Francis Menton
There is a lot of news these days about the alleged “energy transition” not happening. There is so much news on this topic that I could dedicate this entire blog to this topic alone and have enough to do. Expect several posts on this topic in the coming weeks.
To whet your appetite, today I'm taking you to Australia, where we find the latest news about the inevitable collapse of the impossible dream of “green” hydrogen as a means of generating electricity from wind and solar.
But before I get to the latest news, let me remind you of my post from February 14, 2024, titled “Running the numbers, green hydrogen is a no-go.” “Green” hydrogen is the type of hydrogen produced by electrolyzing water using electricity generated solely by wind and solar. The idea is that you run your electrolyzer on sunny and windy days, when the wind turbines and solar panels are producing a surplus, to make the “green” hydrogen; and then you burn the hydrogen to fill the gaps in wind/solar production on cloudy days and calm nights. If everything works out, you end up with electricity that meets demand 24/7, 365 days a year, and the process produces zero carbon from start to finish. In other words: an energy utopia.
But has anyone run the numbers to see if it's economically viable? By economically viable, I mean producing electricity at a cost that's equal to, or about the same as, our current electricity costs.
My post on February 14th was about a Biden administration initiative to provide $7 billion in government funds to “catalyze” $40 billion in private investment to spur the production of “low-cost, clean hydrogen.” How “low-cost”? The government didn't put a number on it, of course, but my post quoted a guy named Jonathan Lesser who had done a study that concluded that they could produce “green” hydrogen in a price range of $2.74 to $5.35 per kg of hydrogen, assuming they could buy the electricity generated by wind/solar at $40 per MWh. That's the goal anyway.
Does $2.74-5.35 per kg of hydrogen sound cheap? I like that they quote hydrogen prices in different units than those typically used for natural gas so no one can easily make a comparison. Natural gas prices are usually quoted in dollars per MMBtu. You have to understand that it takes 8 kg of hydrogen to produce 1 MMBtu of energy. So $2.74-5.35 per kg of green hydrogen is $21.92-42.80 per MMBtu. For most of the past five years, natural gas prices in the US have been below $4/MMBtu and never reached $10/MMBtu. And to achieve green hydrogen prices of $20-40/MMBtu requires wind/solar power costs of $40/MWh. Recent contracts for wind and solar generators call for guaranteed prices of $150/MWh and more. So adjust the $20-40/MMBtu accordingly. Green hydrogen will cost you at least ten times more than natural gas, possibly even twenty times more.
Now for the latest news from Australia. Australian energy blogger Joanne Nova reported yesterday (July 19) that a major green hydrogen project in that country had just “collapsed” with 700 jobs lost. I assume that by “collapse” Ms. Nova means some kind of bankruptcy or something similar. Ms. Nova's headline reads: “The Hydrogen Titanic Just Collapsed in Australia Because Renewable Power Is Too Expensive.”
The project in question is the baby of Australian industrialist Andrew “Twiggy” Forrest and his company Fortescue. According to Ms Nova, Mr Forrest “burned $2 billion (AU) to implement his Green Dream Hydrogen energy plan”. Forrest’s project was the “heart of [the Australian Labor government’s] $2 billion Hydrogen Headstart program.”
Ms. Nova quotes extensively from the major Australian newspaper The Australian, which unfortunately is paid for. I will only use Ms. Nova's extracts. Here is the most important one:
For more than two years, Fortescue has been working hard to make Forrest's promise of making green hydrogen commercially viable within a few years a reality. But as the economics of rising electricity costs for green hydrogen production became clear, the timelines kept getting pushed back. The mission changed, and then there was a change in leadership.
The problem is simply the cost of producing green hydrogen, which is not remotely competitive with natural gas. And nothing can be done to make the cost even remotely competitive. This quote comes from another Australian source called Financial Review, which is also paid:
Matthew Rennie, a former EY partner who now works as an independent consultant, said his firm's analysis found that prices for electricity and electrolysers – which use renewable energy to split water into hydrogen and oxygen – would need to be much cheaper to produce green hydrogen in Australia, even at a price below $100,000.[AU]3 per kilogram. He said electricity prices should be below $[AU]40 per megawatt hour, and electrolyser costs would need to be more than halved to produce hydrogen at that level – which is still 50 percent more expensive than the government's target of two Australian dollars for the gas to be competitive.
The $[AU]3/kg target equals $[AU]24/MMBtu [thus about $US16] — 5 [or so] times the typical US natural gas price of $3-4/MMBtu. And they say that to achieve even that, they would need wind/solar power prices of $.[AU]40/MWh [thus about $US27/MWh] and electrolyzer prices are halving. Ms Nova reports that the two Australian states that produce the most electricity from wind and solar are South Australia and Tasmania, and they have wholesale electricity prices of $[AU]199/MWh and 214 $[AU]/MWh or [thus about $US133 and $US138 respectively]In the real world, the cost of this green hydrogen will be as high as [ten to] 20 or more times as much as natural gas, instead of the measly 5 [or so] times higher than hoped.
I keep reading that green hydrogen is the future. But I can't find anything about large production plants for this substance coming online. Maybe they will never come online.
UPDATE, July 21: Commenter littleoil (who I believe is Australian) asks for clarification on which monetary amounts in this post are in AU dollars and which are in US dollars. An Australian dollar is worth about 2/3 of a US dollar. I have added some clarifications to the post.
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