There are four main categories of hydrogen: grey, blue, green, and brown, and its "type" depends on the origination and extraction process. The most common form of hydrogen used today is grey hydrogen, which is created using steam methane reforming (SMR). This involves catalyzing a reaction between methane from natural gas and high-temperature steam. Grey hydrogen is primarily employed to refine oil and produce ammonia fertilizer. The SMR process yields nine kilograms of carbon dioxide per kilogram of hydrogen. Global hydrogen production currently emits as much carbon as all emissions from the United Kingdom and Indonesia combined.
Blue hydrogen is a lower-emissions alternative, which uses carbon capture and sequestration to capture anywhere from 50 to 90 percent of carbon dioxide produced. But in a warming world, "lower-emissions" may not be good enough. In our June newsletter, we featured green hydrogen as an emerging zero-emissions energy option. It is produced by splitting hydrogen from water (via electrolysis) using nuclear and/or renewable-powered electricity, and thus is the "cleanest" hydrogen option. However, only 1 percent of all hydrogen currently produced qualifies as green hydrogen.
Green Hydrogen Is a Costly Endeavor
Currently, green hydrogen is much more expensive for two main reasons: (1) drawing green hydrogen from water using renewable electricity is significantly more expensive than production processes for grey and blue hydrogen, which use heat and steam from fossil fuels; and (2) green hydrogen is not always produced in the locations where there is demand. Therefore, grey and blue hydrogen are more favorable in the near term since their production technologies are more established and less expensive. The costs fall between $0.50 to $4.00 per kilogram for grey or blue hydrogen, versus $2.50 to $10.00 for green.
For all types of hydrogen, transportation is difficult, because hydrogen lacks density, meaning that it must be cooled and liquified or compressed for delivery via pipelines. At present, there are around 1,600 miles of hydrogen pipeline in the United States. These are primarily near the regional "hubs" that use grey hydrogen for refining and fertilizer. This poses a challenge to green hydrogen, because production sites are not located near infrastructure.
A recent study estimated that the U.S. hydrogen economy could generate $140 billion and support 700,000 jobs by 2030, including increased green hydrogen use over the next five to 10 years. Cost effectiveness, however, will require technological and efficiency advancements, as well as significant pipeline retrofits and construction. So, what does this mean for green hydrogen development?
Can Green Hydrogen Compete?
Enter Antlia Energy, a North Carolina startup building the world's first green hydrogen credit network. Antlia was recently one of six startups selected to participate in the Joules Accelerator, a North Carolina-based organization accelerating cleantech adoption and deployment through southeastern corporate partnerships. Antlia was also selected as one of 16 regional startups to receive funding from the N.C. IDEA Micro fund in fall 2020. Since receiving funding, the company has worked with stakeholders to develop a business model that addresses the key market challenges facing green hydrogen project development.
Leyline spoke with Sam Pollan, one of the company's co-founders, who says that Antlia wants to accomplish two main goals. The first goal is to build a recognized standard for a tradeable green hydrogen credit. Currently, the costs of green hydrogen production and delivery outweigh the benefits of its use. Antlia wants to decouple the environmental benefits of green hydrogen from the product itself and establish a transactable green credit. The company's second goal is to build a marketplace around that value, developing a network of project developers, corporations, hydrogen consumers, policy/advocacy groups, and others who will utilize the auditable credit as a financing instrument.
Hydrogen is not only a clean energy carrier, but also an important chemical feedstock in some of the world's most carbon-intensive industries, such as ammonia production and oil refining. A green hydrogen credit would work somewhere in between the role of a renewable energy credit and a carbon offset by guaranteeing the origin of clean production and denoting the displacement of dirty hydrogen production. Antlia's marketplace ties all of these characteristics together and hones in on how green hydrogen may displace grey hydrogen, kilogram by kilogram.
Growing Green Hydrogen's Viability
Right now, companies are trying to focus on making grey hydrogen more "green." Pollan notes that there are some sites capableofproducing green hydrogen at costs competitive with grey hydrogen, but few of these locations are located where there is demand for clean hydrogen. Transporting green hydrogen to its optimal location incurs delivery costs that drive prices to three to five times the amount of grey hydrogen. This doesn't provide much incentive to decarbonize - but that's where Antlia comes in.
The Antlia Marketplace aggregates and connects green hydrogen supply and demand by decoupling the physical hydrogen from its environmental attributes. This enables early adopters to decarbonize, while also encouraging incumbents to embrace the next generation of green technology without the added cost premium. Antlia serves as a central marketplace to secure demand and supply, connect these locations, commoditize green hydrogen's environmental benefits, and transact this credit at a fee. The grey hydrogen region may purchase the clean credits and offset their dirty production at a fraction of the price it would take to import the green hydrogen.
Though the green hydrogen market is still new, with no more than 10 projects currentlyoperational in the United States, it is gaining momentum. Pollan anticipates that Antlia will help jump start further development. Antlia's credit system will allow grey hydrogen to reap green hydrogen benefits today at only 50 percent added cost. As the company and market grow in the next three to five years, we will likely see lower costs and enhanced economic and environmental benefits from green hydrogen.
Leyline is keeping a keen eye on the development of green hydrogen projects and initiatives with our internal technology and trends working group as we continue to invest in decarbonization and the clean energy transition.