BUSINESS DEVELOPMENT | THE HYDROGEN OPTION


interstitial or chemical hydride, liquid organic or complex hydride and metal hydride options. But they are likely to be used in niche applications.


‘Free’ hydrogen from renewables? The most frequently cited hydrogen model is using excess green energy from wind and solar sources, which are expected to be built out at massive scale in the next decades. Huge renewables capacity is required to meet increasing demand as industries electrify, but it will supply its energy in surges, as weather conditions are right, that have to be captured, stored and provided to customers as required. It has led to a simple narrative about hydrogen production: use the excess to produce hydrogen by electrolysis of water. That seems to suggest hydrogen production might be cheap or even free, as the excess renewable energy is currently discarded, or pays a negative price to export to the grid and this appears to be far more attractive than investing in a nuclear plant. In fact, there are hidden costs.


Renewables, especially wind, are variable generators,


but for off-takers, steady and predictable power is more valuable (and realises a better price for the generators). Typically a wind farm operator will sell a proportion of its generation as baseload on a long term contract (possibly to an electrolyser operator). At the moment electrolysers tend to be of the alkaline


variety, and are not flexible in operation. Running hydrogen plant at full capacity requires it to be under-sized relative to an associated wind farm, as wind farm peak hours will be infrequent. If the baseload feed is guaranteed, the generator will have to source low-carbon power from another supplier to ‘fill in’ at times when the wind plant is not generating – and at times when one wind farm is in low-wind still weather many others are also stationary, so low-carbon grid power is at a price premium. Meanwhile, the variable component will be sold as


‘merchant’ power, but because the ‘baseload’ portion of generation has been sold on a long term contract the merchant sale is now ‘very variable’ and typically less valuable. This issue has to be managed by using flexibility that exists in the wider system and this is why electric vehicles are so important, because they offer the scale of flexibility required for the ‘very variable’ wind fraction. Electric home heating may also be important, but either way, the flex has to be accessed from downstream.


What changes? Nuclear’s long lead time means much can change while it is being deployed – even with the development of small modular reactors – there is little opportunity for rolling out multiple projects to reduce costs via ‘learning by doing’. Electrolysis, in contrast, is likely to develop more like renewables or batteries: by replication of hundreds and thousands of units that can also begin to provide a partial return to investors at an early stage in the project. It also means electrolysis technologies are likely to


undergo significant development and innovation while nuclear is being developed and licensed – especially in regards to flexibility and efficiency, which are seen as major targets. That raises the possibility that the case for nuclear hydrogen will be ‘hollowed out’. Another competitor may be hydrogen imports.


10 | WNE Special Edition | www.neimagazine.com Harris says, “a key question about nuclear is how it


competes with wind on a £/MWh basis if we will electrolyse”. If it cannot reduce its costs nuclear must bring something new, either to support wind through low wind periods or find a role in hot electrolysis”. Nevertheless, he sees value in the nuclear option for hydrogen. That is partly because of the opportunity for bulk production, but there are other important advantages: “There is an advantage in having baseload power to reduce the double flex need of green hydrogen. [In Northern Europe] winter heat load is a key driver and hydrogen with caverns can do this”. He says storing hydrogen in caverns “seems to come out


on top”.


What is the strategy? This exploration suggests a long-term strategy for nuclear to secure a role in the hydrogen industry by aiming for a twin track solution. Electrolysers benefit most in a flexible system. Wind


powers baseload electrolysers, with the power spill going to EVs or other flexible users. In addition, for the system as a whole there is a security benefit from including electrolysers. That is because even if they are not generally variable in operation, there is an option to shut them down on occasions, to free up low wind or other lack of supply for other users.


Meanwhile nuclear’s strength is be to provide consistent power and hydrogen in bulk. It can have a strong synergy with wind in situations


where demand does not achieve the extreme flexibility that is most desirable. In this scenario the provision of baseload power from nuclear capacity to meet baseload hydrogen demand reduces the strain on demand flexibility. The two hydrogen sources can combine to power industrial processes plus some other uses and spill any excess hydrogen to caverns. The caverns absorb the imbalance between hydrogen production and consumption. The nuclear has reduced the double flex requirement of the wind-hydrogen system. To maximise its attractiveness, nuclear should focus on siting in industrial regions that also have access to bulk hydrogen storage. In this future, steam methane reforming with carbon


capture and storage may be a short-term solution for industrial customers and initially nuclear competes head on with high capture fossil CCS. Which wins is unknown, but both are extremely expensive, and indicate more efforts on the demand side are needed. But nuclear does not require transport and disposal of carbon dioxide – which may in any case be under used in a future where electrolysis from renewables is under way at large scale. This in turn has implications for the infrastructure


investment in these areas. In the event of a switch to nuclear hydrogen production, hydrogen transport options remain important and so does bulk hydrogen storage, but carbon dioxide infrastructure becomes obsolete. Policymakers should have this in mind when considering


business models for carbon dioxide infrastructure. It should focus on whether flexible options such as tankering would be a cheaper option if nuclear has potential to take over bulk supply of hydrogen for industrial customers. In this event, fixed pipelines for carbon dioxide transport quickly become stranded assets and so do connections to carbon dioxide sequestration. ■


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