Hydrogen-Based Energy Conversion

Gas takes off

 

The role of hydrogen in the energy system and the value of hydrogen-based energy storage and conversion offer key opportunities to spur continued energy transition. Hydrogen-based conversion solutions have been developed to overcome the renewable energies’ intermittence challenge. This FactBook is one of a series of academically reviewed publications by the A.T. Kearney Energy Transition Institute, a non-profit energy transition research organization established in 2011.

According to the FactBook, the value of hydrogen-based solutions lies predominantly in their ability to convert renewable power into chemical energy carriers. But hydrogen is more than just an energy carrier. Utilizing the current energy networks hydrogen also acts as a bridge between the different branches of the energy supply system, optimizing the use of energy generated from renewable power at the energy-system level.

The main challenge for hydrogen conversion, however, lies not in its technology but in its economics. Most technologies in the hydrogen value chain are proved, albeit at different stages of maturity. The FactBook considers that cost reduction is the next prerequisite on the road to commercialization, especially for flexible water electrolysis technologies. Beyond innovations that could disrupt the technology landscape, the principal areas of focus are engineering and manufacturing to allow for greater scalability and capitalize on accumulated knowledge.

Costs are only one side of the commercialization equation. The versatility of hydrogen opens the way to a wide range of end uses that valorize the power conversion to hydrogen as a service or the hydrogen generated as a product. However, the benefits of hydrogen solutions remain difficult to assess and monetize as most end markets are virtually nonexistent today and are subject to the growing penetration of variable renewables.

The publication finds that the use of electrolytic hydrogen as a product is closer to commerciality, as electrolytic hydrogen fits better in the current market structure and fetches higher end-market prices than when conversion is monetized as a service. Transport will most likely be the main driver in the mid- to long term although fuel cell electric vehicles must still overcome three major challenges: onboard hydrogen storage, the durability and high costs of fuel cells, and the lack of a hydrogen distribution network. Finally, providing grid services with electrolyzers adjusting output up or down on demand for control power could provide additional revenues essential for hydrogen solution to be profitable.

Hydrogen conversion solutions may also suffer from the high number of stakeholders involved. As underscored in this new FactBook, the profitability of hydrogen is likely to be conditioned by the bundling of applications and revenue streams. And with the economics of hydrogen-based energy storage solutions being inherently system- and application-specific, investors, policy-makers and decision-makers must assess how appropriate hydrogen-based solutions compare with the alternatives in the context of local and application-specific conditions.

 

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