While Equinor and SSE are planning to build a brand new hydrogen power plant, Siemens Energy is basing its business model around the conversion of existing fossil-gas power plants, as well as the construction of new “hydrogen-ready” combined-cycle gas-fired facilities.
Yet even though converting a gas power plant to run on H2 would be “fairly inexpensive”, using clean hydrogen to generate electricity today “is not something that makes sense economically”, says Zindel.
Natural gas is simply a lot cheaper than green, blue and even unabated grey hydrogen, he explains.
The cost of green H2 is estimated to be in the range of $2.50-6/kg today, with blue hydrogen at somewhere between $1.50-4/kg.
If clean H2 was available at €2 ($2.35) per kg, to make it cost-competitive with fossil gas “would require a CO2 price of something between €200-250 per tonne, so it’s still far away”, says Zindel. The EU carbon price was about €53 per tonne at time of publication.
Zindel believes that clean hydrogen will not be used for large-scale electricity production until 2035 — partly because it would be more cost-effective to use that H2 in other sectors such as transport and heavy industry.
“We expect hydrogen electrification will occur in 2035 or the 2040s on a large scale — when we really have to go into a deep decarbonisation of the power sector,” he says.
Equinor has stated that its Keadby Hydrogen facility would only go ahead “with appropriate policy mechanisms in place”. In other words, if it is heavily subsidised.
“We have a market failure,” Andersen tells Recharge. “So we’re working on a business model that is probably more tailored towards some kind of producer Contract for Difference. So the offtakers would pay a price for the natural gas, and those producing blue hydrogen would get some kind of subsidy to cover [the extra cost].”