Andrew Cunningham, chief executive of ‘green’ hydrogen company GeoPura, likens the challenge of scaling up the sector to a stand-off.
“It’s about breaking that ‘chicken and egg’,” he says. There is a “cycle of people not building hydrogen production capability because they are not sure who is going to be using it . . . and [of] people not building capabilities that need hydrogen [because of the lack of supply]”.
GeoPura, in collaboration with Siemens Energy, has developed green — or renewable-energy derived — hydrogen alternatives to replace diesel generators in industries from live music to construction. Cunningham, previously a founder of other tech start-ups, funded GeoPura himself after recognising the world’s “mind blowing” dependence on diesel-powered generators.
Green hydrogen is produced by splitting it from water using an electrolyser powered by electricity generated from renewable sources. GeoPura’s business model involves generating hydrogen in this way, as well as building the fuel cells that use the gas to make more electricity.
The business launched in 2019 at the Goodwood motorsports festival in West Sussex, southern England. It powered part of the event with its hydrogen-fuelled generator and attracted interest from potential clients. After years of his own research and investment, it proved a turning point for Cunningham.
“It gave me the confidence to break that cycle, to actually buy an industrial electrolyser [and to] buy the trailers that allow you to move that hydrogen around,” he explains.
Having demonstrated that the concept worked, the next step was to scale the business and secure funding from outside investors. GeoPura managed that earlier this year — concluding a round of funding that raised £56mn, including a £30mn commitment from the state-owned UK Infrastructure Bank. Customers to date have included the National Grid and the BBC.
Cunningham’s carefully phased approach highlights the apprehension that still surrounds hydrogen innovation. The gas is seen as a possible panacea as countries rush to decarbonise their economies, but has also faced setbacks as projects that could demonstrate its long-term viability fail to get off the ground.
It is a common problem across industries that claim to have potential solutions to help countries reach net zero targets. Governments are often quick to set out targets — such as phasing out diesel and petrol cars — but slow in providing funding and regulations to facilitate a change in behaviour and the formation of new industries.
In the case of green hydrogen, cost-effective production has proved elusive as high inflation and insufficient subsidies have made it difficult to manufacture the required electrolyser systems.
Most of the hydrogen currently used is so-called “grey” hydrogen, extracted from natural gas, which involves releasing carbon dioxide into the atmosphere. Green hydrogen does not involve natural gas — but it is more expensive to produce, and the costs are increasing rather than falling.
Government support — which is needed to support the supply chain of producing, storing and transporting the gas — has been slow around the world despite widespread support for the technology as a way to decarbonise energy-intensive industries, such as long distance transport.
$5Cost of producing hydrogen, per kilogram
Earlier this year, the International Energy Agency said hydrogen-dedicated renewable energy capacity would grow by 45GW between 2022 and 2028, 35 per cent less than the capacity it predicted a year earlier, suggesting momentum is being lost.
Producing electrolysers, which use electricity to split water into hydrogen and oxygen, is usually the most expensive step in developing green hydrogen. And it is this cost that risks undermining efforts to boost green hydrogen’s competitiveness relative to that of hydrogen produced via dirtier methods.
Sourcing cheap components from China, a leader in the development of clean hydrogen, could help with the cost but it remains problematic due to geopolitical tensions. Western governments have instead sought to develop local supply chains and reduce reliance on a country they view as a competitor. Even so, the cost of producing green hydrogen is still about $5 per kilogramme — or three times more expensive than it is to produce grey hydrogen — according to data company Argus Media.
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“If renewable hydrogen is to kick off in earnest, this cost gap would need to be reduced, which will not be easy and requires a combination of scaling effects, efficiency gains and government subsidies,” says Stefan Krümpelmann, global head of hydrogen pricing at Argus.
He points out that, while the number of electrolyser factories planned for construction has increased, not all planned projects will reach completion and “production could be hampered by bottlenecks for individual components”.
Some projects are just not happening at all. In the latest blow to ambitions for a transition to hydrogen the UK government last month shelved plans for what would have been Britain’s largest trial — using the gas to heat up to 10,000 homes — having abandoned two smaller-scale trials last year.
Industry bodies Energy Networks Association and Hydrogen UK last year found that no significant low-carbon hydrogen production projects had reached a final investment decision, despite the country having a target of 10GW of production capacity by 2030.
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“Seeing is believing,” says Clare Jackson, chief executive of Hydrogen UK. “Whilst we’ve got some small-scale projects in the UK, we haven’t yet seen the first project at scale. We need to get the first projects off the ground [because] you have to have somewhere to scale from.”
Fredrick Mowill, chief executive of Hystar, a Norwegian developer of electrolysers, concedes that some of the “hype” around hydrogen has subsided, but says a reduction in the number of “lofty” projects would leave space for higher quality alternatives.
Hystar has recently signed a supply agreement with Johnson Matthey, a London-listed technology group that makes catalytic converters for vehicles, to boost green hydrogen production — showing there can be demand for energy technologies that are compatible with the decarbonisation agenda.
