INTERVIEW: Rising fossil fuel prices could disadvantage blue hydrogen projects -- JM

Rising fossil fuel prices are making low-carbon hydrogen projects less attractive in the short term, the head of Johnson Matthey's hydrogen technology division said, as feedstock natural gas prices soar in Europe following Russia's military invasion of Ukraine.

However, such projects are long-term investments, and would depend on choosing the appropriate business model, Ralph Calmes, managing director of Johnson Matthey hydrogen technologies, told S&P Global Commodity Insights March 28.

"The high gas and power prices could be both an opportunity and a barrier," he said, noting that renewable power prices had fallen dramatically in recent years, meaning they were "fast becoming cheaper than fossil fuels."

S&P Global assessed the cost of producing hydrogen via alkaline electrolysis in the UK (including capex) at GBP13.43/kg ($17.62/kg) March 31, based on month-ahead grid power prices. PEM electrolysis production was assessed at GBP15.91/kg while blue hydrogen production by autothermal reforming was GBP6.18/kg (including capex, CCS and carbon).

Security of energy supply was becoming a much more important element for countries reliant on imports, while at the same time, companies with large energy requirements would have less cash available for new projects, he said.

Johnson Matthey is technology neutral on hydrogen decarbonization, developing renewable hydrogen production and fuel cells, as well as natural gas-based systems such as autothermal reformers.

"It doesn't matter which technology is deployed, provided we remove the most CO2, at the lowest cost, as quickly as possible," Calmes said.

Low-carbon blue hydrogen was a logical early step in scaling up production, he said, highlighting the advantage northern European countries such as the UK had for developing the technology, with industrial clusters alongside natural gas processing facilities with suitable geological CO2 storage.

Southern Europe was better suited to renewable hydrogen, with abundant solar and wind power potential, though lacking in geological storage options.

ATR CO2 capture advantages

Johnson Matthey coupled ATR in series with gas heated reforming in its blue hydrogen production technology.

This provides the combustion heat within the process stream, meaning precombustion carbon capture can be used to remove CO2 at high pressure from a more concentrated stream, giving higher capture rates.

"The CO2 stream can be captured at a pressure and purity that makes it suitable for sequestration without the need for additional, costly compression of the CO2," Calmes said.

The company's technology is to be used at the UK's HyNet low-carbon hydrogen project, selected by the government to receive financial backing under its first phase of industrial decarbonization cluster funding.

Construction on the first 350 MW phase was due to start at the end of 2022, subject to the government's proposed hydrogen business model, expected in the coming weeks.

Production could reach 3.8 GW or 30 TWh/year of hydrogen capacity by 2030, HyNet said, with the blue hydrogen plant achieving CO2 capture rates of 97%, delivering a total 85%-90% CO2 savings compared with the status quo alternative.

Calmes said industrial clusters were a good way to build up a hydrogen economy, bringing together supply at scale with industrial applications.

Renewable power capacity

Calmes said limited renewable power capacity was in principle a barrier to the rollout of green hydrogen, but "the need for renewable energy is well understood, and the massive scale-up needed is already happening."

"We must remember that renewable energy capacity has risen by 45% from 2019 to well in excess of 270 GW," he said, citing International Energy Agency figures.

Not all of this capacity was fully utilized, he said, underlining the business case for renewable hydrogen deployment to balance grids and enable higher utilization in periods of high generation and low demand.

Governments should continue to develop hydrogen infrastructure, as well as contracts for difference to support early market development, giving certainty and financial security to investors, Calmes said.

He also said a level playing field for international trade was key, which could be underpinned by carbon taxation.

Platinum group metals

Calmes took up the role as head of JM's new hydrogen technologies business in October 2021, coming from the company's platinum group metals services business.

He said supply of PGMs was also critical to some electrolyzer technology.

"Both proton exchange membrane electrolyzers and PEM fuel cells will be important as the market grows," he said. "We must ensure that we obtain the most from every atom of PGM, and then when electrolyzer systems reach the end of their lifetime, we must recycle and reuse as much as possible."

Anion exchange membrane electrolyzers do not use PGMs in their systems, but the technology is at a much earlier stage of development, he added.