PF IN THE EARLY STAGES OF HYDROGEN
HYDROGEN , AND ESPECIALLY GREEN-HYDROGEN , IS THE CURRENT BUZZ-WORD OF THE ENERGY TRANSITION . THE LONG-TERM THEORETICAL POTENTIAL OF GREEN HYDROGEN TO BE A MAJOR PART OF THE ENERGY TRANSITION AND HELP DECARBONISE THE PLANET IS UNDENIABLE . HOWEVER , THE ABUNDANCE OF RECENT COMMENTARY AND ARTICLES COMPARING THE NASCENT GREEN-HYDROGEN INDUSTRY TO LNG AND PREDICTING AN IMMINENT BOOM IN MEGA-PROJECTS SEEMS PREMATURE . BY OLIVER IRWIN , PARTNER AND RO LAZAROVITCH , PARTNER , BRACEWELL ( UK ) LLP .
The idea of multi-gigawatt renewable energy plants electrolysing water into hydrogen that is then liquefied , shipped around the world and sold at competitive prices to end-customers , all without creating any carbon emissions , is very appealing and can ’ t come fast enough . The challenges , however , of implementing such a vision , including the technical challenges and high cost of building such facilities , the low volumetric density of hydrogen and the absence of infrastructure for consuming the hydrogen , mean this vision is still a way off .
The focus with hydrogen projects today should be – and , based on our discussions with clients , to a certain extent already is – on less ambitious projects that help decarbonise our existing use of hydrogen and research and develop the technology needed for efficient , large-scale and cost-competitive hydrogen electrolysis of the future . Project finance can help with this journey . This article will briefly discuss the current state of the hydrogen sector , the challenges that must be overcome for hydrogen to become a general , competitive and widespread fuel , and how and where project finance can play a role in this journey .
Hydrogen today According to the IEA 1 , global demand for pure hydrogen in 2018 was approximately 73.9Mt . The largest consumers of hydrogen are refineries ( approximately 38.2Mt in 2018 , or 51.5 % of global demand , according to the IEA ) where hydrogen is used for hydrotreatment by hydrogenation of unsaturated hydrocarbons and hydrosulfuration as part the refining process . The second largest consumers of hydrogen are producers of ammonia – approximately 31.5Mt in 2018 , or 42.5 % of global demand , according to the IEA – of which hydrogen is a building block . The vast majority of ammonia is produced by fertiliser plants for use as fertiliser in various forms , such as salts or solutions . Between them , refineries and ammonia producers account for over 95 % of global hydrogen consumption .
Hydrogen is the most abundant element in the universe but it does not occur naturally on its own and is always found in combination with other elements , for example in water and in hydrocarbons such as coal and methane . Obtaining pure hydrogen therefore requires a process of separating the hydrogen from the other elements . The most common process for producing hydrogen is steam reforming of natural gas , whereby methane reacts with steam at high temperatures to produce hydrogen . While this method is cleaner than reforming other hydrocarbon fuels , such as gasified coal , it still emits significant amounts of carbon . A clean alternative to this process , discussed further below , is electrolysis , which splits water into hydrogen and oxygen using an electric current . Recent hydrogen taxonomy broadly categorises hydrogen into “ colours ” ( notwithstanding that all hydrogen is transparent ) by the method of production . The most common are :
• Grey hydrogen – Hydrogen produced by syngas processes from fossil feedstock , such as steam reforming of natural gas .
• Blue hydrogen – The same processes for hydrogen production as grey hydrogen , but with the carbon emissions from the process being captured and stored .
• Green hydrogen – Electrolytic production of hydrogen utilising electricity generated through renewable and non-carbon emitting sources , such as wind turbines or solar photovoltaic systems .
Additional colours may be used to refer to hydrogen produced from other sources of energy . For example , pink hydrogen may denote electrolytic production of hydrogen utilising nuclear energy as the source .
Most large consumers of hydrogen , such as refineries and fertiliser plants , produce “ grey ” hydrogen on-site for captive use or pipe hydrogen from nearby centralised plants . For example , a modern refinery may incorporate a hydrogen production unit as part of its many components to produce the hydrogen needed for its refining processes . Transportation of hydrogen in compressed or liquefied form exists , and has for some time ( for example , liquid hydrogen has been used by NASA and others as rocket fuel for many years ), but these methods of transportation do not currently account for a significant portion of global hydrogen production or demand .
Challenges with hydrogen The use of hydrogen by refineries and fertiliser plants today is driven by hydrogen ’ s chemical properties . That is , hydrogen is used because it is
64 Project Finance International September 8 2021