Why are all these "green" hydrogen projects being cancelled?

Perhaps they never made sense in the first place

BP recently announced that it has put a hold on a number of capital projects, including 18 proposed “green” hydrogen projects. That announcement follows the cancellation or postponement of “green” hydrogen projects in Spain, Canada, Denmark, and Australia among others.

Meanwhile, companies in the USA, chasing massive subsidies offered by the misnamed Inflation Reduction Act are actively lobbying the government to manipulate the rules so that subsidies are available for projects that will make hydrogen that does not even qualify as “green”. Forcing the projects to follow the rules will apparently put many of the developments in jeopardy.

Is it possible, perhaps, that these projects are not progressing because they don’t make sense?

Is it possible that the projects were announced to score brownie points with the green lobby, and when the companies put them through a rigorous cost/benefit analysis they realized that they could never be economically viable?

Let’s start by comparing the most common method of hydrogen production, steam methane reforming versus electrolysis, using natural gas as the feed stock for both the SMR process and the making of electricity.

It takes 3.04 Kg of natural gas and 0.13 Kwh of electricity to make 1 Kg of hydrogen by steam methane reforming. If the electricity is generated from natural gas, it will take less than 0.01 Kg of natural gas to make the electricity. So, a total of 3.05 Kg of natural gas will make 1 Kg of Hydrogen by steam methane reforming. Emissions from that process are about 9 Kg CO₂ per Kg of H₂

Electrolysis uses 55 Kwh of electricity to make 1 Kg of hydrogen. Using electricity generated from natural gas would require 10.4 Kg of gas for 1 Kg of hydrogen, emissions would be about 27 Kg CO₂ for 1 Kg H₂.

Clearly, steam methane reforming is the superior technology. It uses about one third of the resources, has one third of the emissions and will be at least three times less expensive than hydrogen made by electrolysis.

The concept of “green” hydrogen, using electricity made from renewables is an attempt to circumvent the significant disadvantages of the electrolysis process. The use of “clean” electricity gets around the problem of emissions, although that benefit is soon lost if the electricity comes from a mix of “clean” and “dirty” sources.

But the use of “clean” electricity does not solve the problem of high cost unless the electricity is also very cheap.

Neither wind nor solar, as stand-alone suppliers of electricity to a hydrogen plant, can provide power at a low enough price to offset the technical disadvantages of electrolysis compared to steam methane reforming.

However, in places where wind and solar power account for a significant chunk of the grid power, there are times when electricity prices fall drastically, sometimes even below zero. In many instances, wind and solar power must be curtailed because they are producing more than the grid can handle.

The case for “green” hydrogen is that it can make use of this surplus electricity and, since it would otherwise be curtailed, it could be given to the hydrogen maker at little or no cost, and hydrogen could be made cheaply by electrolysis.

That argument is false. The electricity is not free. If it is curtailed, then the owner of the wind or solar facility must be compensated, or he must increase the price charged to the fee-paying users to make up for the loss of income. The cost is simply shifted to the consumer, or in some cases the taxpayer.

But even if the hydrogen maker can access the electricity at low or zero cost, the use of surplus power from renewables brings up another problem. That problem is intermittency, the curse of all wind and solar projects.

Electrolysis has been touted as a variable load that can soak up wind and solar power during periods of excess production, when in fact it is a technology like many others that relies on a steady, continuous power supply to make it economically viable.

The feasibility of using surplus wind and solar power to generate hydrogen is very much dependent on the quantity and reliability of the surpluses.

California’s electricity system operator (CAISO) publishes daily reports of curtailment of wind and solar power. The information gives us a chance to make an assessment of how it might be used to make hydrogen.

As you can see from the attached chart, most of the curtailment happens in a three-month period in spring when electricity demand is at its lowest and the supply from solar, wind and hydro is at its peak.

Constructing a hydrogen production plant to make use of the massive curtailment during those peak months would be an expensive proposition that would have the plant working at well below its full capacity for nine months of the year. Keep in mind that the curtailments happen only during the daytime, and even during the three high curtailment months, the plant would average less than ten hours of operation daily.

On the other hand, constructing a smaller hydrogen plant, something that can operate at close to its full capacity during the day for most of the year, would not make use of the higher volumes of curtailed energy during the spring. It would only be able to use a small portion of the curtailed energy.

The problem is made even more complex because the curtailment varies hourly, usually with higher curtailment on weekends when demand is lower. For a full evaluation of the problem, it is necessary to download the raw curtailment data published by CAISO, that shows production and curtailment at five-minute intervals.

I have analyzed that data for the one-year period between Dec 1^st, 2023 and Nov 30^th, 2024.

The chart below shows the results of that analysis. It shows the percentage of curtailed electricity that could be utilized to make hydrogen plotted against the equivalent number of full-load hours that the hydrogen plant could operate.

Most of the literature I have seen assumes a 50% load factor for viable operation of a hydrogen electrolysis plant, even with very cheap electricity. A 50% load factor is impossible in a solar dominated system because the sun shines less than 50% of the time.

However, the chart shows that even an electrolysis plant that operates at an average of only 33% of its full capacity can only make use of ten percent of the curtailed energy. The remainder must still be curtailed at the expense of the consumer.

Keep in mind also, that if that hydrogen is subsequently used to generate electricity during periods of renewable power deficit, it will only generate about one third of the electricity that was consumed in the making of the hydrogen. The end result is that after significant capital expenditure for the electrolysis plant, the storage facility, and the generating equipment, the system has recovered only about 3% of the curtailed electricity.

This is not a feature of the status of California’s electricity system, it is a feature of the intermittent and seasonal nature of wind and solar power. Adding more renewables will increase the amount curtailed energy, but it doesn’t change the shape of the curve, only a small portion of the curtailed energy can be used, the rest must be discarded.

The increasing list of cancelled or postponed “green” hydrogen projects is telling us that the whole concept of using cheap, otherwise curtailed electricity to make hydrogen is a pipe dream.