one above is about alkaline and the one below is about PEM. They’re both 5MW.

So we've done LCOH mapping and the colors show the range. So green is $1 to $2 per kilogram, which is fantastic. That kind of beats the dirty hydrogen. Like blue is 2 to 3. Yellow is 3 to 4, brown 4 to 5 and fo forth. Five is expensive, really. So you can see that green, blue and yellow, which are nice ranges, especially with the subsidies, not more than $4, they occupy most of the space, so you can have pretty expensive LCOE, like buying electricity at a high price or pretty bad utilization rate and still achieve a very nice LCOH with alkaline. With PEM it's a lot harder. So this nice space where economics might work is a lot smaller. So you need very high utilization rate or very cheap LCOE to achieve the same LCOH and of course there are limitations. Okay, designing for minimal LCOH is not possible.Water and power supply constraints could be in place, and also the PPAs, hydrogen offtake agreements. So it can get very complicated for the designers of the projects and the developers and I was watching discussion recently about exactly this how the new additionality rules in the EU, combined with the country regulations can be very, very tricky and complicated, and very difficult to future proof when you have temporal correlations, being relaxed, or being enforced, etcetera. So basically, that's the end of it and we're happy to take questions.

Q&A

Jonathan Gifford

Thank you very much George Touloupas, the senior director of Technology and Quality with Clean Energy Associates. We've got some questions coming through live. Sergio Matalucci, who's our PV magazine Italia editor and also our hydrogen correspondent, you've got some questions from attendees.

Sergio Matalucci

46:46

Right. I mean, there is a lot of interest for your presentation for Yana’s presentation, that's quite obvious. But I will start with you, George.

When we speak about electrolyzers we always think about hydrogen. But what about oxygen? Do you think it is well marketed? Or does it make any sense to throw away such a large byproducts? And there was a question from Russell Blades with this webinar at the moment. I will add something: Are you aware of cases companies investing in this option? So oxygen, say for instance, for medical purposes?

George Touloupas

47:28

Well, it's definitely doable. So if you need to install additional equipment, of course, purify it. And then you need to have a supply chain in place, proximity, etc. So if the economics work, it's an additional revenue stream. But it doesn't necessarily work. If you imagine a huge solar plant in the desert and a big hydrogen production facility next to an ammonia and fertilizer plant, it doesn't necessarily make sense to that. So it depends. So I believe we're gonna see cases where oxygen becomes an additional revenue stream.

48:06

Okay, interesting. Thank you George. A question for Yana. I'll jump in:

If EU and US both apply subsidies and tax incentives to support their hydrogen industry growth, how does China and Asian countries do it? Asian being logically Southeast Asian countries and among Asian countries, which one is the most advanced in terms of hydrogen readiness?

Yana Zabanova

48:31

Yeah, thank you for this question. On China actually my colleagues published the report into the presentation so please go to our website RIFS Potsdam. My collegues wrote this huge report in China. But basically my takeaway, even though I don't specifically work in China, is that for China it's a bit underwhelming, to be honest, the hydrogen strategy. For them the clear policy perspective, priority, is fuel cell vehicles. So they have wide consumer support for that. They have direct subsidies, they also they really try to promote the industrial manufacturing of hydrogen technologies as well. But in terms of really decarbonizing the economy with hydrogen, they're not, they don't have such ambitious targets. I think for 2025, the the target is 200,000 tonnes, I mean, for a country like China, it could be so much more. And so I feel like they're still trying to build hydrogen value chains and to decarbonize maybe as the next step in the future. So it's a very different approach compared to the EU where hydrogen is really for decarbonisation, so fuel cell vehicles everywhere. And also importantly, state owned energy enterprises and China play a key role. They build hydrogen pipelines, and then develope storage infrastructure. So that would be my takeaway for ACN. I'm not really such an expert, but what I've heard is basically the two main drivers are the expected steel production expansion. So they want to build a lot of new steel mills, not the electric arc furnace ones, but the other ones. And so for that they might need hydrogen. And also, there's this controversial plan to use hydrogen ammonia for coal firing and coal plants, you know, like Japan is also planning to do. And in Europe, usually it's not considered to be a good idea. But this would be the two main drivers. And as as far as which country is most advanced, I think they're still at very early stages. So I wouldn't be able to tell, but I think steel production and cofiring would be the drivers at the moment. 

Jonathan Gifford

50:33

Okay. Thank you for that Yana. Sergio, do we have another question?

Sergio Matalucci

50:40

Yes, I mean, there is plenty of questions. And one question probably for somehow both of you. But I will ask the question first to George. And then I will ask Yana to eventually comment on George’s answer.  

The EU and Norway have established a green Alliance in Oslo in Brussels want to accelerate the transition with a focus on Hydrogen an offshore renewable energy? Is it relevant? Do you think this will be an element to watch in the next few months, and also is it relevant, for instance, for Swedish, green steel. There is both a commercial element and somehow geopolitical aspect to it. So George, what do you think about it?

51:31

Let me first clarify the question. Is it about relevance of offshore hydrogen production?

51:38

Yes. And in general, the alliance of the EU with no way also when it comes down to hydrogen?

George Touloupas

51:45

Well, this is not really new. I mean I'm reading the news and press releases, there are gigantic projects, hydrogen islands, hydrogen hubs, piping hydrogen to Norway or Norway to EU or to the UK, whatever. So definitely, you can produce cheap hydrogen offshore with very high capacity factors, and then send it onshore for pipelines. That probably makes sense, although I'm not an expert in this kind of stuff. And then yeah, obviously, green steel is primary target for industry there, decarbonization, and the Swedes are very good at making steel. So, they definitely take advantage and have already started producing green steel.

Sergio Matalucci

52:36

Now, I was wondering, Yana, do you have a comment on the geopolitical aspects of, you know, work either in collaboration?

Yana Zabanova

52:47

Yeah, I mean, obviously, Norway, I think is an important part now for the EU. I think how it's different from most other European countries in the EU is that it is interesting, both in blue hydrogen and green. However, I think there is a little bit of a mismatch in the debate in Germany, let's say, where there's still a lot of hope for Norwegian hydrogen, and the Norway itself, because we've worked with researchers from Norway, actually, exactly on this topic on Norwegian hydrogen plants just recently. And so the discussion, the debate in Norway is much less, it's maybe a bit more cautious, because they need a lot of renewable electricity for their own needs for electricity demand expansion. And so it's not such a clear case for them, even though there's a lot of interest. It's not like 100%, the size, that thing that they will export hydrogen, and then also think in blue or green, and also other applications. So for me, it was living in Germany, it was a bit surprising to hear about this more cautious debate in Norway, internally in Norway, regarding hydrogen, even though of course for their companies it's a way maybe to preserve the relevance through Blue hydrogen, and building CCS. I think CCS will be important there. But we'll have to see, I think, given the projects that are announced, they will be completed much, much later, it would be really something for the future. But we'll have to see. For Sweden, definitely green steel is very important. But you always have to look at the domestic political environment for Sweden. There's also this debate about nuclear what's going to happen with it offshore. And in Norway, there's a lot of social licence problems that are in opposition to large scale renewable energy projects. I mean, because of the landscape and everything. So you have to look at the domestic political context. I think sometimes we don't really see it being in another country.

Jonathan Gifford

54:39

Okay, thank you for that, Yana. Let's try and get through a few questions quickly. We have a lot from our presenters, and Sergio has said our attendees rather, for you, George:

What is the outlook for hydrogen pipelines and metallurgy?

George Touloupas

54:56

So it’s not something that is in our immediate interest or our mother-company, Intertek, does do a lot of work on general gases and hydrogen gas pipeline. So I guess the question is about economics. Yeah, hydrogen is a tricky atom, molecule if you like, so the pipelines must be very special. So that you don't have leakage. Leakage in general is a very big safety concern. And from others have seen, it seems to be probably the most economical way of transporting it. And the basic concept behind hydrogen valleys and backbones. And I think that kind of sums it up from my perspective, however, I mean, can I take the opportunity to highlight something from the content that I showed, that probably is the most critical, I shown the slide where we have seen like 100x magnification, I think this is really, really very important. And when you scale up something 100 times in seven, eight years, this is not trivial. This is huge. It's, it's the big challenge of industry, there are big risks around. So in China, there are some very recent mega projects, buildings, 1 million tons per year each. In the north, in Xinjiang, inner Mongolia, we're actually looking at the bidding numbers. All the big players are there, and also hear about failures in just a few months. So although it's a mature technology, it's been around for 80 top 90 years, the scale makes it brand new. So everything is challenged right now. Because there's a huge pressure for volume, for price, optimization of materials, optimization of technologies. So it's all new entirely new, just because of the scale, this 100x is a big factor. And that's where I think, you know, there will be a lot of challenges. And we're trying to help our clients to avoid this kind of pitfall. 

Jonathan Gifford

57:13

Okay, thanks, George. We're almost out of time. One last question.

You've spoken about the variability of renewable sources and the consequences on hydrogen. How does the power to x facility co-located with wind and or solar park make financial sense in comparison with building power to x facilities near a chemical cluster and draw power from the grid?

George Touloupas

57:39

Yeah, well, I said electrolytic hydrogen is not green, unless the electricity is green. So if you draw power from the green, and the green is green, the green energy is green, it's fine. No problem. But we're not there yet. In the future, we will be there. So this is a big part of the delegated act. So it's trying to avoid exactly this kind of situation

Jonathan Gifford

58:05

Okay, thank you, George. Yana, do you have anything to add to that?

Yana Zabanova

58:10

I agree. I mean, I think in Europe, there are very few countries where the grid is sufficiently green already. I think Sweden is one of them, it will be easier for them to meet these requirements there. But otherwise. Yeah, I think there's also caveat, if you have a low emission grid, like with nuclear, then you don't have to prove new renewable energy capacity, but it's enough to just go through the PPA. So you have to look at the different cases. Like France.

Webinar wrap up 

Jonathan Gifford

58:38

Okay, perfect. And as I said, unfortunately, we have come to time. But I do want to thank you both very much for your presentations. Yana Zabonova, thank you for taking us through the geopolitical aspects. George Touloupas from CEA, thank you for giving us the techno-economic view on the green hydrogen economy by the number of questions coming through and the registrants we had to this webinar. There's clearly a lot of interest. So thank you for taking the time.

59:07

Thank you very much, and enjoy your evening.

And thank you, as I said, for helping me in your area of expertise, Sergio joined us from the Italian Alps actually today where he's been reporting on the frontline of climate change on glaciers, sadly in retreat. So thank you very much.

Sergio Matalucci

59:28

Thank you so much. And thank you, Yana and George, for taking part. It has been a pleasure to listen to you and I'm sure that we'll work together for articles in the future.

George Touloupas

59:39

It will be great. Great questions.

Jonathan Gifford

59:44

Indeed. Okay, now on to some final conclusion remarks. Thank you everyone for attending our webinar today. As a bit of a thank you we're giving you a 10% discount on subscriptions to PV magazine. There's a QR code there, and code (webinars 10) that you can use. The May edition of PV magazine is just freshly out I think two days ago, it was released, I encourage you to pick up a copy. And of course, through subscriptions it allows us to do a lot of our great work. Like webinars like this today, the focus on some of the May edition of the magazine is really celebrating China's contribution to the global PV installation industry race, something we're all a part of hitting that 100 gigawatt AC milestone in terms of annual installations in 2023. Coming up, we have more great webinars, of course, mounting big modules on rooftop PV a very practical one there. And I also want to alert you to PV magazine event, which is happening next week. It's solar and storage Hispania in Barcelona, that's going to be presented in partnership with RE plus events. I involve you to get involved. So thank you very much. Once again, my name is Jonathan Gifford. I’m the editor in chief of PV magazine global and thank you for joining this PV magazine webinar. And of course, fill out the survey to provide us with some feedback and to help us to make these webinars better for you. Thank you very much, and I look forward to speaking with you again soon.