Published on World Economic Forum
- Green hydrogen – produced using renewable energy – currently accounts for just 0.1% of global hydrogen production.
- But it’s a powerful bet for solving renewables’ intermittency problem and decarbonizing heavy industry.
- Scaling up green hydrogen does present challenges – but modern digital technology could provide some of the answers. Here’s how.
The potential of green hydrogen to plug the intermittency of solar and wind whilst burning like natural gas and serving as feedstock in industrial chemical processes has piqued the interest of businesses, governments and investors.
Green hydrogen is produced through electrolysis, a process that separates water into hydrogen and oxygen, using electricity generated from renewable sources. Today it accounts for just 0.1% of global hydrogen production. However, the declining costs of both renewable electricity (accounting for ~70% of the cost of producing hydrogen) and electrolysis technology indicate that green hydrogen could be the next best investment in the world of clean energy.
For many – including oil and gas players, large utilities, industries from steel to fertilizers, and more – green hydrogen is regarded as the best bet for harmonizing the intermittency of renewables whilst decarbonizing the energy-hungry industrial, chemical and transportation sectors.
Although green hydrogen is gaining traction across industries, it still faces numerous challenges.:
1. Reduced knowledge on optimum design and return on investment, thus limiting bankability. To meet market demand, organizations will need to scale up and improve their green hydrogen plant designs. However, based on limited market data and low maturity in the space, optimizing plant designs and end-to-end green hydrogen systems can be costly and incredibly complex. Furthermore, many of these large green hydrogen facilities are built within existing industrial clusters, which adds another dimension of designing to ensure limited impact on existing operations during the transition to green hydrogen.
2. Limited specialized workforce and high operational costs. While the rise of green hydrogen will create countless new job opportunities, many individuals still lack the necessary training and skills to support the hydrogen economy. As the industry matures, a shortage of specialized workers will hinder its progress. Green hydrogen is also incredibly challenging and expensive to store and transport. It is a highly flammable gas with a low volumetric density, requiring investment in specialized pipelines and carriers.
3. High energy losses. Green hydrogen loses a considerable amount of energy at every point in the supply chain. Approximately 30-35% of the energy used to produce hydrogen is lost during the electrolysis process; liquefying or converting hydrogen to other carriers, such as ammonia, results in a 13-25% energy loss; and transporting hydrogen requires additional energy inputs that are typically equal to 10-12% of the hydrogen’s own energy. The use of hydrogen in fuel cells will result in an additional 40–50% energy loss. These inefficiencies, if not optimized, will require significant renewable energy deployment to feed green hydrogen electrolyzers that can compete with end-use electrification.
4. Green hydrogen off-takers and value. The main challenge is how to monetize green hydrogen. Firstly, while cost-effective green hydrogen can be produced in sunny places (such as Australia, Portugal, Spain or Tunisia), off-taking industrials are not usually next door. This creates a need for dedicated pipelines, with all the associated lead times and costs. Additionally, valuing green hydrogen assumes guarantee of origin certification and convertibility to carbon credits; both processes are still under development and subject to heavy debates.
Among increased investment, government support, engineering development and a skilled workforce, digital technology is one of the critical levers for accelerating the transition to green hydrogen – especially artificial intelligence of things (AIoT) – a combination of artificial intelligence and internet of things technology that enables the optimization and automation of systems through enhanced data management and analytics.
Here are four areas in which digital technology could help expedite the green hydrogen transition:
1. Digital twins. Before committing capital, investors want to know which system configuration will optimize their return. From PV to electrolyzer capacity, to buffers (such as energy and hydrogen storage), multiple variables must be considered. Digital twins can model multiple designs and scenarios, including variables such as weather, off-takers demand volatility and local infrastructure (current and future), optimizing each design to maximize return on investment and minimize risk. Estimates indicate that digital twin analysis can optimize capital expenditure (CAPEX) by 10-15% whilst reducing risk by 30-50%, along with a marginal change in operating expenditure (OPEX).
2. Monitoring and control. Energy consumption, plant performance, production rates, purity and storage are among the key performance indicators (KPI) for hydrogen production which require visibility to ensure efficient production. AIoT can offer rapid anomaly detection using intelligent alarms, sensors on assets to monitor KPIs, and asset health and cloud-based remote monitoring beyond control rooms. Providing real-time monitoring of plant operations and asset health, coupled with remote control of assets, can reduce costs by 10-20% through lower energy consumption and a streamlined workforce. Leveraging monitoring models, consistent with design digital twins, allows investors to see where they stand regarding the business plan and to take actions to reduce eventual losses.
3. Advanced analytics. Analytics can transform data into business intelligence with actionable insights. For green hydrogen, churning and learning through data from plants, tanks, pipes, energy off-takers and even the weather, and the application of plant–level or fleet-level analytics can provide corrective action recommendations to maximize yields. Energy losses can be prevented by forecasting failures and optimizing electrolyzer uptime, thus increasing revenues and decreasing OPEX. Leveraging analytics models consistent with their digital twins allows investors and bankers to ‘close the design loop’ and take strategic and tactical decisions to optimize their returns.
4. Certificates of origin. Guarantee of origin (GoO) is a prerequisite for monetizing green hydrogen by certifying the renewable nature of all consumed electricity. AIoT-monitored installations can leverage near real-time data to automate input to GoO issuers – this avoids manual processing, offers more confidence and reliability, and increases future-proofing as more and more certification evolves towards real-time and automation. AIoT can also ensure end-to-end traceability along the entire life cycle of the green hydrogen, from cradle to grave.
Green hydrogen offers a decarbonization solution to the industrial, chemical and transportation sectors. Combined with increased investment, government support, engineering advancements and a skilled workforce, AIoT solutions will be vital in enabling the transition to green hydrogen and will play a critical role in the global decarbonization effort. We estimate AIoT-enabled solutions can reduce CAPEX and OPEX by 15% – 25%, expediting the scaling of commercially viable green hydrogen by four to seven years. Maybe then, key industries, planes and vessels could be powered by 100% green hydrogen.