Los Angeles plans to jump-start a green hydrogen market in the US

In mid-May, Los Angeles became the first big city in the country to commit to creating a major North American market for green hydrogen. Its plan relies on two simultaneous developments: a partnership with industry groups and clean-hydrogen advocates to drive down the industry’s still-high production costs, and an offtake agreement from its public power agency to create demand for the carbon-emissions-free energy source.

The Los Angeles Department of Water and Power has committed to running its 4,300 megawatts of fossil fueled power plants — 3,500 MW of that within the LA area — partly on green hydrogen by around mid-decade, ramping to 100 percent in about 10 years. It’s also seeking to create enough hydrogen storage capacity to ensure supply to power the electric grid through long periods when solar, wind and batteries can’t cover the need.

LADWP’s new public-private coalition project, known as HyDeal LA, faces major challenges in scaling up from a few boutique producers to assembly-line manufacturing. But if it works, it could move the needle on an industry many hope could help fully decarbonize electricity production and energy-intensive sectors ranging from transportation to industry.

The partnership includes Sempra Energy subsidiary and major natural-gas supplier Southern California Gas, turbine maker Mitsubishi, the Green Hydrogen Coalition group and solar developer 174 Power Global. It ​“will grease the wheels” of a green hydrogen market, Rachel Fakhry, Natural Resources Defense Council senior policy analyst and HyDeal adviser, said during a Green Hydrogen Coalition webinar on May 18.

Thomas Koch Blank, senior manager of breakthrough technologies at think tank RMI, was more circumspect. HyDeal is ​“a very exciting development,” he said, since it could ​“largely address the availability of affordable production” by creating a market for producers. But while large-scale transportation in big pipelines ​“is pretty straightforward, affordable distribution is a problem,” he said in a recent interview. (RMI is a financial backer of Canary Media.)

Louis Ting, director of LADWP’s power planning, development and engineering division, agreed that big challenges remain. ​“We are in the discovery stage” of a long-range plan seeking to attain affordable sources of fuel and transportation, he said in a late May phone interview.

But in his view, ​“it will happen because it has to.” LA’s 100 percent clean energy target is set for as early as the next decade, and California has mandated 60 percent renewable energy by 2030 and a carbon-free economy by 2045.

The Biden administration is also pushing green hydrogen as one of many tools needed to decarbonize the U.S. economy and prevent the worst impacts of climate change. On Monday, the U.S. Department of Energy announced its Hydrogen Shot program, which aims to cut the cost of clean hydrogen to $1 per kilogram by 2030, an 80 percent decrease from today’s levels.

LADWP’s size makes it a notable player in California’s statewide goals. The municipal power agency’s territory covers 475 miles, and its autonomous transmission system extends to the Southwest U.S. and Pacific Northwest to serve its 1.5 million customers. It is the country’s largest public power agency in terms of revenue, and it and the Puerto Rico Electric Power Authority are the largest in terms of numbers of customers.

Two years ago, Los Angeles began working with the National Renewable Energy Laboratory to develop strategies for eliminating greenhouse gas emissions in the city over the next 15 to 25 years. The resulting LA100 study details four pathways, including continuing use of natural gas. However, LADWP concluded that green hydrogen is the best pathway for decarbonizing its power sector.

“Green hydrogen is the most feasible fuel as far as carbon reductions,” Ting said. Using biogas and biomethane in its plant turbines was ruled out because of the carbon impacts.

The uncertain road to lower costs

HyDeal LA aims for a green hydrogen production cost of $1.50 per kilogram by the end of the decade, down from current costs of between $4 to $7 per kilogram. That’s well out of competitive range with natural gas, which is now available at about 15 percent the cost of renewable hydrogen, said Paul Schultz, LADWP director of power external energy resources.

Creating hydrogen without carbon emissions can be done in a variety of ways, but the initial phase of HyDeal LA plans to use the now-dominant ​“green hydrogen” method that employs renewable-energy-powered electrolyzers to split hydrogen from water. Modeling is being conducted over the summer that will also analyze how widely this greenhouse gas free fuel can be commercialized.

Green hydrogen’s price tag includes the price of the power to supply electrolyzers, the cost of the electrolyzers themselves, and those electrolyzers’ capacity factor, or how many hours of the year they’re able to work to pay off their capital costs.

California is already producing more solar power than it can consume or export during certain hours of the year, and that excess power could be used to electrolyze hydrogen. LA may also tap into local surplus rooftop solar.

But using only excess renewable energy won’t yield high enough capacity factors to cost-effectively create the amounts of hydrogen needed in the coalition’s early stages, according to LADWP General Manager Martin Adams.

On top of those costs, there are also the costs of transporting the fuel. Hydrogen can be blended in small quantities with natural gas for transport in existing pipelines, but pure hydrogen will need new or refurbished pipeline networks to manage the distinct differences between hydrogen and methane molecules. Hydrogen can also be moved by tanker trucks, which is a much costlier option.

Then there’s the challenge of storing hydrogen, which is highly flammable and can escape through the tiniest of openings. Above-ground tanks, underground storage facilities or a combination of the two are being explored.

“The final cost is not entirely obvious,” said David Edwards, a director at industrial gas manufacturer Air Liquide, a big backer of green hydrogen, in a June interview.

Air Liquide currently supplies California’s vehicle refueling market with renewable hydrogen, which is created from processing methane captured from landfills, dairies and other biological sources. That process does reduce the resulting fuel’s greenhouse gas footprint, but it does not entirely eliminate carbon emissions. The cost of moving to green hydrogen production via electrolysis will largely depend on which electrolyzer technologies can achieve a big drop in costs.

HyDeal LA is modeled on a European project dubbed HyDeal Ambition, a coalition that has committed to producing 3.6 million tons of green hydrogen annually before 2030 at 1.50 euros ($1.83) per kilogram. Its primary focus is on green hydrogen via electrolysis, but with space for deriving it from organic waste in a way that does not increase emissions.

Green hydrogen development has more public and private support in the European Union, in no small part because of that region’s far smaller price gap between renewable hydrogen and natural gas. The EU also has huge amounts of offshore wind that can power electrolyzers.

Climate-friendly hydrogen makes up less than 1 percent of the hydrogen supply today. The rest of the hydrogen is derived from coal, or so-called ​“brown” hydrogen, and natural gas, or ​“gray” hydrogen. Making hydrogen from natural gas accompanied by carbon capture and storage is known as ​“blue” hydrogen.

Janice Lin, founder and president of the Green Hydrogen Coalition nonprofit group, says creating a robust green hydrogen market to power everything from turbines to marine vessels would safeguard high-paying fossil fuel jobs, create many more new jobs and help clean up some of the most polluted neighborhoods.

Although the U.S. has lagged behind Europe in its green hydrogen efforts, the Biden administration wants to catch up. DOE’s newly announced Hydrogen Shot program is seeking out regional demonstration projects that could serve as the starting point for reaching its steep cost-reduction goals for producing green hydrogen at scale by decade’s end.

Short-term challenges on the way to long-term grid capacity

Using green hydrogen to replace natural gas to fuel power plant turbines involves some significant energy efficiency problems. Hydrogen packs only about one-quarter the energy density of natural gas, making it less efficient in terms of volume. Of course, in a zero-carbon world, natural gas may no longer be an option, unless its use can be combined with carbon capture and storage technologies whose cost-effectiveness has yet to be proven.

Converting excess renewable energy to hydrogen via electrolysis is also far less efficient than using clean electricity directly, since a significant amount of energy is lost in converting electricity to hydrogen and hydrogen back to electricity.

Where green hydrogen is expected to shine is to help balance out the grid, particularly as widespread electrification of the transportation and building sectors increases demand for always-available electricity.

In a two-part examination of the potential for green hydrogen in decarbonizing multiple sectors, Michael Liebreich, the founder of Bloomberg New Energy Finance and now head of Liebreich Associates, found that green hydrogen’s ​“most substantial opportunity” will be ​“making sure…that the lights stay on in absolutely all circumstances.” LADWP’s plants are expected to provide power only at times of very high demand, which fits in well with this use case.

The green hydrogen jigsaw puzzle

While some parts of the green hydrogen puzzle being assembled are missing, proponents point to many that are already in place. Electrolysis is a proven technology, albeit expensive. Hydrogen has been blended with fossil fuels and transported in pipelines. And Mitsubishi, Siemens and GE all are developing turbines capable of burning hydrogen. None have yet been powered by green hydrogen, but ​“turbines don’t care what color the hydrogen is,” LADWP’s Ting noted.

Predictions are that green hydrogen’s costs will fall significantly, perhaps by as much as 70 percent by early 2030, LADWP’s Schultz said. In a Nov. 2020 analysis, S&P Global concluded that ​“steep declines in green hydrogen costs are possible by 2030, with reductions resulting from three factors”: lower renewable energy costs, lower capital costs of electrolyzers and attaining economies of scale.

Electrolyzers make up the largest chunk of the fuel’s costs. A promising indicator of falling costs is that major electrolyzer companies are investing in new facilities, Air Liquide’s Edwards said. A multitude of pilot projects are seeking to lower electrolyzers’ costs as well, mostly in Asia and Europe. A recently launched project by SoCalGas and H2U Technologies aims to cut electrolyzer costs in half, largely by replacing the rare metals used in proton exchange membrane systems today with lower-cost metals.

Electrolyzers require a steady supply of renewable power. A big source is expected to come from solar power generated in the spring and fall, which is now being curtailed when there’s more of it than the grid needs. As even more solar power comes onto the grid and is joined by wind power that may also generate in excess of demand, using that essentially free surplus green electricity helps lower costs and benefits the transmission system.

There’s also a challenge in terms of water to supply electrolyzers in a semi-arid state facing long-term water supply challenges. On that front, LADWP will investigate using its solar resources in the Mojave Desert to power electrolyzers to separate hydrogen in recycled water. The end fuel could potentially be stored on site and transported from the desert via new pipelines that parallel the existing recycled water pipes.

LADWP is looking into installing electrolyzers at its in-basin Scattergood natural-gas power plant that sits adjacent to the Hyperion water recycling facility. Around mid-decade, this power plant, the first of its four in-basin plants considered essential for peak reliability, will be fueled by a mix of 30 percent green hydrogen and 70 percent natural gas. It and two other plants must be overhauled because they use huge quantities of seawater to cool spinning turbines under a state-mandated phaseout. The plants’ intake and heated expulsion is detrimental to marine life.

The Intermountain Power Plant leads the way

The template for the clean energy modernization of LA’s in-basin plants is the Intermountain Power Plant in Utah, which helps fuel LADWP. In 2018, the owners agreed to convert this 1,800 MW coal plant to an 840 MW natural-gas-fueled facility. Then last November, they announced the new turbines would be fueled by 30 percent green hydrogen when it comes online in 2025, using 31 million kilograms per year. Mitsubishi, which is part of the HyDeal LA, guaranteed the turbines will be modified to be fully fueled by renewable hydrogen in about two decades’ time.

The Utah generating facility is surrounded by massive salt caverns, which are ideal geologic formations for storing the fuel that could be produced nearby.

“[The Intermountain Power Plant] is our premier project,” Schultz said.

LADWP also is investigating the feasibility of hydrogen storage within California, to complement its battery projects and its 1,244 MW Castaic pumped storage hydropower facility, as part of a suite of tools to balance out the ebb and flow of solar and wind energy.

Green hydrogen is able to ​“store renewable power for hours and seasons,” said Paul Browning, Mitsubishi Power president and CEO.

Green hydrogen, like all hydrogen, is highly flammable. It has been widely used by industry for years and industrial and regulatory safety protocols are in place, including those established by DOE. But there are new applications, including for power plants and turbines, Green Hydrogen Coalition’s Lin said during a June 2 interview.

Blending or pure?

Another unsettled question is whether green hydrogen should be blended with natural gas and sent in existing pipes or new ones. Some clean-power advocates worry that using existing pipelines is a smoke screen for continuing the life of the fossil fuel industry. In addition, hydrogen is a smaller molecule, and can leak from pipelines and wreak havoc on steel alloy.

SoCalGas and other pipeline companies strongly support using existing infrastructure to move blended green hydrogen. How much can be safely blended in pipes, however, is under study. Estimates are that roughly up to 10 percent can be used before higher blending levels are expected to require an upgrading of pipes and compressor stations.

SoCalGas and Pacific Gas & Electric await permission from state regulators to blend hydrogen in their natural-gas pipelines. SoCalGas’ plan is to start with 1 percent to serve a small neighborhood though plastic pipes, according to Neil Navin, the company’s vice president of clean energy innovations. An advantage of plastic pipes is that it avoids corrosion seen in steel pipelines. Depending on scientific findings, SoCalGas may raise the hydrogen blend as high as 20 percent over time.

Thierry Lepercq, founder of Soladvent, a company that develops large solar-to-gas projects in Europe, insists that separate pipelines should be built to transport green hydrogen since they will be needed to move pure hydrogen.

Pipeline transport is about 20 percent of green hydrogen’s costs, according to RMI’s Thomas Koch Blank. In addition, new pipelines in most cases are much less expensive than new transmission lines to carry remote renewable resources into cities.

From Koch Blank’s perspective, blended fuels won’t result in a carbon-free future. But sometimes ​“you have to cheat to make the market work.”

(Article image courtesy of Air Liquide)