BHP Billiton will not rely on green hydrogen to reach its decarbonization ambitions.
BHP’s manager for energy, carbon, and technology research, Lee Levkowitz, claimed at the Hydrogen and Mines virtual summit that green hydrogen would be unlikely to achieve competitive pricing during the 2020 decade, or even the first half of 2030.
“It’s no surprise that the economics of hydrogen production, particularly green hydrogen, is difficult. Currently, production expenses range from $2.50 to $8 per kilogram. When you factor in storage, transportation, and end-use markets, you should expect to pay an extra $2 to $5 per kilogram. When you compare that to the current cost of producing grey hydrogen, which ranges from 70c to $1.50 a kilogram.”
According to Levkowitz, there are three approaches to reduce the cost of green hydrogen: upgrading electrolyzer technology, lowering electricity costs, and increasing electrolyzer utilization to spread out those fixed cost components over a larger volume of production output.
“Any modeler in the audience will tell you that getting all of these moving in the same way without one of the elements ballooning out in the opposite direction is actually rather difficult. As an example, many project developers are currently dealing with a difficult optimization challenge in which they are attempting to reduce electricity costs while avoiding adding additional costs for things like transmission, electrical, or chemical storage in order to increase utilization.
“In our most optimistic scenario, renewables cost around $10 per megawatt hour by default. To get to the point where hydrogen can be competitive in steelmaking, hydrogen prices must fall between $1 and $1.50 per kilogram. Such who are familiar with obtaining energy in Western Australia understand that achieving those healthy outcomes will be difficult. And it’s not simply a matter of cost; the enormous amount of electricity required to make green hydrogen is also a barrier.”
While the market waits for the cost of green hydrogen to drop, other decarbonization technologies will continue to develop and evolve, according to Levkowitz.
“Decarbonizing a sector only needs to be done once. It is easier to abate industries, such as renewable energy for power and light-duty vehicle electrification, which already have a clear path to commercialization and will likely win out over more immature technologies. With power and transportation accounting for about two-thirds of worldwide emissions, hydrogen is relegated to a niche function, making economies of scale difficult to accomplish.
“That’s not to suggest there won’t be a role for green hydrogen; in our opinion, green hydrogen will make the biggest advances, displacing traditional emitting sources hydrogen, or grey hydrogen. We also envision it playing a role in industries where there are no other viable decarbonization options and associated infrastructure is easily available.
“In particular, we believe hydrogen has a role in heavy-duty transportation, with some exciting prospective uses, such as excavators and drills, both of which are more difficult to electrify.
“Perhaps most crucially, we believe hydrogen will take off in locations where there is a lot of very, very inexpensive, green electricity,” Levkowitz said.