Australian offshore wind and hydrogen projects are still a long way over the horizon but developers here will be watching the North Sea, a proving ground for the technology where hydrogen production is also being floated. The area – between the UK, northern Europe and Scandinavia – not only has plenty of ageing platforms and pipelines that could host production and transmission of hydrogen cheaply, but also salt caverns to store it at low cost.
This hybrid approach offers promising elements but the high costs – at least for now – remain a show-stopper, according research from Rystad Energy.
The modelling is based on combining a green hydrogen project with an offshore wind farm of 1GW, assuming that about half of the farm’s generated power is excess and used for hydrogen production. The analysis shows that at current break-even costs, the bulk of the hydrogen produced needs to be sold at €5.1 per kilogram, or about four times the price of hydrogen made from fossil fuel.
In this scenario, the wind farm’s assumed break-even power price is €85/MWh. The scenario project is coupled with on-site hydrogen production, consisting of proton exchange membrane electrolyzers, and storage in a salt cavern.
According to the US National Renewable Energy Laboratory, storing hydrogen in a salt cavern costs €70/MWh, with negligible change over the next 10 years. The Rystad research also considered the cost of compressors, used to level the pressure of the electrolyzer output with the pressure of the salt cavern.
Unfortunately for green hydrogen, even in a scenario where the wind farm’s assumed break-even power price falls to €61/MWh by 2030, a €3.7/kg bulk hydrogen selling price would be required – a far cry from its much cheaper fossil-fuel-made version.
The business case calculations show that a combination of offshore wind and a hydrogen plant is not economically viable at the current cost scheme, as the bulk green hydrogen price will be too high compared with the current price for grey hydrogen.
However, on the flip side, the rapid reduction of offshore wind farms’ capital costs might accelerate the learning curve for hydrogen production, lowering the cost for electrolyzers and potentially for hydrogen storage. With the future cost scheme, the prices at which the power and bulk hydrogen need to be sold are more reasonable, although there is considerable uncertainty surrounding this cost trend prediction.
Green turns to blue
Determining the full potential that hydrogen can unlock is challenging, Rystad says, as hydrogen may open opportunities to decarbonize sectors that would otherwise be difficult to electrify, such as industries, building heating, marine shipping and aviation. But early-phase support and subsidies can cut costs tremendously, it says.
“Offshore hydrogen production may become more interesting if a higher carbon tax is imposed on grey hydrogen production. This would force existing hydrogen manufacturers to shift more of the production to blue hydrogen [grey hydrogen coupled with carbon capture and storage], which in turn would make green hydrogen projects more cost-competitive,” says Petra Manuel, energy research analyst at Rystad Energy.
The modelling is based on the electrolyzers operated offshore, to minimize power infrastructure to transport the power onshore, thereby minimizing the power loss to generate hydrogen. The salt caverns are also assumed to be offshore, based on research about salt cavern potential in Europe.
Australian developers planning onshore hydrogen production powered by offshore wind may be disappointed to hear Rystad’s views on the prospects of liquifying hydrogen for export.
“I have not modelled for liquified hydrogen, but I’d say it takes a huge cost to liquefy and store – and probably it requires hydrogen tanks that are more expensive than salt caverns,” says Manuel, responding to a query from EcoGeneration.
In Norway, a consortium led by TechnipFMC is working on a pilot project where offshore wind turbines will power electrolyzers at sea to produce hydrogen that will be stored in tanks on the seabed. The €9 million pilot, dubbed Deep Purple, will be hoping to beat Rystad’s expectations and prepare a system for large-scale commercial use. Let’s hope there’s no smoke on the water.