By Jon LeSage
While Elon Musk and other naysayers have condemned hydrogen, the energy is expected to see a breakthrough over the new decade: a 50 percent cost reduction — making it highly competitive with traditional fuel and low-carbon alternatives.
That comes from a new study by Hydrogen Council and McKinsey & Co., Path to Hydrogen Competitiveness: A Cost Perspective. The report outlines three core market drivers: a steep drop in production costs, higher load utilization cutting distribution and refueling costs, and additional cost drops from scaling up of end-use equipment manufacturing.
The study looked at 25,000 data points gathered and analyzed from 30 global companies with cost reductions expected across several different hydrogen applications. These sectors include long-distance and heavy-duty transportation, industrial heating, heavy industry feedstock, and others, which make up about 15 percent of global energy consumption.
Writers of the study see the need for supportive government policies to be adopted in key geographies, along with investment support of around $70 billion in the lead up to 2030 in order to scale up and produce for a much more cost-competitive fuel. The study makes the argument that while it’s a sizable spend, it would account for less than 5 percent of annual global spending on energy. Another comparison was offered. Last year, Germany invested about $30 billion to support renewable energy.
“The Hydrogen Council believes that the report’s findings will not only increase public awareness about the potential of hydrogen to power everyday lives, but also debunk the myth that a hydrogen economy is unattainable due to cost,” said Euisun Chung, executive vice chairman of Hyundai Motor Group and co-chair of the Hydrogen Council. “If we are to reach our global climate goals by mid-century and reap the benefits of hydrogen, now is the time to act.”
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Hydrogen critics continue to waive flags of warning about the energy really succeeding.
S&P Global Platts’ Jeffrey McDonald and Andrew Moore point out that while advocates champion the pervasive fuel’s carbon-reducing benefits, much of it is being extracted from natural gas. It’s abundant in key markets like the U.S., and its much cheaper than from electrolysis.
Critics also argue that the transportation refueling infrastructure is likely decades away from coming close to competing with retail gas stations.
But support for hydrogen as a viable energy source is growing.
The Hydrogen Council study is given more credibility by Chevron joining up days ago with a number of other global oil producers such as BP, Shell, Sinopec, and Total S.A., as supporters of the hydrogen global advisory group. These energy giants share that ranking with global automakers and a few of their Tier 1 supplier partners — Audi, BMW, Bosch, Cummins, Daimler, General Motors, Great Wall Motors Co., Honda, Hyundai, Michelin, Siemens, and Toyota.
Chevron sees hydrogen as part of the “energy transition.” The company has been testing out the fuel and investing in infrastructure and technology in recent years. It’s used to refine crude at Chevron refineries and in other chemical processes. Between 2005 to 2010, the energy company operated five hydrogen filling stations at fleet operator sites using multiple technologies for on-site generation, storage, and dispensing. It was part of a US Dept. of Energy hydrogen demonstration project.
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While support for hydrogen had been fading by the end of that time period, Chevron has been impressed in recent years to see new supportive regulations, automaker commitments, and technology advancements. As the emissions regulatory structure tightens in Europe and other global markets, Chevron and other oil giants have been spreading capital into other energy segments that they see having a strong competitive chance for the future.
Chevron will be conducting hydrogen fueling station “test-and-learn” pilots at locations in California. The global energy giant also recently contributed to a report developed by the Fuel Cell and Hydrogen Energy Association entitled Road Map to a US Hydrogen Economy. The association’s report stresses the versatility of hydrogen in a lower-carbon future.
Hydrogen’s market potential in three segments is another facet that’s gained Chevron’s support.
“Our support for the Hydrogen Council reflects our view that hydrogen can play a role in a lower carbon future as a transportation fuel, an industrial feedstock and an energy storage medium,” said Michael Wirth, Chevron’s chairman and CEO.