In a former article we explored six renewable commodities that might power the emissions free world of the future. Among those, green hydrogen has gained most attention in recent months. What would it cost to import green hydrogen?
Conflation of goals
The shift to renewable energy often is advertiser as a shift to energy independence as well.
That might work for some countries with large potential for hydro, wind or solar power but for most countries it is a conflation of goals. Global reduction of carbon emissions is much more important than national energy independence. If part of a country’s energy demand can be met cheaper via imported low carbon energy, low carbon energy will be traded.
Cheap solar power spurs renewable energy export ambitions
Over the last decade, the price of solar panels has decreased at an unimaginable pace. In regions like the Middle-East and South-America the cost of producing solar power consequentially has dropped below 2 dollarcents per kilowatt-hour (kWh). It is to be expected that solar installations in Australia and the Sahara-region soon will follow.
Solar power in these desert regions is available for prices far below wholesale power prices in Europe, the United States, Singapore and Japan. Logically, proposals arise to get this cheap renewable energy to aforementioned markets. Some think enormous new power lines may be the best way to distribute cheap solar power around the world. Others propose converting cheap power to hydrogen, for transport via pipelines or ships.
Shipping in the short term is most probable
The solar potential in desert regions is that big, and the challenge of the energy transition in densely populated northern regions that large, that all routes will probably come to fruition someday.
Despite the extra energy losses in transport and liquefaction, transport of hydrogen via ships will probably be the first viable option. Dutch tank storage giant Vopak in 2019 announced an investment in in the German startup Hydrogenious (developing a liquid organic carrier able to bind hydrogen). Vopak also joined a feasibility study for conversion of gaseous hydrogen to liquid ammonia, for use as a marine fuel. In July 2020 Air Products announced a $5 bln plant for production of ammonia using wind an solar power in Saudi-Arabia. Starting in 2025 it would export the renewable commodity to global markets.
Estimates for the cost of green hydrogen produced in the Middle-East
If by 2025 renewable hydrogen or hydrogen derivatives would indeed be available in ports all over the world that would off-course be great for the global energy transition. In the following an attempt to estimate the costs of one kilogram of hydrogen, originating from a 1 gigawatt solar electrolysis plant in Saudi-Arabia.
Basic assumptions and bandwidths:
- Solar power generation cost. 1 up to 2 dollarcents per kilowatt-hour (kWh);
- Solar capacity factor. ±20%;
- Electrolyzer cost. For long, the estimate of the cost of electrolyzers has been about $1,000 per kilowatt. Recent reports have claimed cost could fall rapidly with growing deployment, $200 per kilowatt might even be possible before 2025;
- Electrolyzer efficiency. 65 to 80%;
- Design lifetime electrolyzer: 10-15 years;
Cost of power per kilogram of hydrogen:
At the mentioned efficiency, 50 up to 60 kWh of solar power is required for every kilo of hydrogen produced. At 1 up to 2 dollarcents per kWh this results in a power cost of $0.50 to $1.20 dollarcents per kilo of hydrogen;
Cost of the electrolyzer per kilogram of hydrogen:
In order to convert all solar power originating from 1 gigawatt of solar panels into hydrogen, an electrolyzer capacity of 1 gigawatt is required. This would cost $200 mln up to $1 bln. At a capacity factor of 20% and over a 10 to 15 year lifespan the electrolysis plant would convert 17,5 up to 26,3 billion kilowatt-hour into hydrogen. Given the efficiency of 50 up to 60 kWh per kilogram that would result in 290 million up to 525 million kilograms of hydrogen over the project lifetime. That gives a spread of $0.40 up to $3.50 of ‘electrolyzer cost’ per kilogram of hydrogen produced.
What would it cost to get the hydrogen to Europe?
The production cost* of solar hydrogen in the Middle-East would end up somewhere just under a dollar to up to five dollar per kilogram. Natural gas derived ‘grey hydrogen’ is prized between one and to dollar per kilogram. Mostly depending on the real cost and lifespan of electrolyzers, solar derived hydrogen might all-ready be competitive with fossil fuel derived hydrogen.
The question remains what it would cost to get this fairly affordable hydrogen to customers all over the world. Estimates for the cost of either liquefaction of hydrogen or conversion of hydrogen to ammonia are hard to find. The cost for liquified natural gas (LNG) might give an indication. Liquefaction of natural gas, shipping between the Middle-East and Rotterdam, handling and one month of storage would cost around $120 per tonne LNG, or about 1 cent per kilowatt-hour of energy content imported.
LNG is about 7 times denser than liquid hydrogen, resulting in significantly less hydrogen transported for a given ship type. Furthermore these estimates for LNG assume consumption of local energy mix for liquefaction and regular marine fuels for shipping. If the hydrogen produced is also to serve for its own liquefaction, transport and processing, more than 30% of the hydrogen would be consumed in the process, resulting in considerably higher costs.
*Aside from power cost, fresh water and labour cost will add to the price of hydrogen. Several optimizations (adding wind power, extra solar power and/or batteries) might help bring down the estimated cost.
