The Role of Hydrogen in a Zero-Cost Electricity World

By Traver Kennedy, Chairman and CEO on October 23, 2018
Traver Kennedy
Home  / Blog  /  The Role of Hydrogen in a Zero-Cost Electricity World

Some people believe that hydrogen is just a niche market and that low-cost batteries, solar, and wind power will keep it that way. Evidence and technological innovations of the past decade indicate that it may be just the opposite. The value equation of low-cost solar and wind energy, as well as that of batteries, increases when combined with hydrogen generation and storage. This is a renewables win/win/win that is gaining momentum.

To shed light on this issue, this week we explore the role of hydrogen in a world where the cost of electricity is falling―at times reaching zero (or less). It’s a transformation brought about by renewables, mainly solar and wind power, which given the nature of their variability, often produce excess electricity at times when demand is not sufficient to absorb the entire supply. Utilities everywhere are racing to transform their business models, clean generation capacity, and peak load flexibility to remain viable in a world where dirty, centralized, baseload power no longer makes sense for carbon-conscious cities, businesses, and consumers demanding sustainable electricity.

Win/win/win: solar, wind and hydrogen working together.

 Zero-Cost Electricity

In many areas of the world where solar and wind power are abundant, the cost of electricity for users can be zero. In fact, zero is not the lower limit; there are instances where the cost of electricity is negative. A few weeks ago, MSN Money wrote an interesting article on this topic where they laid out in layman terms how utilities are “struggling to earn a return on traditional power plants.” This is because renewables, like wind and solar, and in some cases traditional hydrogen, have reached critical mass, and the power they produce has gained priority to feed the grid as cities and countries decarbonize their electrical power consumption.

While it used to be true that renewables once had the challenge of being viable when the wind wasn’t blowing or the sun wasn’t shining (known as intermittency), today the electricity that renewables generate often exceeds demand, especially on sunny, breezy days. The MSN Money article explained how all over the world, from California to Germany to Australia, “zero-cost” electricity is becoming more frequent. What this means is that in these places, consumers are getting rebates on their electricity bill for using excess electricity in the middle of the day, because there is nowhere to store it. Although this is a practical way to handle excess electricity, the over-generation of renewables only explains one part of the challenge.

Electricity generation, transmission lines, and distribution grids were designed and deployed based upon a set of technical standards and geographic realities in an effort to meet the needs of population, industry, and government. The underlying design principle is that there is an amount of electrical power that is in constant demand, known as baseload. When demand peaks during certain times of the day, such as in the morning when people wake-up and prepare to go to work or the evening when they return home and start operating appliances or plugging in their electric cars, utilities activate “peakers” or generators that sit idle most of the time so they can meet dynamic demand during these peak cycles. Managing these ever-changing loads is required to balance the utility’s system, and peak cycles have always been difficult for utilities.

Going Beyond Zero

Zero-cost electricity can temporarily solve the overcapacity of traditional renewables, which is good for now. The larger challenge for utilities is that baseload generating plants, unlike the peaker plants mentioned above, are not designed to be throttled (adjusted up and down in their production). A baseload plant typically has a sweet spot in which it operates to achieve maximum efficiency. To attain that level of optimal performance, there is usually a startup cycle and operational sequence that require active management of personnel and safety staff.

It is generally not a good idea to stop or lay idle baseload plants because you want to keep them operating at their peak performance producing electricity. Therein lies the conundrum. During times of intermittency, baseload plants provide the balancing or smoothing of electricity needed to meet consumers requirements. During times when renewables can provide maximum power generation, baseload plants need to redirect their power to storage for use during peak energy periods or those times of intermittency. Clearly, the solution lies somewhere outside the traditional electricity “box.”

The Role of Batteries in the Renewable Mix

Enter batteries, which already power our lives much more than we may think. We all have experienced mobile phones that die from a lack of power in their batteries, but most of us don’t think about the batteries in the cell towers that keep the system operational at all times. Battery technology is making great strides in their ability to charge faster and increase their storage capacity. Yet for all the value they bring, batteries are not a sufficient solution for solving the utility-scale electrical storage challenge. Undoubtedly this will change, albeit slowly.

According to Michael Liebreich, the founder of Bloomberg New Energy Finance who has been bullish on batteries for years, by 2030 the total volume of grid-connected batteries will be sufficient to meet the world’s power needs for just 7.5 minutes!

The Growing Role of Hydrogen

Liebreich understands the value and role that hydrogen gas plays as an ideal storage medium for large-scale energy, calling hydrogen “one of the most promising ways of dealing with longer-term storage, beyond the minutes, hours or days that could be met by batteries, or the limited locations in which pumped storage could work.” I couldn’t agree more.

As the cost of electricity continues to fall due to the mass production and deployment of renewables, perhaps the best way of handling excess electricity from renewables and clean baseload plants is to generate and store hydrogen, which can then be converted back to electricity when it is needed.

For decades, the cost of electricity has held hydrogen back. With the price of electricity falling, hydrogen is becoming increasingly competitive. When made from renewable electricity, hydrogen is the only sustainable energy source available 24/7 other than hydroelectric, which carries its own environmental impacts. For this reason, hydrogen is becoming a global energy standard across all sectors (especially as new technologies such as Hydrogen 2.0 make their way to the market) and is projected to contribute nearly 20% of the total energy mix by 2050.

The reality is that the energy game has been disrupted by the broad-scale adoption of renewables and demand from consumers everywhere for sustainable energy. Just like the advent of PCs made the mainframe obsolete, there is no way back when it comes to renewables. What we have to apply are new techniques that play well in the new energy reality we face. The more advances we make with renewables, batteries, and other advanced technologies, the more sense hydrogen makes in contributing balance and flexibility to the overall system.


Image under license from Shutterstock.
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