Research highlights

13th January 2021

Research highlights – hydrogen production 

AP Ventures has an extensive research activity to stay ahead of market trends and deploy effectively its capital. Lately, we have focused on hydrogen production as an area of interest. We see the ability to produce competitively priced low-carbon hydrogen as critical – in terms of decarbonising current hydrogen production, making existing end-use applications more competitive and enabling hydrogen to be more competitive in new technologies such as synthetic fuels, ammonia and heavy-duty trucks.

Here are a few thoughts we would like to share on the different modes of producing hydrogen

Green hydrogen

  • Water electrolysis technology is highly attractive, and we believe it has an exciting long-term future.
  • We see attractive investment opportunities in many areas, for example, in:

o   Helping achieving electrolyser scale (the EU recently released a strategy calling for 40GW of electrolyser capacity by 2030, as well as the formation of a supply chain of 40GW of electrolyser capacity for the import of hydrogen from outside of Europe. To put the magnitude of this scale-up in context, the EU currently has an installed water electrolysis capacity of ~100MW)

o   Stack and system architecture that reduces OPEX requirements (this is particularly important as renewable energy costs currently account for >75% of the cost of green hydrogen)

o   Stack and system architecture that can leverage the fuel cell supply chain (there are certain components and design synergies that can be utilised across the two technologies),

o   Reducing the capital cost of key components, and

o   Technologies (e.g., synthetic fuels) that can utilise green hydrogen to decarbonise hard-to-abate sectors such as air travel.

  • Although we are seeing significant project opportunities in the market for utilising competitively priced green hydrogen through curtailed and surplus renewable power, hydrogen costs from electrolysis are generally still more expensive than hydrogen from fossil fuels. We believe therefore that electrolysis will struggle to solely meet low-carbon hydrogen demand due to current capacity limitations for both electrolysers and installed renewable energy. We see a strong case for other forms of low-carbon hydrogen production.

Blue hydrogen

  • We believe that continuing to use natural gas is an attractive method of producing hydrogen, as long as the carbon by-products associated with the process are captured, sequestered or used in other industry. We see blue hydrogen as being crucial in meeting the short-to-medium term low-cost hydrogen demand, as well as providing long-term baseload supply even after green capacities have scaled up.
  • Key general economic drivers include the cost of natural gas, the price of carbon and location to markets and sequestration.
  • If gaseous carbon is produced in the form of carbon dioxide through reformation, the purity of CO2 produced is important as well as location, to offer either industrial utilisation opportunities or permanent sequestration through geological storage. We have an exciting investment in this space, Zeg Power, which produces very pure CO2 as a by-product, and is collocated with the Northern Lights project site and actively working with the project team.

If solid carbon is produced via methane pyrolysis, then the price of natural gas becomes more important as double the quantity is required (as a hydrogen source in lieu of water). However, solid carbon can be more easily captured, transported, sequestered or used, if applicable.

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