What is good hydrogen?

The market and opportunities are there, but the only hydrogen projects that will succeed are the good ones.

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What you will learn

• The three main elements to consider for successful hydrogen project development in North America
• Opportunities, challenges and building blocks for each of these elements

One of the greatest challenges of the energy transition is decarbonizing hard to abate industries, such as aviation, cement and steelmaking, fertilizer, and chemicals. Hydrogen is a viable solution, but this depends on a reliable and affordable hydrogen supply. Unfortunately, hydrogen suffers from reputational challenges based on outdated perceptions about how it is produced, transported, and used.

 

What is good hydrogen?

With incentives from the IRA (Inflation Reduction Act) in the U.S. and similar policies in Canada it is expected that demand for hydrogen as energy (rather than as a feedstock) will grow from, essentially, zero to 53 Mt per year in 2050, according to DNV’s Energy Transition Outlook North America report. The market and opportunities are there, but the only hydrogen projects that will succeed are the good ones.

So, what makes good hydrogen? There are three essential elements:

 

Safety - or good safety processes make good neighbors

Good hydrogen projects begin by ensuring the right safety processes and systems are in place. To put it simply, you and your neighbors must feel comfortable with it being produced, distributed, and used “in your back yard.”

The convergence of renewable power, electrolyzers, and chemical processes necessitates an integrated hazard management process and a strong safety culture. Identifying hazards and implementing effective mitigations are critical elements to assure facility safety. During the engineering phases of a clean hydrogen project proponents need to consider the potential impact of unintended releases which will inform designers on the types of mitigations needed to achieve a robust level of safety. Hydrogen has some unique physical properties which can be managed with the right expertise. In the latter stages of engineering, the mitigations must be designed and evaluated for effectiveness when more detailed designs are produced. A key consideration is process safety culture and the workforce’s ability to adapt to handling clean hydrogen during operations; effective communication of hazards and the systems and processes to manage them has been a focus area for DNV and its customers.

Closely related to, and equally important, is stakeholder management. The energy transition is increasing pace, and this change can cause apprehension from stakeholders. In short, people living near hydrogen production facilities and distribution infrastructure must be able to see the upside for their communities and have trust that their environment will not be harmed. A proactive approach is needed to demonstrate the shared benefits of hydrogen projects. Transparent decision-making, emphasizing environmental justice and public benefits during permitting phases, can ensure that projects are not canceled before they can begin. The IRA includes a public benefit provision for energy projects, so measuring the impact on communities and the environment is crucial and the ability to demonstrate the project's benefits to them.

Well-established renewable generation projects already face pushback from local communities, and this is heightened with a relatively unknown quantity like hydrogen. The ability to demonstrate the value and safety of a hydrogen project is a hallmark of good.

 

Sustainable production - or it’s getting easier being green

There is an ever-growing rainbow of hydrogen technologies, but the only one that is truly useful in the energy transition is green hydrogen. Hydrogen and its derivatives will only have a 9% share of final energy demand in North America by 2050, but this relatively small slice of demand is critical for hard-to-electrify sectors like long-distance trucking, maritime, aviation, and manufacturing. To ensure that the hydrogen coming to market is primarily green the U.S. and Canada have enacted policy levers, primarily tax credits, to incentivize this type of production. The IRA includes a clean hydrogen production tax credit (PTC) and an investment tax credit (ITC) based on the CO₂ emissions thresholds of hydrogen. Additionally, blue hydrogen—produced through steam methane reforming paired with carbon capture and storage—qualifies for CO₂ tax credits of USD 85/ton of CO₂ captured. Canada has also allocated funding for ITC for clean hydrogen, setting the stage for a boomlet in clean hydrogen production in North America. One aspect of clean hydrogen production that is starting is pairing renewable energy production with hydrogen production, often referred to as Power-to-X. The “X” can be other things, but mostly it is hydrogen production. This concept is particularly enticing to renewable power developers because it lessens or even eliminates the need to find offtakers and opens up market opportunities that go beyond electricity markets. Power-to-X is a win-win for the energy transition, ensuring a supply of green hydrogen while building the renewable power sources industry. Technology innovations are moving at a rapid pace and betting on the right solution is paramount. Successful developers and operators will need to regularly review the science to determine the best available technology and avoid being caught with a Betamax of HD-DVD hydrogen production and distribution system.

 

Offtakers - or what to do with all this hydrogen

Currently, the demand for hydrogen (of all colors) in North America is for use in refineries (65%), producing ammonia for fertilizer (25%), and the balance as a raw material for chemicals like methanol, but this is set to change with expected offtake policy support. The injection of hydrogen as an energy source for manufacturing, transport, and buildings can accelerate the energy transition. Finding the right offtaker will be critically important as the energy transition accelerates and more sectors adopt the use of hydrogen. The business case must be viable for the long term — the right offtaker and the right business case will spur vibrant economic growth. The government also has a stake in supporting good hydrogen and wants assurances that taxpayer money is being spent effectively on producing clean hydrogen to a set standard. Project owners and developers are increasingly conscious of the need to secure long-term offtake agreements. Producing a product that minimizes the amount of adaptation required by the offtaker increases the likelihood of adoption. Recently, a customer partner asked DNV to analyze its business portfolio and map where their existing assets could be used as a platform to cater for clean hydrogen offtakers. We analyzed demand clusters for clean hydrogen or a derivative fuel and the feasibility of adapting technology to existing assets to meet this demand. Our customer was able to make decisions on clear strategic positions to take. As this customer demonstrated, the motivation to build good hydrogen projects is already present, but there are some technological, regulatory, and NIMBY-related hurdles to overcome.

 

DNV is ready to de-risk your hydrogen project

Each of these elements are intertwined, and having a partner like DNV to help you navigate project development can ensure you have “good” hydrogen. Our science-based approach means that we dive into technology reviews, develop recommended practices, and address industry-wide challenges through joint industry projects (JIPs). DNV brings science-based methods for validating carbon footprints and developing industry standards which helps customers lower project risk profiles for obtaining financing, earning their license to operate, and achieving high safety and reliability levels. Learn more about our hydrogen capabilities.

2/20/2024 2:00:00 PM