A long-term support mechanism similar to the UK's offshore wind regime could be needed to underpin natural gas-base hydrogen production with carbon capture, the main proponent behind the HyNet hydrogen project told S&P Global Platts Sept. 24.
Operation beyond the term of the support regime would depend on the price of carbon emissions, Chris Manson-Whitton, Director at Progressive Energy, said.
"There is every expectation that by that point, the cost of CO2 emissions under UK ETS will be such that it will be cheaper to purchase low carbon hydrogen, rather than pay for natural gas and the cost of emissions," Manson-Whitton said in emailed responses to questions.
A blue hydrogen plant, that generates the gas from fossil fuel sources with carbon capture and storage, would typically be built on the basis of a 20-year life, he said.
HyNet will start hydrogen deliveries to early users from the first 3 TWh/year hydrogen plant from 2025, producing 200 mt/day of the energy carrier. The consortium will start a second hydrogen production line by 2027 with a total capacity of 9 TWh/year.
Storage and transport
The project aims to deliver 3.8 GW or 30 TWh/year of hydrogen capacity by 2030, accounting for almost 80% of the government's 5-GW target by that date.
Alongside hydrogen production, the project partners will deliver 1.3 TWh of hydrogen storage in a series of local salt caverns.
HyNet aims to establish a regional hydrogen pipeline network of around 80 km across Liverpool, Cheshire, Warrington and Greater Manchester by 2027, including connections to storage facilities.
It sees early users in heavy industry, flexible power generation, nodes on the gas system for hydrogen blending, and transport hubs.
It plans to expand the network to over 250 km by 2030, including to the Wirral, Flintshire, Wrexham and southern Lancashire.
HyNet expects to take a final investment decision on the project in 2022, dependent on the outcome of the UK government's proposed hydrogen business model, it said in an online presentation Sept. 17.
The government is consulting on business models and hydrogen carbon intensity, following the launch of its hydrogen strategy in August.
HyNet has early-stage offtake agreements in place that underpin the capacity required for the next 10 years of the project's build out, Manson-Whitton said.
"The detailed terms of these are contingent on the final arrangements in the support regime under development by the UK government," he said.
Early partnerships include with bottle manufacturer Encirc and power producer InterGen, which plan to use low-carbon hydrogen from the HyNet project.
HyNet said its cost of hydrogen production was broadly in line with the figures given in the government's strategy, of GBP62/MWh ($85/MWh) for a 300-MW autothermal reforming unit, with costs rising to GBP65/MWh by 2050.
S&P Global Platts assessed the cost of producing hydrogen by autothermal reforming with carbon capture and storage at GBP4.01/kg ($5.49kg) on Sept. 24, including capex and carbon.
HyNet will use a combination of autothermal reforming coupled with a gas heated reformer, which reduces feedstock needs and CO2 emissions by 10% compared with steam methane reforming with CCS.
It aims to reduce CO2 emissions by over 1 million mt/year by 2025, rising to up to 10 million mt/year by 2030, and says its CCS technology captures 97% of carbon emissions.
Hydrogen spot markets
Manson-Whitton said a spot market for hydrogen would evolve in the long term, with "established indices that facilitate trading just like natural gas today."
In the early stages, however, hydrogen pricing would be localized, depending on geographic conditions in terms of production, early users and associated infrastructure.
"Over time, particularly as transmission infrastructure becomes established, we would expect pricing to transition towards a national basis," he said. "A fully-fledged market is probably unlikely before the 2030s, although there should be good regional price discovery ahead of that."
HyNet sees the early market dominated by gas-based production with CCS, given the volumes such facilities can produce. Electrolysis-derived hydrogen could dominate after 2050, Manson-Whitton said.
"Our energy system is likely to need more renewable electricity than we can generate in the foreseeable future for existing and already identified uses of low-carbon electricity," he said. "This is likely to be a constraint on the rate of growth of green hydrogen."
Other HyNet project partners include Eni, Cadent, Essar, Inovyn, Johnson Matthey, CF and Hanson Cement.