Francis Menton
Today, there is a lot of news about the so-called “energy transition” not happening. There is so much news out there on this subject that I could dedicate an entire blog to it and have it fill up enough of my time. Expect more posts on this topic in the coming weeks.
To whet your appetite, I’ll take you to Australia today, where we find the latest news on the inevitable collapse of the impossible dream of “green” hydrogen as a means of generating electricity from wind and solar.
But before we get to the latest news, let me remind you of my post from February 14, 2024 titled “Green Hydrogen Can’t Succeed When You Squeeze the Numbers.” “Green” hydrogen is hydrogen produced by electrolyzing water using electricity generated only from wind and solar energy. The idea is to run electrolysers to make “green” hydrogen on sunny and windy days, when wind turbines and solar panels produce excess; then burn the hydrogen to make up for cloudy and calm nights with wind/solar generation gap. If all goes well, you'll end up with power that meets your needs 24/7/365, with no carbon emissions from start to finish. In other words, an energy utopia.
But has anyone crunched the numbers to see if this can be done economically? What I mean by “economical” is: the cost of generating electricity is the same or about the same as our current electricity costs.
My February 14 post discussed the Biden administration’s move to allocate $7 billion in government funds to “catalyze” $40 billion in private investment to jump-start production “Low-cost, clean hydrogen.” How “low cost” is it? The government certainly didn't quantify it, but my post quoted a guy named Jonathan Lesser who did a study and concluded that they could get “green” hydrogen for $2.74 to $5.35 per kilogram . Anyway, that's the goal.
Does $2.74 – $5.35 per kilogram of hydrogen sound cheap? I like how they quote hydrogen in different units than the normal units used for natural gas so that no one can easily compare. Natural gas prices are typically quoted in US dollars per MMBtu. What you need to know is that it takes 8 kilograms of hydrogen to produce 1 MMBtu of energy. Therefore, US$2.74 to US$5.35 per kilogram of green hydrogen is equivalent to US$21.92 to US$42.80 per MMBtu. In the past five years, U.S. natural gas prices have been below $4/MMBtu for most of the time and have never reached a high of $10/MMBtu. To achieve a green hydrogen price of $20 – $40/MMBtu, wind/solar power generation costs would need to reach $40/MWh. Recent wind and solar generator contracts require guaranteed prices of $150/MWh and above. Therefore, adjust $20 – 40/MMBtu accordingly. Green hydrogen costs at least 10 times, and possibly as much as 20 times, the cost of natural gas.
Follow the latest news from Australia. Australian energy blogger Joanne Nova reported yesterday (July 19) that a large-scale green hydrogen energy project in the country had just “collapsed”, resulting in the loss of 700 jobs. I think what Ms. Nova meant by “collapse” was some kind of bankruptcy or something like that. Ms Nova's headline read “Hydrogen Titanic just collapsed in Australia because renewable electricity costs too much.”
The project is the brainchild of Australian industrialist Andrew “Twiggy” Forrest and his company Fortescue. According to Ms Nova, Mr Forrest had “Building his green dream hydrogen plan burned $2 billion (AU).” Forrest's project is “Core [the Australian Labor government’s] $2 billion hydrogen start-up plan.
Ms Nova quoted extensively from Australia's leading newspaper, The Australian, which unfortunately was paid for. I will only use excerpts from Ms. Nova. This is the key:
For more than two years, Fortescue has been firing on all cylinders to try to turn Forrest's promise of turning green hydrogen into a commercial reality within a few years. Instead, deadlines have been pushed back again and again amid the economic fallout from soaring costs of electricity needed to produce green hydrogen. The mission changed, and then there was a revolving door of senior executives.
The problem is simply the cost of producing “green” hydrogen, which is simply not competitive with natural gas. Nor can anything be done to bring costs anywhere near competitive. This quote comes from another Australian source called the Financial Review, also behind a paywall:
Matthew Rennie, a former Ernst & Young partner who is now an independent consultant, said his firm's analysis showed that electricity and electrolysers, which use renewable energy to split water into hydrogen and oxygen, would need to be much cheaper to Producing green hydrogen in Australia.[AU]3 per kilogram. He said the price of electricity should be lower than $[AU]40 MWh and electrolyzer costs would need to be cut by more than half to produce this level of hydrogen – still 50% more expensive than the government's ${AU]2 target set to make natural gas competitive.
$[AU]The 3/kg target is equivalent to $[AU]24/MMBtu [thus about $US16] — 5 [or so] This is multiple times the typical US natural gas price of $3-4/MMBtu. To achieve this, they say, they need to increase the price of wind/solar power to $10[AU]40/MWh [thus about $US27/MWh] Electrolyzer prices are halved. Ms Nova reported that the two states with the most wind and solar power in Australia were South Australia and Tasmania, with wholesale electricity prices of $[AU]199/MWh and US$214[AU]respectively/MWh [thus about $US133 and $US138 respectively]. So, in the real world, the cost of this green hydrogen will be more like [ten to] 20 times or more the cost of natural gas instead of a paltry 5 times [or so] Several times higher than they hoped.
At the same time, I keep reading a lot of articles saying that green hydrogen is the wave of the future. But I couldn't find any information about the main production facility for the upcoming product. Maybe no one will.
Update July 21: Commenter Littleoil (who I believe is Australian) asked for clarification as to whether the currency figures in this article are Australian dollars or US dollars. The Australian dollar is worth approximately 2/3 of the US dollar. I've added some instructions to the post.
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