Green hydrogen industry in NZ – Expert Q&A

On March 15, the Prime Minister released a roadmap for transitioning the Taranaki region from an oil and gas producer to a green hydrogen hub.

The following week, new policy think tank The Helen Clark Foundation released a discussion paper on how green hydrogen can help New Zealand get to carbon zero and the potential of an industry exporting hydrogen to Japan. The bones of a hydrogen export industry are already in place, as last year the government signed a Memorandum of Cooperation with Japan and in January a pilot plant to convert geothermal electricity to hydrogen started construction near Taupō.

The SMC prepared a Q&A with renewable energy experts about possible uses of hydrogen as a fuel source in New Zealand.

Robert Holt, Team Leader, Electrical Engineering, Callaghan Innovation, comments:

How could hydrogen fit into New Zealand’s energy landscape?

“In New Zealand, we have a high proportion of our electricity produced from renewable sources (which is excellent), but it does mean there is relatively little motivation to replace the last of the fossil fuel from that system. A great potential for New Zealand is to meet the international demand for renewable sustainable energy, in the form of clean hydrogen. If we built all the available wind capacity to the point where there was net surplus (when wind is plentiful), this could be exported as ‘Green Hydrogen’ and the overall renewable energy production on average could rise above 90-95%. This only becomes economical if long term commercial supply agreements are established and a large investment is completed in electrolysers, storage and a terminal (or two).

“Hydrogen could be a flexible energy sink to allow the economic growth of intermittent renewable energy generation, especially wind power and probably solar PV. Electrolysers that can take power when there is otherwise no demand and convert that energy into a simple carbon-free thermal fuel or energy feedstock will raise the commercially viable penetration of renewable electricity sources.”

What potential uses are there for hydrogen in New Zealand?

“Hydrogen could find use as a thermal fuel gas, replacing or complementing natural gas; as a source of electrical power, via a fuel cell in heavy vehicle or fixed back up generation; and/or as a component in synthetic fuel or fertiliser production. At a small scale, hydrogen could be an alternative to batteries or LPG within a renewable energy system.

“Specific applications:

  1. Flexible process heat, i.e. complementing wood waste/wood chip as a fuel source for industrial heating or drying,
  2. Fuel source for large vehicles where the weight and charging time of batteries is a relative disadvantage compared to fuel cell electric vehicles,
  3. As a ‘green gas’ augmenting natural gas in the North Island reticulated gas network (as done in Germany and a few other countries), typically 3-5%.”

How is the process that produces hydrogen from natural gas different to the process that produces it from water using renewable energy? 

“The processes are very different: steam-methane reforming is an industrial scale chemical reaction process, driven by temperature and pressure, that takes the carbon in methane and combines it with oxygen in water (steam) to produce carbon dioxide (which is usually released to the atmosphere) and hydrogen.

“Electrolysis is an electro-chemical process that splits water into its component gases (hydrogen and oxygen) by the passage of direct current through water. The cost of hydrogen is significantly lower from steam-methane reforming (without any CO2 capture), because the process and therefore capital equipment is less expensive. Also the energy for steam-methane reforming comes from gas, rather than electricity and is therefore at lower cost. The quality of gas specified for fuel cells is relatively high and some of the by-products from steam-methane reforming have to be removed, these harmful gases are generally not present in hydrogen produced by electrolysis.”

What barriers are there to creating a green hydrogen industry in New Zealand?“Business as usual is the first barrier, given the existing fossil-fuel usage systems are well established and relatively efficient. The first green hydrogen will be relatively expensive and only available is a few special places. There will be some reluctance from businesses and consumers to accept a new fuel. There are some regulatory issues to be addressed, but work has started in the area and there are few experts available. A high cost of CO2 emission per tonne would be the economic driver that would start to make green hydrogen attractive to businesses.

“Lowest cost hydrogen is likely to be centrally produced (both by electrolysis and steam-methane reforming) as it is a low-density fuel (energy per unit volume) and is therefore relatively expensive to move by truck. Choosing a few well-placed centres for hydrogen generation will be a critical (and difficult) process. Provision of dedicated pipelines for hydrogen transmission will require significant investment and would only be rolled out slowly, along with the demand.”

Conflict of interest statement:  I lead a team that developed a small-scale hydrogen generation system, called HyLink™, as part of an R&D project funded by MBIE. I have no private financial interest in any business that promotes hydrogen energy. I have, in my professional capacity at Callaghan Innovation, undertaken consultancy work to evaluate hydrogen as a possible fuel for a New Zealand business. 

Simon Arnold, Chief Executive, National Energy Research Institute, comments:

How could hydrogen fit into New Zealand’s energy landscape?

“There is already a market for hydrogen in New Zealand as an industrial gas. This is mainly produced by reforming hydrocarbons. Any shift away from the latter will need to consider this demand alongside energy.

“Hydrogen is one of a number of fuels that could displace fossil fuels, depending upon its relative competitiveness. Understanding where this will be is still unclear and is the key issue we face.

“Because New Zealand’s energy system is relatively unique (isolated but with significant hydro; a relatively unique geothermal resource; above-average wind resource) international experience is unlikely to transfer directly.”

What potential uses are there for hydrogen in New Zealand?

“It’s not yet clear what the mainstream energy applications are yet might be, but here’s what we do know:

  • Heat pumps and biofuels are significantly cheaper than reticulated electrolytic hydrogen for domestic and industrial heat loads.
  • Electric Vehicles (EVs) for light duty cycle transport in New Zealand are cheaper than using electrolytic hydrogen; their limiting factors are refuelling times and fuel capacity.
  • Heavy duty cycle land transport remains unclear, with technology improving refuelling and storage for EVs, and electrolysis and fuel cell in support of electrolytic hydrogen. The potential for biogas and bio liquid fuels is under-explored in New Zealand.
  • The consensus seems to be that biofuels in hybrid configurations are most likely for larger marine and aviation.

“Export opportunities are unclear and will depend upon how low cost we can be and the local demand for the electricity for higher value exports, e.g. clean energy foods.”

Are there any environmental benefits to using hydrogen as a fuel source?

“Hydrogen, like electricity and biofuels, can be used as a clean fuel at small scale. This is unlike fuels that rely upon Carbon Capture and Storage (like natural gas) – the technology is only economic at large scale and is less than 100% effective.

“The environmental performance for all three fuels depends upon their supply chain. Relatively speaking, electricity uses energy significantly more efficiently than electrolytic hydrogen, and biofuels use more land than either electricity or hydrogen. There are also differences in the life cycle impacts of the equipment required for each (e.g. batteries vs fuel cells/electrolysers).”

What are some potential issues involved in a supply chain for hydrogen? 

“Conversion of hydrogen to other forms of energy carrier is being mooted to aid storage and shipping (e.g. Ammonia liquefies at -33°C rather than -250°C for hydrogen), but the additional conversion processes will add cost and losses, and the technologies aren’t yet mature.

“Reticulation in the natural gas pipeline appears possible but beyond around 10% addition it starts to cause problems for users that will need to change their burners etc. Currently, even specialist gas turbines are limited to ~50:50 natural gas: hydrogen mix.

“New Zealand lacks the large salt-lined caves that are used in Europe for large scale storage, and it is as yet unclear if we will be able to find replacements.”

Conflict of interest statement: Simon is also the convener of the Liquid Biofuels Interest Group for the Bioenergy Association.

Harvey Weake, Adjunct Professor of Engineering, University of Auckland; Executive Advisor, Methanex Corporation, comments:

How is the process that produces hydrogen from natural gas different to the process that produces it from water using renewable energy?

“Production of hydrogen from natural gas is most commonly done via a steam methane reforming process that breaks methane into carbon oxides and hydrogen from which hydrogen is purified and delivered at high pressure. This process has been around for more than 90 years. Natural gas consumption ~0.2 Gigajoules per kg of hydrogen.

“Production of hydrogen using renewable energy utilises a process called water electrolysis. This process is also mature and well understood but power consumption is high at around 60KW-h/kg of hydrogen. The pure hydrogen is then compressed to around 450 atmospheres pressure at a cost of power of around 3KW-h/kg of hydrogen.

“The technologies of both processes are quite mature and well understood. The costs of each process depends on the cost of natural gas and the cost of power. Assuming natural gas is priced at US$6/GJ, the cost of hydrogen from steam methane reformers is approximately 50% of the cost of electrolysis using renewable power. Capital costs of electrolysers are around 50% higher than that of steam methane reformers.”

What are the economic risks or benefits of transitioning away from fossil fuels to hydrogen?

“The biggest risk is picking winners in tomorrow’s energy landscape, of which hydrogen is only one solution. There are a number of more commercially compelling options (e.g. methanol) than using hydrogen, which inherently carries a safety risk due to the enormous pressure stored on board a car.

“The issue that has prevented a widespread uptake is that it is not commercially competitive. If New Zealand subsidises this option, the country as a whole then loses competitiveness.

“Producing a fuel in New Zealand for export doesn’t make much sense given that New Zealand does not offer a specific competitive advantage and we are a long way from anyone else. However, producing a fuel for domestic consumption that competes internationally at least provides an import replacement benefit to New Zealand.”

What are some potential issues involved in a supply chain for green hydrogen? 

“Storage of hydrogen is problematic as it has to be compressed to very high pressures or liquified to very low temperatures and at moderate pressure. Hydrogen has the habit of leaking out of any container over time.

“A petrol or diesel tank in a car after say 15 years still has integrity as it is a simple container of simple materials. What happens to the hydrogen pressure vessel in a car after a time? A national certification system will need to be rigorously enforced to ensure older cars do not explode.”

Conflict of interest statement: My background is with Methanex Corporation which is the largest global supplier of methanol. I continue to have an economic interest in Methanex. Methanol would be a competing option to green hydrogen although we have an interest in a company producing green methanol using electrolysis and geothermal power. My comments do not represent Methanex.

Dr Paul Bennett, Science Leader for Clean Technologies, Scion, comments:

What potential uses are there for hydrogen in New Zealand?

“Hydrogen is a very flexible energy source, and can be used as a fuel for transportation, heat and power generation. There is also an opportunity to use hydrogen as a means to export renewable energy. There will also an increasing demand for hydrogen in the processing of biochemicals and biofuels, which may have an impact on hydrogen supply in New Zealand.”

Are there any environmental benefits to using hydrogen as a fuel source?

“Hydrogen coupled with fuel cell technology, available in a limited number of vehicle models (and currently very expensive) or for power generation, produces only water as a product. If hydrogen is combusted then nitrogen oxides (NOx) are also emitted in the exhaust.

“The benefits in terms of greenhouse gas emission reduction needs to be assessed, and will depend on the greenhouse gas footprint of the electricity being used to produce it, and the efficiency of production along the entire supply change of a usable form of hydrogen (there are some large inefficiencies in the supply chain, e.g. 36% energy loss to liquefy).

What barriers are there to creating a green hydrogen industry in New Zealand?

“No technological barriers. Breakthroughs need to be achieved in energy density for long haul applications.”Hydrogen production by electrolysis will still have a carbon footprint. Research focused on means to produce hydrogen from biomass and to capture and sequester the CO2 should be a priority. This technology would produce net negative CO2 emissions and lessen the pressure on sectors that are difficult or expensive to decarbonise.

“Insufficient economic analysis of the complete value chain has taken place. For example, how much would it cost to replace the fossil fuel refuelling infrastructure across New Zealand, compared with biofuels that can be dropped directly into the infrastructure? A reliable comparison of the economic and environmental benefits of hydrogen versus electrification or bioenergy has not yet been done.

“A completely new supply chain will be required, requiring new technologies at certain points. Production, pipelines, trucks ships terminals, refuelling stations etc. As mentioned above there are energy inefficiencies and benefits with hydrogen to be assessed too. Health and Safety considerations need to be taken into account.”

No conflict of interest.

Professor Richard Blaikie, University of Otago, comments:

How is the process that produces hydrogen from natural gas different to the process that produces it from water using renewable energy?

“Hydrogen is an atomic component of both the methane in natural gas (one hydrogen atom for four carbon atoms) and water (two hydrogen atoms for every oxygen atom), but splitting out the hydrogen is done in different ways for each.

“For natural gas ‘reforming’ the water from high-pressure steam is reacted with methane, producing hydrogen, carbon monoxide and carbon dioxide, so some greenhouse gases are created. For renewable water splitting, electricity from a renewable source (wind, solar, hydro) is used to directly split water into hydrogen and oxygen, so no greenhouse gases are created.

“Both of these are mature technologies, but due to the relative costs of the natural gas and steam generation compared to the cost of electricity, steam reforming is used for most commercial hydrogen production currently.

“In saying that, some active research is underway, including research in New Zealand, looking at increasing the efficiency of water splitting using renewable energy, which is one way of lowering the cost. Additionally, hydrogen production plants that take renewable electricity from the grid at times where there is an excess supply compared to demand (at which times the spot price for electricity will be very low) could be cost-effective.”

No conflict of interest.