, 15 tweets, 5 min read
Why I’m bullish on electrolysis. A thread:

Depending on the regional gas price, producing H2 through electrolysis can be between 1.5 to 2.5 x as expensive as SMR with CCS, and up to 3x unabated SMR. I wanted to find out where the tipping point for green H2 lies. 1/12
First I looked into what carbon price warrants CCS. Assuming that cost of CCS equipment is the same in China as in Europe and US, a carbon price of $32/tCO2 would mark the threshold at which it’s more profitable to build SMR + CCS than to keep running an unabated SMR plant. 2/12
Does that mean in Europe, a major producer of H2, we’re on the cusp of widespread CCS deployment? Perhaps. But shrewd investors will have noticed that by 2040 SMR + CCS will be undercut by electrolysis before the expected 25 year lifetime of a SMR plant. 3/12
Part of the reason electrolysis will undercut SMR are the electrolysis and fuel cell experience curves of 17%. Yet the electrolyser + fuel cell CAPEX already account for less than 30% of the plant LCOE. In China, a special case, CAPEX costs are as low as 15% of plant LCOE. 4/12
Electrolysers have two major sensitivities. 1) Power price and 2) Capacity factor. Holding capacity factor constant at ~50%, I looked at the intersections of LCOEs for electrolyser and SMR + CCS while varying fuel prices for both. 5/12
In U.S., electrolysis becomes competitive at 6$/MWh. For Europe, higher gas prices mean that number jumps to 17$/MWh. However, in China, H2 from electrolysis will beat gas SMR + CCS at anything above 31$/MWh. Of course, we have seen renewable PPAs at prices lower than that. 6/12
The other sensitivity of electrolysers is equally, if not more, important. Running an electrolyser at higher capacity factors offers diminishing reductions of levelised costs because of an inversely proportional relationship. 7/12
In practise, this means that an electrolyser running on curtailed power 1500 hours costs as much as one purchasing power for 30$/MWh running 4000 hours. Another way to put it, a 100MW solar farm with 17% curtailment would be enough to support a 20MW electrolyser. 8/12
17% curtailment is a lot and very few VRE projects will be averaging those levels. That is because curtailment is currently treated as an undesired side-effect of intermittency. But what if we looked at it as a feature 9/12 linkedin.com/pulse/scenario…
And here’s the real kicker from policy point: it appears that the fastest way of of integrating green hydrogen into our energy system would be not to support electrolyser development per se, but to pursue policies that would bring down power prices as quickly as possible. 10/12
We should encourage overcapacity, as a hedge against extreme demand peaks, while providing rationale for deploying W&S with electrolytic H2 for seasonal balancing. Mr Gates was wrong to call for end to W&S subsidies. They’re the biggest cleantech multiplier we have. 11/12
More importantly, it’s not just hydrogen that would benefit from loads of cheap power. Here is an article making the same case for industrial chemistry, which accounts for 14% of global GHG emissions. 12/12 sciencemag.org/news/2019/09/c…
Sidenote: the overall efficiency of the SMR plant is very important. If the plant is designed to recycle heat from the SMR process, HHV value of H2 can be used, pushing down specific emissions, which translates into a higher effective carbon price of 42$/tCO2
P.s. tweet n2 should have been the one below. The difference between higher and lower heating values is subtle, but important
Correction: *in China H2 from electrolysis will beat gas SMR + CCS at power prices BELOW 31$/MWh. Apologies.
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