Navigant Research Blog

A Roadmap to the Coming Hydrogen Economy in One Chart

— July 5, 2017

Hydrogen has been discussed as a future energy carrier for decades, though infrastructure challenges and high cost seem to always keep broad adoption in the hypothetical realm. However, as the cost of electrolyzers and renewable energy continue to tumble and climate policies tighten, hydrogen is again experiencing renewed global interest.

Versatility and Disruptive Potential

Hydrogen’s versatility boosts its appeal as an energy carrier. It is the only energy carrier that has significant disruptive potential across the world’s energy-consuming segments: power, transport, industry, and heating. Electrolytic hydrogen—which comes from splitting water molecules by electrolysis, often with renewable electricity—is broadly seen as the key to clean hydrogen.

As seen in in the following chart, electrolysis remains expensive today. This is because electrolyzer capital costs have not fallen much below $1,000/kW. Renewable electricity costs, while falling dramatically, remain relatively high compared to a very high penetration future. But as those two costs fall, as is projected through 2025 and beyond, the cost of clean hydrogen falls substantially.

Hydrogen Cost Comparison with Other Energy Carriers, World Markets: 2017, 2025, and Beyond

Notes: Commodity costs include representative data from California, Germany, and Japan. Electrolytic hydrogen (2017) based on DOE data and actual filling station costs, while future prices presume large-scale (100 MW) systems with continued declines in both cost of renewable electricity and electrolyzer capital costs. SMR is steam methane reformation.

(Sources: Navigant Research, US Department of Energy, International Monetary Fund, International Energy Agency, California Energy Commission)

Hydrogen Use in Transportation

Transportation, which favors expensive energy-dense fuels, is among the more attractive uses for hydrogen. Indeed, electrolysis is providing a growing share of hydrogen to rollouts of both passenger vehicles and heavy duty vehicles like buses—in places such as China, California, Germany, and the United Kingdom. The success of battery EVs (BEVs) represents a major hurdle for hydrogen, though there is growing reason to believe that both energy carriers will be embraced. For example, the range-extending capabilities of hydrogen on battery vehicles are continuing to improve.

Other Hydrogen Uses

Hydrogen is also highly valued by industry as an important process input to production of ammonia, glass, and metals. Industrial uses represent an existing hydrogen economy that can be decarbonized and made more efficient by renewable hydrogen. Finally, hydrogen could revolutionize power generation and heating through fuel cells or other thermal generators, though it is expensive compared to natural gas, especially in the United States with its ongoing shale gas boom. Still, if the aggressive cost decline targets are met, even these two heavily polluting segments could be disrupted by hydrogen energy.

Hydrogen detractors correctly point to the infrastructure challenges of hydrogen storage, compression, and transport and the steep cost declines needed. If those hurdles can be cleared, this chart may hold two additional reasons for optimism: carbon pricing and hydrogen’s efficiency bonus. Carbon pricing, which is on the rise, makes hydrogen more attractive, as it displaces fossil fuels. Finally, comparing by units of energy hides a key efficiency bonus of hydrogen: it is often twice as efficient as the fossil fuels it replaces. This is because both stationary and vehicular fuel cells can be around 60% efficient, which is roughly twice the efficiency of combustion-based technologies after losses.

A Roadmap to Future Energy

This chart can be considered a roadmap to an eventual hydrogen economy. Electrolytic hydrogen is already competing with fossil fuels in the transport and industrial segments, and will continue to grow its market share. Provided the favorable carbon policies and cost declines continue, hydrogen has the potential to be the best and most versatile energy carrier of the future.


Postcard from Hawaii to Nation’s Capital

— June 29, 2017

The mood at the second annual VERGE conference in Honolulu, Hawaii last week was upbeat about the future of clean energy, despite pushback on the US mainland. Apparently, those committed to a clean energy agenda, including the private sector, are more motivated than ever to push forward with aggressive programs to bring renewables resources online. They aim to not only combat climate change, but also create jobs.

Conference attendees clearly supported the supposition that clean energy is here to stay, no matter what might be unfolding in Washington, DC. The proposed dismantling of the federal Environmental Protection Agency’s Clean Power Plan and recent withdrawal of the United States from the Paris Agreement on climate change only seemed to serve as motivation to push forward even harder.

Hawaii’s Renewable Energy Vision

Hawaii is the first (and so far) only state in the United States to commit to a 100% renewable energy future. Governor David Ige of Hawaii didn’t seem to blink in the face of counter currents flowing from the Trump administration. A confessed energy geek, he seemed to take particular delight in the fact that Hawaii has emerged as a key testing ground for bolstering commitments to infrastructure needed to integrate variable renewables for both power and transportation services. Since each island of Hawaii is its own separate electric grid control area and retail costs are high due to such a reliance upon imported sources of fossil fuel, Hawaii is in a unique spot. The economics in the state clearly favor renewable energy.

Industry Momentum Is for Renewables

Even Connie Lau, CEO of Hawaiian Electric Industries, reported that her investor-owned utilities brethren have all bought into the clean energy agenda. If the administrative about-face on clean energy had occurred 8 years ago, then the momentum for renewables and other clean energy may have been halted, but that time has passed. Past government and industry investments have driven down the price of solar PV, wind, and batteries while software innovation to manage such resources has scaled up.

Nevertheless, there are challenges in implementing aggressive clean energy goals. Just look at California, where the state is paying neighboring states to take excess solar production. Many models show that once one reaches 80%-90% renewables penetration, the cost of integration can jump dramatically.

One of the key tools Hawaii will rely upon to reach its 100% renewable energy goal is to integrate devices like energy storage into self-balancing distribution networks such as microgrids. As of now, over 90 MW of new energy storage devices has been authorized by state regulators to be installed among the Hawaiian islands, with the majority of that capacity—70 MW—to be installed in Oahu.

Continuing Conversation

I had the pleasure of helping to run a 4-hour workshop on how to overcome challenges to developing a microgrid at VERGE with cutting edge microgrid market makers such as ENGIE and Spirae. I also moderated a session on how microgrids boost clean energy on islands, with featured speakers from ABB—which is pushing forward with a 134 MW microgrid designed to reach 50% renewable energy on the island of Aruba by 2020—and representatives from Hawaii and the US Navy.

Ironically, there may still be some room for collaboration between Hawaii and Washington, DC in the clean energy space. As I noted in a previous in a previous blog, one area where the interests in promoting national security in DC and a clean energy agenda in Hawaii align is the microgrid space. Watch for a report on that topic later this year.


Energy Access Continues to Attract Power, Internet, and Tech Giants

— June 12, 2017

Recent moves by some of the largest energy and Internet companies in the energy access space highlight the social and economic allure of providing electricity to remote, typically rural, communities in developing countries. More than 1 billion people have unreliable access to electricity and are reliant instead on harmful and expensive sources of lighting such as kerosene and diesel. Growing public and private investment in the sector continues to grab headlines—and increasingly ambitious roadmaps—but it remains to be seen how these projects will pan out. A round up from the past few months indicates the growing momentum:

  • In March, ENGIE signed three partnerships in Indonesia for microgrid and renewable energy development agreements to develop, co-finance, build, operate, and maintain microgrid and other renewable energy projects worth up to $1.25 billion over the next 5 years. As part of the agreement, ENGIE partnered with microgrid developer Electric Vine Industries to target 3,000 villages in the province of Papua over a 20-year period—reaching an estimated 2.5 million people and requiring $240 million over the next 5 years. The announcement is an exciting development that, if realized, could make a significant contribution to the country’s Bright Indonesia rural electrification program targets Papua as a priority area for increasing its electrification rate from 85% in 2015 to 97% over the next 3 years.
  • In April, founding partners Allotrope Partners, Facebook, and Microsoft launched the Microgrid Investment Accelerator (MIA) at the annual United Nations Sustainable Energy for All Forum. According to the press release, “This first-of-its-kind energy access financing facility seeks to mobilize ~$50 million between 2018-2020 to expand energy access to communities that currently lack reliable access to modern energy services in India, Indonesia and East Africa.” The MIA seeks to accelerate energy access microgrids through an ecosystem approach to finance—leveraging grant and concessionary finance from foundations and development finance institutions to mobilize private sector capital into renewable energy microgrid projects. With Internet and tech giants involved, others are likely to join; a solicitation to developers is slated for summer 2017.
  • Pay-as-you-Go (PAYG) is an Internet of Things (IoT) off-grid lighting solution that is gaining traction. PAYG enables rural, typically off-grid, customers to pay for electricity service in the form of a 1W-5W lantern or 10W-200W solar home system—or as part of a remote microgrid using their mobile phone. M-KOPA, Angaza, BBOXX, and others have been successful in expanding distribution of lighting products that are monitored and paid for via their cellular-enabled payment platforms.
  • Providing high-level context on the direction of energy access globally, the recently released State of Electricity Access Report 2017 provides an up-to-date look at how countries and governments are faring in the race to meet the sustainable development goal of universal access to electricity by 2030. The report underscores the importance of the integrated public-private approach being taken by ENGIE, Enel, MIA, and others that have operated in the energy access sector over the past year.

Taken together, these recent announcements showcase how rising connectivity—and in many cases, incomes—are attracting investment activity in the energy access sector.


Zero Emissions from a Fossil Fuel Plant … Really?

— June 6, 2017

The claim of zero emissions from a fossil fuel plant sounds too good to be true. I was skeptical when I first read the headline, “Goodbye Smokestacks: Startup Invents Zero-Emission Fossil Fuel Power,” on the Science website. But on second glance, this does appear to be a big deal in the carbon capture realm.

Oxymoron or Innovation?

Author Robert Service notes: “Zero emissions fossil fuel power sounds like an oxymoron.” And indeed, it does. But the people behind startup NET Power believe its technology makes this possible. The company is backing a 25 MW demonstration plant in the Houston area that will be activated later this year. Basically, the plant will burn natural gas in a pure oxygen combustor. By using mostly pure, high pressure CO2, the plant can avoid the phase changes of traditional steam cycles. And instead of driving a steam cycle and losing heat up a smokestack, the NET Power plant retains heat within the system, resulting in less fuel used for a turbine to reach the necessary temperature.

The result, the company claims, is a stream of nearly pure CO2 that is then piped away and stored underground, or that can be shot into sapped oil reservoirs to recover what oil remains. This latter process is called enhanced oil recovery. In either case, the CO2 is kept out of the atmosphere. The system is based on work done by Rodney Allam, a retired British engineer, and is called the Allam Cycle. The key to Allam’s idea is the recycling of the CO2 in a loop.

A Fossil-Fueled Game Changer

NET Power says it can produce emissions-free power at about $0.06/kWh, which is about the same as the cost from a state of the art, natural gas-fired plant. And lower than most renewable energy. If the demonstration meets expectations, the company intends to move to a full-scale, 300 MW version that could be operational in 2021 at a cost of about $300 million. Such a power plant could supply more 200,000 homes. One expert, John Thompson from the Clean Air Task Force, says the breakthrough plant would be “a game-changer if they achieve 100% of their goals.”

We shall see. The NET Power facility could fail to reach its goal; as carbon capture expert Howard Herzog says, “There are only a million things that can go wrong.” But if successful, the zero emissions plant could be a bridge to a cleaner environment, and could drive more aggressive use of renewable sources. So, what’s not to like about this kind of audacious engineering that aims to solve a problem in a practical way? Failure is a possibility, but success is, too.


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