How Green Hydrogen can Decarbonize Hard-to-Abate Sectors
Dec 6, 2023
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Jacob Susman, CEO and co-founder of Ambient Fuels, discusses how green hydrogen can decarbonize hard-to-abate sectors. He highlights the role of renewable power in green hydrogen production and its potential uses in industries like shipping and fertilizer. The challenges and complexities of using hydrogen as fuel in the trucking industry are also discussed. They share insights on financing in the energy sector and the process of building a successful Devco in the green hydrogen sector.
Green hydrogen can decarbonize hard-to-abate industries by providing a clean fuel source and replacing gray hydrogen production.
Infrastructure development for green hydrogen projects requires careful planning, feasibility assessment, and securing off-take agreements and financing partnerships.
Deep dives
The Role of Green Hydrogen in Decarbonizing Hard-to-Abate Industries
Green hydrogen can play a crucial role in decarbonizing industries that are difficult to electrify due to the challenge of energy density. Green hydrogen projects, like those developed by Ambient Fuels, offer an opportunity to tackle the decarbonization of industries such as refining, fertilizer production, shipping, aviation, and long-haul trucking. The production of green hydrogen involves using renewable power to separate water into hydrogen and oxygen using an electrolyzer. This carbon-free form of hydrogen, also known as electrolytic hydrogen, can provide a clean fuel source for industries currently reliant on gray hydrogen production, which emits CO2. The market for green hydrogen is expanding, with potential applications in ammonia production, shipping, aviation, industrial heat, and utilities. However, challenges remain, including scaling up production capacity to meet demand, reducing costs through innovation and efficiency improvements in electrolyzer technology, and cultivating regulatory and voluntary demand to drive the adoption of green hydrogen across various sectors. The US, Europe, and China are key players in the green hydrogen market, with Europe leading in regulatory demand and the US offering supply-side incentives. The future growth of green hydrogen will depend on the development of infrastructure, financing, and partnerships, as well as the continued advancement of technology and support from investors and policymakers.
The Business Model of Green Hydrogen Infrastructure Development
Green hydrogen infrastructure development involves assembling the necessary components of a project, such as feasibility studies, land rights, permits, renewable power sources, and off-take agreements. Infrastructure developers, like Ambient Fuels, focus on creating projects that can secure long-term revenue streams to attract financing and eventually build and operate the infrastructure assets. Off-takers, or customers, play a crucial role in providing fixed revenue streams that reduce risk for developers and make project financing more feasible. Infrastructure developers also handle commercial aspects, such as securing anchor tenants and signing engineering, procurement, and construction contracts. The infrastructure development process requires careful planning, feasibility assessments, and consideration of factors like fuel sources, renewable resources, and connection to the electrical grid. It involves ensuring a fixed revenue stream, credit profiles of off-takers, and navigating contractual agreements. The financing landscape for green hydrogen varies, with partnerships and investments from entities like Generate Capital providing capital support to developers. The future of green hydrogen infrastructure development lies in scaling up manufacturing capacity, optimizing operations, including tax incentives, and forging partnerships within the ecosystem to drive growth.
Differentiating Green, Gray, and Blue Hydrogen
Hydrogen exists in different forms, including green, gray, and blue hydrogen, distinguished by their production methods and associated carbon emissions. Green hydrogen, also called electrolytic hydrogen, is produced using electrolyzers powered by renewable energy sources. This carbon-free form of hydrogen offers a clean alternative to gray hydrogen, which is mainly produced through steam methane reforming using natural gas and emits significant CO2. Blue hydrogen is produced using the same process as gray hydrogen, but with CO2 capture and storage, reducing emissions to some extent. The production of green hydrogen relies on renewable power, which is a key input and an important factor in determining its cost. The cost of green hydrogen production, efficiency improvements in electrolyzers, and the broader adoption of renewable energy sources for electrolysis are crucial considerations in advancing the green hydrogen industry. Although gray hydrogen is currently the most widely produced form of hydrogen, the market is shifting towards green and blue hydrogen to align with decarbonization goals and regulatory demand. Green hydrogen, in particular, offers a promising solution for decarbonizing hard-to-abate industries that rely on hydrogen.
Opportunities and Challenges in the Green Hydrogen Market
The green hydrogen market presents various opportunities and challenges for different sectors. Regulatory demand and voluntary commitments from industries like shipping, aviation, and utilities are driving the adoption of green hydrogen. Ammonia production is a particularly significant market for green hydrogen, with efforts underway to replace gray hydrogen with green hydrogen in the production process. Other industrial heat applications, such as steel production, also show potential for green hydrogen adoption. The market outlook for green hydrogen depends on factors like supply and demand dynamics, technological innovations, and policy frameworks. While significant progress has been made, the industry is still in early stages, with the operational scale-up of electrolyzer assets and manufacturing capacity expected in the coming years. The US, Europe, and China are key players in the green hydrogen market. However, challenges remain, such as optimizing the cost-efficiency of electrolyzers, expanding infrastructure, securing off-take agreements, and developing supportive policies and regulations. Financing and partnerships with value-added investors are crucial for the success and growth of green hydrogen companies and projects.
The third in our series on hard-to-abate sectors, this episode features Jacob Susman, CEO and co-founder of Ambient Fuels, a developer of green hydrogen projects. He describes how green hydrogen can help decarbonize hard-to-abate sectors and which applications are especially promising for green hydrogen solutions. Jacob also describes Ambient’s role in green hydrogen project and infrastructure development, provides career advice, and shares tips to attract early-stage financing.
