BHP not banking on green hydrogen

8th September 2021

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia


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PERTH ( – Diversified giant BHP will not be relying on green hydrogen to meet its decarbonising targets, the miner said on Wednesday.

Speaking at the Hydrogen and Mines virtual summit, BHP manager for energy, carbon and technology research Lee Levkowitz said that it was unlikely that green hydrogen would achieve competitive costs within the 2020 decade, or potentially even the first half of 2030.

“It shouldn’t come as a surprise that the economics of hydrogen production, especially the green variety, are challenging. Today, production costs range from $2.50/kg to $8/kg. If you add on storage and transport and end-use markets, you can tack on as much as additional $2/kg to $5/kg. You compare that against roughly 70c/kg to $1.50/kg it costs to produce grey hydrogen today.”

Levkowitz said that there were three ways to bring down the cost of green hydrogen; namely by improving the electrolyzer technology, by bringing down electricity costs, and to increase the use of the electrolyzer to spread out those fixed cost components over a higher quantity of production output.

“Any modeler in the audience will tell you it's actually very difficult to get all of these going in the same direction without one of the factors ballooning out in the other direction. So for example, many project developers are facing a very tricky optimisation problem at the moment, as they try to simultaneously bring down electricity costs without tacking on additional costs for things like transmission, electrical or chemical storage to drive up utilisation.

“In our most optimistic scenario, renewables costs at default roughly $10 per megawatt hour to get to the point in which hydrogen can be competitive in steelmaking where you need to see hydrogen prices fall around $1/kg to $1.50/kg. And those who are of course used to procuring electricity in Western Australia know that those healthier leads will be challenging to achieve. And it's not purely just the cost equation either - the sheer amount of electricity that's required to produce green hydrogen is also a barrier.”

Levkowitz said that while the industry was waiting for the cost of green hydrogen to decline, other technologies that would assist with decarbonising would continue to emerge and evolve.

“You only need to decarbonise a sector once. It is easier-to-abate sectors, namely renewables for power, electrification of light duty transport; these already have a very clear path for commercialisation and will likely win out relative to more nascent technologies. And with power and transport making up roughly two-thirds of global emissions that leads hydrogen to play much more of a niche role, making it difficult to achieve those economies of scale.

“That's not to say there will be no role - in our view green hydrogen will first make the most inroads, where it's displacing traditional emitting sources of hydrogen, or grey hydrogen. We also see it playing a role in sectors where there's no alternative compelling decarbonisation route and where enabling infrastructure is readily available.

“In particular, we think there may be a role for hydrogen in heavy duty transport with some potential applications that might excite; namely for excavators and drills, both of which are more difficult to electrify.

“Perhaps most importantly, we think hydrogen will take off in areas that have access to a lot of really really cheap green electricity,” said Levkowitz.

Edited by Creamer Media Reporter


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