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Renewables, gas generators seen as winners in green hydrogen-tinged future


According to Market Intelligence, December 2022


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Renewables, gas generators seen as winners in green hydrogen-tinged future

Electric utilities and independent power producers are positioned as key players to help speed cost reductions for green hydrogen, a fuel predicted to become pivotal in decarbonizing the U.S. economy, experts said Feb. 10.

The opportunity lies in co-locating renewable power facilities with electrolyzers — energy-intensive systems that break water into hydrogen and oxygen through a process called electrolysis to produce a carbon-free liquid fuel that contains about one-third of the same energy as natural gas.

"We've got to cover the cost delta right now right to get green hydrogen competitive, but we forget that with natural gas or other fuels, they have to be shipped," Matt Valle, vice president of development for Florida Power & Light Co., said during a panel discussion hosted by the National Association of Regulatory Utility Commissioners. "But if it's effectively free to get the electrons on-site because you already have service there, it's really just the cost of the capital on the site and that could help accelerate the reduction and close that cost gap even faster."

Looking forward, Valle said he sees a future where the U.S. West, Midwest and southeastern states are producing so much renewable energy on some days that they simply will not have enough lithium-ion battery capacity to store all of that excess power. On those days, generators that would otherwise be curtailed can be paired with electrolyzers to produce green hydrogen, which can shift energy between seasons, Valle said.

"There will be days when you don't have enough batteries to store all of the energy," Valle said. "Hydrogen really starts to make sense, and there's a crossover point at a certain duration of storage, when you effectively would be curtailing renewable energy in the future but you can otherwise direct that into hydrogen, which will be your long term storage."

In the meantime, utilities are starting to blend green hydrogen with natural gas fed to gas-fired combustion turbines.

Florida Power & Light, a NextEra Energy Inc. subsidiary, is aiming to bring a $65 million pilot project online in 2023. The project involves using a 20-MW solar-powered electrolyzer to produce green hydrogen that will initially be fed in small amounts to one of three gas-fired combustion turbines at the 1,723-MW Okeechobee Clean Energy Center.

"I think about this like you're going to the pump and you're filling up with a 5% blend of ethanol with your gasoline," Valle said. "Manufacturers like Mitsubishi Corp., General Electric Co., Siemens AG are telling us, 'Of course, these combustion turbines can handle that, you have to make some configuration changes once you get above a certain percent,' but we want to see and believe with our own eyes because these are very expensive investments that we made on behalf of our customers."

Laura Nelson, executive director of the Green Hydrogen Coalition, cited another project in Utah to convert Intermountain Power Agency's Intermountain power plant, Utah's largest coal-fired power plant, into an 840-MW combined-cycle gas turbine facility powered by a 30% blend of hydrogen when it starts up in 2025.

Nelson said she expects the unit price of green hydrogen to become cost-competitive by about 2030 but hopes that the timeline can be shortened.

S&P Global Ratings estimated in a November 2020 research note that the cost of producing hydrogen from renewables will need to fall by over 50% to $2.0-$2.5/kg by 2030 to make green hydrogen a viable alternative to conventional fuels.

Arshad Mansoor, president and CEO of the Electric Power Research Institute, noted during the panel discussion that the U.S. will still need to eliminate about 3 gigatons of planet-warming carbon dioxide emissions from its economy after fully decarbonizing the electric power sector.

Beyond seasonal storage, Mansoor asserted that green hydrogen could be used in hard-to-electrify sectors such as aviation and shipping.

"It's not just long-haul trucking," Mansoor said "How do you decarbonize the shipping industry? How do you decarbonize the airline industry? That, again, is where the opportunity comes in."