Project Trickle Expected to Turn to Flood
By Carly Fields
While there might not be a sizable pipeline of hydrogen-related work buoying the project lists of engineering, procurement and construction companies today, make no mistake, progress in the sector is rapidly gathering a head of steam. First movers in the project cargo world have much to gain from early involvement in hydrogen infrastructure projects.
Neil Golding, director of market intelligence at the Energy Industries Council, or EIC, notes that hydrogen strategies continue to be developed and released for domestic and export focused geographies. New energy players are also emerging in the global market and project announcements are increasing for “all colors” of hydrogen projects. While hydrogen is a colorless gas, depending on the type of production used, different colors are assigned to the hydrogen. Green hydrogen and blue hydrogen are most commonly heard, but you may even hear of brown, yellow, turquoise and even pink hydrogen. There is no universal naming convention and these color definitions may change over time, and even between countries.
Golding said: “We are beginning to get a clearer line of sight of the pipeline of opportunities globally.” There is huge growth potential, but he questioned whether the projects can be delivered with current supply chain capabilities and capacities, and whether the required scale up of electrolyzer manufacturing can be delivered. “Will hydrogen demand keep up with the supply?” he asked.
“We’ve got green, we’ve got blue, we’ve got pink and I’ve even heard of white. All these particular colors are not helpful; what is helpful is knowing what components go into these. Green hydrogen needs electrolyzers, typically 5 to 10 megawatts, that need to be transported to market.”
There has already been recognition of the increasing need for electrolyzers in Europe, with a pledge to increase production 10-fold to 17 gigawatts, or GW, by 2050. “That commitment is crucial to speed up the energy transition and to help wean us off gas from other markets,” Golding said.
Looking at the global opportunities for hydrogen, the EIC calculates that 93 percent of investment is going to be made in green hydrogen. “We continue to see projects being announced in the non-traditional markets, but also now in the traditional markets.” Golding noted that some of the most exciting projects moving forward right now are in the Middle East. “An example of that is in Saudi Arabia where thyssenkrupp has been awarded a contract to deliver 2 GW of electrolyzers. They are going to use a 20 MW model; if you scale that up, that’s a lot of modules that need to be moved, a lot of infrastructure that needs to be put in place and then there is the transporting of the hydrogen. An awful lot of equipment is needed too and perhaps that points to a supply chain crunch going forward as well.”
Golding also noted that there is a changing dynamic in terms of the developers of hydrogen projects: “We will continue to see major oil and gas companies, but we will also see major mining companies playing a role.”
Project Take-off
Globally, project announcements are starting to trickle in. Earlier this year, French renewable power company Total Eren (formerly Eren RE) announced commissioning of an initial engineering study for a mega-scale green hydrogen and green ammonia plant in the Magallanes region of southern Chile. UK-based energy engineering consultancy Wood is to provide a conceptual engineering study for Total Eren’s H2 Magallanes Project, a giant green hydrogen plant located on the windy Strait of Magellan. The plan calls for development of 10 GW of onshore wind power capacity, a desalination plant to make clean water to feed the electrolyzers, 8 GW of electrolysis capacity, and an ammonia plant to turn the hydrogen product into green ammonia. Chile has a national goal of building out 25 GW of green hydrogen capacity by 2030.
In Egypt, Prime Minister Mustafa Madbouli has allocated areas for producing green hydrogen in the Suez Canal Economic Zone. Egypt is upgrading its energy strategy to include green hydrogen as a source of power and is to provide incentives for the production of green hydrogen.
In Canada, Hy2gen Canada and the SAF+ Consortium signed a memorandum of understanding in May that will see them working together on the development of Québec’s hydrogen sector. The two companies will work towards the development of structuring projects in the hydrogen industry sector, more specifically green aviation fuels, starting with a Quebec-based project. Hy2gen AG raised E200 million (US$10.7 million) earlier in 2022 and will use those funds for the construction of installations worldwide that will produce synthetic green hydrogen-based fuels, or “e-fuels,” for land and sea transportation, aviation and the industry.
There is also the accelerated energy transition to consider as countries in the West seek to lessen their energy dependence on Russia as the war in Ukraine continues.
Political Support Lifts Progress
Hydrogen production in the U.S., meanwhile, is benefiting from political support. Marty Chiaramonte, global business development director at Engineering, Procurement & Construction LLC., or epc4h2, a specialist in delivering hydrogen systems-related engineering, design, procurement, permitting, construction, operations, maintenance and consulting services, points to development of hydrogen hubs as part of the Bipartisan Infrastructure Law passed Nov. 15, 2021. “There is US$8 billion in funding for these hydrogen hubs for the production, storage, transportation/logistics, and dispensing of hydrogen in support of the U.S. Department of Energy’s ‘111’ initiative,” he said to Breakbulk. Launched in June 2021, the DOE’s Hydrogen Shot seeks to reduce the cost of clean hydrogen by 80 percent to US$1 per 1 kilogram in 1 decade, or “111.”
As well as the US$8 billion Regional Clean Hydrogen Hubs, the Bipartisan Infrastructure Law includes US$1 billion for a Clean Hydrogen Electrolysis Program to reduce costs of hydrogen produced from clean electricity; and US$500 million for Clean Hydrogen Manufacturing and Recycling Initiatives to support equipment manufacturing and strong domestic supply chains.
U.S. states are already competing hard for the pot of federal funds earmarked for the hydrogen hubs. Biden’s infrastructure plan includes funding to build at least four hubs – described as places where the gas can be produced and used in a self-reinforcing cycle. Two of the hubs must be in regions with plentiful natural gas reserves, a provision that helped secure backing from U.S. Senator Joe Manchin of West Virginia.
Subsidizing the transition from fossil fuels to hydrogen is helping this sector develop in the U.S. “While slow and bureaucratic, this has helped germinate the seeds for a hydrogen economy in the U.S.,” Chiaramonte said.
One of the proposed U.S. hydrogen hubs is expected to be the world’s largest hydrogen production and storage facility. The DOE issued a conditional commitment for up to US$504.4 million in debt financing for a hydrogen hub planned for Delta, Utah, that is designed to convert renewable energy into hydrogen. Developers of the Advanced Clean Energy Storage Project, which is expected to start operating in 2025, include Mitsubishi Power Americas Inc. and Magnum Development LLC. The project will include 220 MW of electrolyzers and will initially provide more than 300 gigawatt-hours of clean energy to the region each year. Construction is already underway.
Logistics ‘Critical’ to Sector Development
epc4h2’s Chiaramonte said that logistics are “critical to a robust interconnected plan to deliver the H2 to that ‘last mile’ to the customer.” His advice for project cargo movers looking to position themselves to get involved in hydrogen infrastructure projects worldwide is to “follow developments, regulations, and projects in marine, heavy duty trucking, and drayage applications because these modes are changing due to regulations and eventually parts of the market will be switching to hydrogen due to the economics.”
There are many U.S. subsidy programs to help the adoption of hydrogen as a fuel or energy source, he added. But there are hurdles too. “The costs of the equipment and operation (capex and opex) expenses need to come down for both the vehicle and the infrastructure,” Chiaramonte said. Here, the arrival of new manufacturers of hydrogen capital equipment entering the market will help to reduce the costs, while DOE funding of research and projects to reduce the cost per kilogram of hydrogen will help stimulate the sale of hydrogen as a fuel and energy source.
“The other issue is lead time and supply chain,” Chiaramonte added. “We are currently facing long lead times that affect the development, rapid deployment, and adoption of hydrogen. We believe that serial production of containerized hydrogen infrastructure is the economic and optimal method for rapid deployment and adoption of hydrogen in our economy.” He points to Europe as a source of inspiration for the U.S. as it ploughs ahead on its hydrogen journey as the continent is “ahead of the U.S. with hydrogen infrastructure strategy, roadmap, and deployment.”
Carly Fields has reported on the shipping industry for the past 22 years, covering bunkers and broking and much in between.
