Lately, it seems like everything published about energy references hydrogen, at least in passing. By now, I’ve noticed most of us in the energy space have some knowledge of hydrogen - and have also formed an opinion about it. The extent of our knowledge and opinion is likely highly dependent on the specific energy industry the individual occupies, and their geographic location. For instance, those from energy heavy supply regions like the Mid Atlantic US might see hydrogen as a future hypothetical that’s unlikely to have any significant near-term impact. Generally, members of the energy industries in Europe that have strict carbon policies and are more energy dependent are incredibly optimistic about the future of hydrogen. Both of these perspectives have their merits, at least for the time being.
Let’s take a step back for a minute and look at how individuals can arrive at such widely different conclusions - convinced that hydrogen is either the next big breakthrough or is completely overhyped. I have the privilege of collaborating with a multitude of companies and institutions globally - crossing many energy sectors. All these companies are doing some sort of planning, with many looking decades into the future. We work with these energy leaders to evaluate what the energy transition might entail: carbon reduction, electrification, etc. What these companies see as the future for themselves, and their customers, is highly influenced by their regional experience, and is also dependent upon the energy sector they serve.
Those aligned with utilities in regions with substantial energy independence are generally going to view hydrogen skeptically. Privileged with an abundance of local natural gas supply, and substantial long term energy storage, individuals in these regions may find it challenging to see hydrogen as a viable fuel source. Many in these regions view Hydrogen as devoid of energy content, and simply put, out of the money. Interestingly, these arguments sound quite like those put forward in the mid 2000’s regarding wind and solar. However, there is still substantial work to be done for both blue and green hydrogen to move from the theoretical space, and into actual, widespread adoption. Consider carbon capture and sequestration, which has been a topic of discussion for more than a decade but has yet to be implemented at any substantial volume. One challenge that needs to be resolved when it comes to hydrogen is that the reuse of existing methane infrastructure to transport hydrogen has many engineering challenges - and there is still a lack of evidence that end use assets can perform properly using blended hydrogen and methane. These are just some of the factors that led some to perceive hydrogen as mere hype.
In contrast, many of those who view hydrogen as the solution to the necessary advancement in clean energy are those who are faced with significant energy supply challenges, have aggressive carbon targets, or have high-cost energy supply. For these regions, hydrogen provides a much-needed long term energy storage solution, with the potential to leverage existing transportation infrastructure. Hydrogen production is advocated for because it:
Many in these regions see hydrogen as the future of clean, carbon free energy and believe it is clearly the break though energy source we’ve been looking for.
This past year I was lucky enough to attend our Xcelerate conferences in Barcelona in April and Nashville in June. At our Barcelona event, nearly everyone I spoke with had questions regarding hydrogen. Many questions came up on how to model hydrogen storage, electrolyzer efficiency reduction, ammonia transportation, hydrogen pricing, etc. Additionally, customers presented on topics such as “Optimisation of off-grid hydrogen production systems”, “Market Modelling with Hydrogen”, or “Moving Big Things to Zero Across Borders”. All representative of different projects that are highly dependent on hydrogen becoming a major piece of the energy landscape. It also seemed that every topic presented included some hydrogen component. Fast forward a month to Nashville – the incredible focus on hydrogen present in Barcelona did not carry over to the States. The Nashville conference had sessions dedicated to hydrogen where some attendees expressed very strong opinions on the viability of hydrogen. In fact, the general mood ranged from skeptical to ambivalent – taking a “wait and see” approach. I believe this comes back to regional energy availability and policy.
Regardless of opinion and speculation, PLEXOS provides customers with key insights around the increased value of renewable assets when long term storage and electrolysis are added to consume their low cost, curtailed renewable generation. Wind and solar investments offer more value to the market and get a greater return on investment when long term energy storage is added. With intermittent renewable assets making up a greater portion of the generation mix, energy storage is necessary to capture the full value of these generating assets.
In the recent past, batteries have been seen as the key to energy storage; however, batteries can only fill short-term energy storage needs given the operational nature of battery technology. Pumped storage is another method of energy storage, but it’s generally used in a similar method to batteries – to shift daily peaks. Longer term energy storage is required to move surplus, shoulder season energy supply to meet seasonal winter and summer peaks. Methane meets this need well due to established underground storage which allows winter peaking to be shifted to spring and fall. Long term energy storage both adds reliability to the overall energy mix and stabilizes energy prices. Hydrogen is seen to be the carbon free version of the methane energy storage approach, and PLEXOS is being used to provide the necessary analysis to properly size, locate, and time hydrogen storage investment decisions.
Whether you believe hydrogen is hype or not comes down to individual perspective. Both sides of the hydrogen debate have rationale to support their position, but it’s undeniable that some governments have placed huge bets with incentives and policy that clearly move the odds in favor of hydrogen. Big oil and gas companies are also putting huge investments into hydrogen as they see carbon producing fossil fuels as having a limited future. With near term pricing and technology hurdles as legitimate barriers, early adoption will only come from sectors that can take advantage of government incentives. As these projects come online, capital costs are expected to come down alongside adoption following a similar path to what we’ve seen with renewable adoption.
Energy Exemplar continues to work with a wide variety of participants in the energy transition who are using PLEXOS to assess hydrogen production via electrolysis (green hydrogen), steam reforming and carbon capture (blue hydrogen), and even naturally occurring hydrogen (white hydrogen). PLEXOS helps them understand the cost and reliability impacts of hydrogen storage, transportation, consumption, and even the impact on market dynamics.
PLEXOS is at the forefront of this evolving energy landscape. It provides an early glimpse into price formation and price prediction for hydrogen products, and the first ever commercially available Simulation Ready Datasets co-optimizing power, gas, and hydrogen in a single model. Regardless of where you stand on the hydrogen debate, I encourage you to harness the power of PLEXOS to assess varying hydrogen production techniques, storage strategies, and market dynamics.
In the ever-evolving world of energy, hydrogen remains a topic of passionate debate. However, the key to success lies in embracing diverse perspectives and leveraging tools like PLEXOS to navigate the path forward. Whether hydrogen is hailed as the energy breakthrough or approached with caution, PLEXOS is prepared to help us find our way toward a more sustainable energy future.
Ready to explore the potential of hydrogen and PLEXOS in your energy journey? Request a demo today and join me at the forefront of the energy evolution.