Low-Carbon Hydrogen Production Using Small Modular Reactors Is energy from small modular nuclear reactors a competitive way of producing hydrogen in the future hydrogen economy? Master’s thesis in Product development and Production engineering BALDER HAGERT LUDVIG BLOMGREN DEPARTMENT OF INDUSTRIAL AND MATERIALS SCIENCE CHALMERS UNIVERSITY OF TECHNOLOGY Gothenburg, Sweden 2021 www.chalmers.se www.chalmers.se Master’s thesis 2021 Low-Carbon Hydrogen Production Using Small Modular Reactors Is energy from small modular nuclear reactors a competitive way of producing hydrogen in the future hydrogen economy? BALDER HAGERT LUDVIG BLOMGREN Department of Industrial and Materials Science IMSX30 Chalmers University of Technology Gothenburg, Sweden 2021 Low-Carbon Hydrogen Production Using Small Modular Reactors: Is energy from small modular nuclear reactors a competitive way of producing hydrogen in the future hydrogen economy? © BALDER HAGERT, 2021. © LUDVIG BLOMGREN, 2021. Supervisor: Simon Wakter & Lars Dahlström, Energy Division, AFRY Supervisor and Examiner: Professor Johan Malmqvist, Department of Industrial and Materials Science, Chalmers University of Technology Master’s Thesis 2021 Department of Industrial and Materials Science IMSX30 Chalmers University of Technology SE-412 96 Gothenburg, Sweden Telephone +46 31 772 1000 Typeset in LATEX, template by Magnus Gustaver Printed by Chalmers Digitaltryck Gothenburg, Sweden 2021 iv Low-Carbon Hydrogen Production Using Small Modular Reactors: Is energy from small modular nuclear reactors a competitive way of producing hydrogen in the future hydrogen economy? BALDER HAGERT LUDVIG BLOMGREN Department of Industrial and Materials Science Chalmers University of Technology Abstract Hydrogen has been proposed as a way to achieve decarbonisation within many sec- tors from transportation to industry. In order to achieve this reduction in emissions the hydrogen itself must be produced with low carbon emissions. The study has investigated what applications hydrogen will most likely have a prominent role in, and what requirements different demands put on the supply. The development of small modular nuclear reactors (SMR) has been investigated as well as their poten- tial as an energy source in low-carbon hydrogen production. The research approach of the study consisted of a literature study, followed by an interview study. The interview study consisted of interviews with 12 experts in the areas of hydrogen ap- plications and nuclear power. The study also included calculations deciding not only production cost but also the final delivered cost of hydrogen. The study found that there are some applications where the demand for hydrogen is certain, including in the production of ammonia and methanol. Other possible hydrogen uses include steel production and transportation are also found as probable areas with grow- ing demands for hydrogen in the future. The study found that SMRs have many synergies with hydrogen production, including process heat, continuous production, modularity and SMRs being less location-specific compared to other alternatives. Finally, the results of the study include calculations of the delivered cost of hydro- gen, proving that, under certain assumptions and when accounting for cost of the whole supply chain, small modular reactors provide a competitive source of energy. To summarise, the study has found that there is a need for low-carbon hydrogen in the future and that it is important to consider the delivered cost of hydrogen, which includes production, transportation, and storage cost. It was found that it is important to be technology-neutral when considering energy sources for producing hydrogen and that nuclear and SMRs should be included as an option. Keywords: Hydrogen, Electrolysis, Levelised Cost of Hydrogen, LCOH, Small Mod- ular Reactors, SMR v Acknowledgements Without the great deal of support and assistance we have gotten during the course of this thesis, non of this would have been possible. First of all, we would like to sincerely thank our supervisor and examiner at Chalmers University of Technology, Professor Johan Malmqvist. Johan’s expertise and experience in structuring and providing feedback, has been invaluable in guiding us through the academic work performed during this spring. We would also like to extend our deepest gratitude to everyone at AFRY for pro- viding us with this opportunity. Specifically, to Simon Wakter and Lars Dahlström whom have shared a never-ending source of experience and valuable as well as up to date insights. Further more, we would like to share our appreciation to Daniel Johansson and Richard Martin. Firstly, for taking a chance in mentoring us at an early stage of our individual masters programmes. This is an experience we feel have not only been valuable now, but will be for a long time to come. Secondly, for aiding us in finding an interesting subject to explore, and lastly, for supporting us during this process. Further, we are thankful for everyone participating in interviews and sharing their expertise. Without you, we would have never reached our goal. Finally, we extend our sincerest gratitude to friends and family for always supporting us and for stimulating discussions as well as happy distractions. Balder Hagert & Ludvig Blomgren, Gothenburg, May 2021 vii Contents Abstract v Acknowledgements vii List of Figures xiii List of Tables xv List of Abbreviations xvii 1 Introduction 1 1.1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Problem Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.3 Collaboration with AFRY . . . . . . . . . . . . . . . . . . . . . . . . 3 1.4 Purpose & Research Questions . . . . . . . . . . . . . . . . . . . . . . 3 1.5 Demarcations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.6 Outline of thesis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2 Research Approach 7 2.1 Overall Research Approach . . . . . . . . . . . . . . . . . . . . . . . . 7 2.2 Literature Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.3 Interview Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.4 Synthesis and analysis . . . . . . . . . . . . . . . . . . . . . . . . . . 11 3 Hydrogen Demand 13 3.1 Industrial Applications . . . . . . . . . . . . . . . . . . . . . . . . . . 13 3.1.1 Ammonia Production . . . . . . . . . . . . . . . . . . . . . . . 14 3.1.2 Methanol Production . . . . . . . . . . . . . . . . . . . . . . . 15 3.1.3 Metallurgical Industry . . . . . . . . . . . . . . . . . . . . . . 15 3.2 Transportation Applications . . . . . . . . . . . . . . . . . . . . . . . 17 3.2.1 Fuel Cell Electric Vehicles (FCEV) . . . . . . . . . . . . . . . 17 3.2.2 Internal Combustion Engines (ICE) . . . . . . . . . . . . . . . 19 3.2.3 Buses, Trucks, and Trains . . . . . . . . . . . . . . . . . . . . 20 3.2.4 Aviation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 3.2.5 Maritime Applications . . . . . . . . . . . . . . . . . . . . . . 22 3.3 Hydrogen for Power Generation and Grid Balancing . . . . . . . . . . 23 3.4 Summary of Hydrogen Demand . . . . . . . . . . . . . . . . . . . . . 23 ix Contents 4 Hydrogen Supply 25 4.1 Hydrogen Production - Fossil Fuel . . . . . . . . . . . . . . . . . . . . 25 4.1.1 Steam Reforming . . . . . . . . . . . . . . . . . . . . . . . . . 26 4.1.2 Gasification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 4.2 Hydrogen Production - Electrolysis . . . . . . . . . . . . . . . . . . . 27 4.2.1 Basic Concept . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 4.2.2 Alkaline Electrolyser (AEC) . . . . . . . . . . . . . . . . . . . 29 4.2.3 Proton Exchange Membrane (PEM) . . . . . . . . . . . . . . . 31 4.2.4 Solid Oxide electrolyser (SOEC) . . . . . . . . . . . . . . . . . 33 4.3 Hydrogen Storage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 4.3.1 Compressed Hydrogen Vessels . . . . . . . . . . . . . . . . . . 35 4.3.2 Underground Storage . . . . . . . . . . . . . . . . . . . . . . . 35 4.3.3 Liquefied Hydrogen Vessels . . . . . . . . . . . . . . . . . . . . 38 4.4 Hydrogen Transport . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 4.4.1 Road . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 4.4.2 Pipeline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 4.4.3 Shipping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 4.5 Cost of Hydrogen Production . . . . . . . . . . . . . . . . . . . . . . 40 4.6 Summary of Hydrogen Supply . . . . . . . . . . . . . . . . . . . . . . 42 5 Small Modular Reactors 45 5.1 Basic Concept . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 5.2 Nuclear Reactor Technologies . . . . . . . . . . . . . . . . . . . . . . 46 5.2.1 Light-Water Reactor (LWR) . . . . . . . . . . . . . . . . . . . 46 5.2.2 Molten Salt Reactor (MSR) . . . . . . . . . . . . . . . . . . . 47 5.2.3 High-temperature Gas Reactor (HTGR) . . . . . . . . . . . . 47 5.3 Economics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 5.4 Reactor Benchmark . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 5.4.1 NPM, NuScale, US . . . . . . . . . . . . . . . . . . . . . . . . 50 5.4.2 BWRX-300, GE-Hitachi, US & Japan . . . . . . . . . . . . . . 51 5.4.3 Xe-100, X-energy, US . . . . . . . . . . . . . . . . . . . . . . . 51 5.4.4 Integral MSR, Terrestrial Energy, Canada . . . . . . . . . . . 52 5.4.5 RITM-200, Rosatom, Russia . . . . . . . . . . . . . . . . . . . 52 5.4.6 HTR-PM, China . . . . . . . . . . . . . . . . . . . . . . . . . 52 5.5 Barriers to the Concept of SMR . . . . . . . . . . . . . . . . . . . . . 52 5.5.1 Licensing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 5.5.2 Deployment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 5.5.3 Promotion of the Technology . . . . . . . . . . . . . . . . . . 54 5.6 Timeline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 5.7 Summary of Small Modular Reactors . . . . . . . . . . . . . . . . . . 55 6 Hydrogen and Small Modular Reactors 57 6.1 Market Opportunity . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 6.2 Nuclear Electrolysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 6.3 Analysis of the Synergies Between Hydrogen and Small Modular Re- actors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 6.3.1 Process Heat . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 x Contents 6.3.2 Availability and Continuous Production . . . . . . . . . . . . . 61 6.3.3 Location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 6.3.4 Modularity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 6.4 Alternative Production Methods . . . . . . . . . . . . . . . . . . . . . 62 6.4.1 Reforming with CCS . . . . . . . . . . . . . . . . . . . . . . . 62 6.4.2 Renewable Electrolysis . . . . . . . . . . . . . . . . . . . . . . 63 6.5 Delivered Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 6.6 Summary of Hydrogen and Small Modular Reactors . . . . . . . . . . 67 7 Cost Comparison of Hydrogen from Different Supply Architectures 69 7.1 Analysing Levelised Cost of Hydrogen . . . . . . . . . . . . . . . . . . 69 7.2 Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 7.2.1 Energy Source . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 7.2.2 Production Method . . . . . . . . . . . . . . . . . . . . . . . . 71 7.2.3 Transport & Storage . . . . . . . . . . . . . . . . . . . . . . . 72 7.3 Hydrogen Production Cost . . . . . . . . . . . . . . . . . . . . . . . . 73 7.4 Delivered Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 7.5 Conclusion of Cost Comparison . . . . . . . . . . . . . . . . . . . . . 75 8 Discussion 77 8.1 Hydrogen - The Fuel of the Future? . . . . . . . . . . . . . . . . . . . 77 8.1.1 Industrial Applications . . . . . . . . . . . . . . . . . . . . . . 78 8.1.2 Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . 79 8.1.3 Conclusion of Discussion of Hydrogen . . . . . . . . . . . . . . 80 8.2 Small Modular Reactors . . . . . . . . . . . . . . . . . . . . . . . . . 80 8.3 Hydrogen and Small Modular Reactors . . . . . . . . . . . . . . . . . 82 8.4 Delivered Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 8.5 First Step . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 8.6 Final Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 8.7 Contributions of Work . . . . . . . . . . . . . . . . . . . . . . . . . . 87 8.8 Research Approach and Validity of Result . . . . . . . . . . . . . . . 88 8.9 Sustainability and Ethical Considerations . . . . . . . . . . . . . . . . 89 9 Conclusions and Future Work 91 9.1 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 9.2 Future Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 References 93 A Electrolyser Benchmark I B SMR Benchmark III xi Contents xii List of Figures 2.1 The research approach illustrated in this study. . . . . . . . . . . . . 11 3.1 The chapter describes the demand part of the overall structure. . . . 13 4.1 The chapter explains the supply part of the overall structure. . . . . . 25 4.2 Graph illustrates the relation between electrical and thermal energy, based on equation 4.2. . . . . . . . . . . . . . . . . . . . . . . . . . . 29 4.3 Schematic of the AEC functionality. . . . . . . . . . . . . . . . . . . . 30 4.4 Schematic of the PEM functionality . . . . . . . . . . . . . . . . . . . 31 4.5 Schematic of the SOEC functionality . . . . . . . . . . . . . . . . . . 33 4.6 A cost comparison of hydrogen distribution methods. TPD stands for tonnes per day. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 5.1 The chapter is in regards to the energy source part of the overall structure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 5.2 Illustrating how "economy of multiples" can compensate for loss of "economy of scale" factor. . . . . . . . . . . . . . . . . . . . . . . . . 48 5.3 Illustrating a projected timeline of SMR deployment and introduction to the hydrogen market. . . . . . . . . . . . . . . . . . . . . . . . . . 54 6.1 The figure on left illustrates low-temperature electrolysis while the figure on the right illustrates high-temperature electrolysis. Both with a nuclear energy source. . . . . . . . . . . . . . . . . . . . . . . 59 6.2 A map of Europe illustrating demand clusters and potential storage sites in salt caverns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 6.3 A map of the US illustrating demand clusters and the areas with the largest potential for wind power as well as existing LNP. . . . . . . . 67 7.1 The chapter describes the system part of the overall structure. . . . . 69 7.2 The production cost of hydrogen for different supply sources. . . . . . 73 7.3 The delivered cost of hydrogen for different supply architectures. . . . 74 8.1 Illustrating the structure of the chapter, including a discussion on the topic and discussion on the study in general. . . . . . . . . . . . . . . 77 xiii List of Figures xiv List of Tables 2.1 A selection of keywords used in the initial literature search . . . . . . 8 2.2 Interview subjects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.1 Summary of hydrogen demand . . . . . . . . . . . . . . . . . . . . . . 24 4.1 Levelised cost of hydrogen based on steam methane reforming pro- duction. All numbers are shown $/kgH2 . . . . . . . . . . . . . . . . 26 4.2 Underground storage comparison . . . . . . . . . . . . . . . . . . . . 36 4.3 Summary of hydrogen production methods. . . . . . . . . . . . . . . 43 5.1 Benchmark over some of the most developed SMRs . . . . . . . . . . 50 6.1 Future demand in amount of hydrogen, electricity and finally number of SMRs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 6.2 SWOT analysis for Reforming with CCS architecture . . . . . . . . . 63 6.3 SWOT analysis for Renewable Electrolysis architecture . . . . . . . . 64 7.1 The cost of heat and electricity and capacity factor from different energy sources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 7.2 The costs associated to different electrolysers. . . . . . . . . . . . . . 71 7.3 The cost of transporting and storing hydrogen and corbon dioxide. . . 73 A.1 Some commercial electrolysers currently on the market. . . . . . . . . II B.1 Benchmark over other SMR designs far ahead in development. . . . III xv List of Tables xvi List of Abbreviations GHG - Greenhouse Gas RES - Renewable Energy System SMR - Small Modular Reactor IEA - International Energy Agency CCS - Carbon Capture and Storage FCEV - Fuel Cell Electric Vehicles ICE - Internal Combustion Engine BEV - Battery-powered Electric Vehicle TCO - Total Cost of Ownership LCOH - Levelised Cost of Hydrogen LCOE - Levelised Cost of Electricity AEC - Alkaline Electrolyser PEM - Proton Exchange Membrane SOEC - Solid Oxide Electrolyser OPEX - Operational Expenditure CAPEX - Capital Expenditure CRF - Capital Recovery Factor LWR - Light-Water Reactor PWR - Pressurised Water Reactor BWR - Boiling Water Reactor MSR - Molten Salt Reactor HTGR - High-temperature Gas Reactor LNP - Large Nuclear Power Plant FOAK - First-of-a-kind NOAK - Nth-of-a-kind WNA - World Nuclear Association NRC - US Nuclear Regulatory Commission CNSC - Canadian Nuclear Safety Commission DOE - U.S. Department of Energy xvii List of Tables xviii 1 Introduction In this chapter, first, a background to the work will be given together with a problem statement. Next, the collaboration with the company with which the study was conducted together with, AFRY, is outlined. The purpose and goals of the work are explained as well as the research questions. Demarcations set for the work are presented and finally, an outline of the thesis is given. 1.1 Background Climate change is one of mankind’s biggest challenges and poses a great threat to the planet and its inhabitants. In order to overcome the challenge, both the emissions of greenhouse gases (GHG) and the concentration of GHGs in the atmosphere must drop sharply. However, despite this, both emissions and the concentration of GHGs are currently increasing. This results in rising global average temperatures which in turn creates more desert landscapes and causes rising sea levels. If something is not done, this will eventually create great disharmony in the way we live and operate as of today. To reverse the effects, the situation requires a change towards more sustainable means of consumption, the way we produce energy, and what types of energy sources we use in transportation, to name a few. The European Union’s latest effort in its strive towards becoming the first climate- neutral continent is "The European Green Deal". The initiative aims to reach an efficient use of resources and a circular economy by, for example, decarbonising the energy sector [1]. More than 75% of GHG emissions are related to the production and use of energy in the EU. In total, the EU plans to invest at least 1 trillion euros to reach its targets [1]. One key part of the EU:s strategy aims at the increased use of hydrogen in the energy sector. The use of pure hydrogen, for combustion or electrification, does not emit GHG. This makes it a necessary alternative to help decarbonise hard-to-abate sectors such as parts of the transport sector and certain carbon-intensive industrial processes [2]. However, hydrogen does not occur natu- rally in its pure form and requires considerable amounts of energy to produce by separating it from other elements. Today, this is mainly done by using fossil fuels [3]. For hydrogen to be an alternative, and be considered low-carbon hydrogen, the production methods and the supplied energy need to be low-carbon as well. Be- cause of inefficiencies in the production, the amount of energy required to produce low-carbon hydrogen is significantly higher than the amount of low-carbon that is produced, in terms of energy. This means that it is not only the use of hydrogen that needs to increase but also the low-carbon energy it takes to produce it sustainably. 1 1. Introduction As an example, the German hydrogen strategy estimates that around 90 to 110 TWh of hydrogen will be needed in 2030. At the same time, it is estimated that only around 14 TWh can be supplied domestically with current initiatives [4]. This would in turn require 20 TWh of low-carbon energy. Assuming it would take the same energy consumption to produce the remaining 76 to 90 TWh of hydrogen, the total low-carbon energy demand for hydrogen production would roughly be 140 TWh. The question that arises is where all of this energy is supposed to come from. The consensus within the EU is to solely rely on renewable energy sources (RES) long- term. In Sweden, a project called Hybrit is currently investigating the possibility of building the first-ever fossil-free steel production site using hydrogen [5]. If success- ful, the factory would require 15 TWh of renewable energy. This is about 75% of the energy produced from solar and wind in Sweden today [6]. So, even though the expansion of RES is necessary in several ways, it is questionable if it can meet the increased energy demand in the required time frame. Furthermore, it introduces risk regarding what will happen with decarbonisation using hydrogen, if the deployment of renewables cannot keep up. Another energy source, classified as low-carbon, that is not mentioned as frequently for this application is nuclear power. The energy produced from a nuclear reactor releases very small amounts of GHG emissions and could, from a theoretical stand- point, stand as an addition to RES. Recent advances within the nuclear industry have also been made to combat some of the downsides associated with the technol- ogy. One of these is the concept of the small modular reactor (SMR). A small reactor is defined as having a capacity of 300 MW electric (MWe), or less [7]. This means that instead of building one large reactor of 1000 MWe or above, you could build several smaller ones. SMRs are also meant to have a simpler and more standardised design. This opens the possibility for them to be largely factory-built and assembled on-site [8]. Additionally, building several, allowing a steeper learning curve, leads to a decrease in construction delays and capital cost per reactor. These traits are supposed to increase the flexibility and ease mainly some of the financial concerns that surround nuclear today. The reactors also aim to increase the safety of produc- ing nuclear energy by implementing passive safety features, as well as reducing the risk of proliferation of nuclear weapons [9]. The first serial-produced SMRs for civil use are already operational on icebreakers in Russia [10]. In addition, the interest in SMR has grown over the last few years and many other designs are on their way to being realised in the US, UK, Canada, and China [11]. 1.2 Problem Statement The EU is putting a lot of effort and faith in the coming age of hydrogen. Following this, the production of hydrogen also needs to shift from using traditional fossil fuels as the primary source of energy, to a more sustainable source. The current consensus is seemingly centred on the expansion of RES for this application. But as mentioned, there is a gap between the large amounts needed and the strategy for supplying this 2 1. Introduction demand. On the other hand, is the recent progress of SMR development in the nuclear industry that aims to mitigate some of the major downsides and concerns with the technology. Is it feasible, as well as competitive, to include nuclear into the mix of low-carbon energy sources that can be used to produce sustainable hydrogen? Especially in dire times where more solutions are needed rather than fewer. 1.3 Collaboration with AFRY The study was conducted together with and at the request of, AFRY - Energy & Power Division. The company has over 60 years of experience working with nuclear energy and the surrounding areas. The company has experience executing nuclear energy projects in over 35 countries together with energy companies, contractors, constructors, and authorities. They have expertise within all areas of the life cycle of conventional nuclear plants and within construction, upgrades, safety, and main- tenance. Relating to this, small modular reactors is one of the latest areas in the field of nuclear power where AFRY has a dedicated effort on SMR deployment and find- ing new applications for nuclear beyond electricity. AFRY is actively working with clients, cooperating with other companies and innovations and other developments within SMR and nuclear beyond electricity are followed closely. The other main theme, hydrogen, is not a new industry, and an area in which AFRY has long experience working within. Hydrogen has been used for a long time but primarily produced with and from fossil fuels. A growing business within this field is to instead use electrolysis, supplied with low-carbon energy. The primary interest for AFRY was to understand different applications for hydrogen in the future, potential methods for more sustainable production, and finally the possible connection to SMRs. Building further knowledge in these areas will be of interest to the company, to better understand where competence might be lacking and have to be developed. In addition, to better meet the future needs of their clients. 1.4 Purpose & Research Questions In collaboration with Chalmers University of Technology and AFRY - Energy & Power Division, the study aimed to learn what use areas there are for hydrogen in a more sustainable future. Further more, what is required in terms of its produc- tion, and what methods exist to make it a competitive product compared with the alternatives? Also, since much low-carbon hydrogen is needed in the near future; it investigated under which conditions nuclear, and more specifically small modular reactors, can be a competitive way of generating the energy needed in its production. 3 1. Introduction The synergy between hydrogen production and nuclear energy generation was in the end analysed and discussed. The work also addressed what foundations there are to realise this in a foreseeable future. The purpose of the thesis has been summarised in the following four research questions and will be answered throughout the report: 1. What does the hydrogen value chain look like? 2. What is an SMR and how does it differ from conventional nuclear power? 3. Under what conditions can an SMR be a viable alternative for hydrogen pro- duction? 4. What are the major barriers for hydrogen produced by SMRs to become a real- ity? 1.5 Demarcations The demarcations of this study are presented below. They are categorised based on the three main topics examined in this report. Hydrogen Demand • The study is not meant as an exhaustive compilation of all future and poten- tial applications of hydrogen. Some of the more prominent ones not analysed in this study include hydrogen for producing cement and hydrogen for heating residential and commercial buildings. Hydrogen Supply • The study only briefly examined the two most prominent ways of producing carbon-rich hydrogen. These are steam methane reforming and coal gasi- fication. Only steam methane reforming was further analysed throughout the study. Other carbon-rich methods, such as producing hydrogen as a by- product from various industries, fell outside the scope of this study. • In terms of low-carbon hydrogen production, the main focus was on electroly- sis. This means that new and/or innovative production methods such as pho- toelectrolysis, the usage of biological processes, or other, fell outside the scope. • The study focused on the usage of the most prominent electrolysis techniques. These are alkaline electrolyser, proton exchange membrane and solid oxide electrolyser. This means that new and innovative techniques, such as the an- ion exchange membrane, fell outside the scope. • The study analysed the current and future development of the mentioned electrolysis techniques. This means that the study did not investigate the pos- sibility of technically optimising these techniques. 4 1. Introduction • In terms of hydrogen storage, the study focused on physical storage methods. This means that chemical storage, such as storing hydrogen in ammonia or various metal hybrids, fell outside the scope. It also means that the transport of chemically stored hydrogen fell outside the scope. Nuclear Energy • In terms of nuclear energy, the main topic of the study was SMRs. This means that hydrogen production utilising energy from large and conventional nuclear power plants fell outside the scope of the study. • The study analysed the current and future development of different SMR de- signs. This means that the study did not investigate optimising these designs or the nuclear technology used. • As there are several other studies on the subject, the study did not focus on barriers relating to the handling of radioactive waste. This means that the supply chain surrounding the final storage of radioactive waste fell outside the scope of this study. • The study focused on utilising SMRs for the sole purpose of hydrogen pro- duction. This means that other areas of application for SMRs fell outside the scope of this study. 1.6 Outline of thesis This section aims to describe the content of each chapter in this report. The general outline of the study will be based on a 3S approach introduced by Canan Acar and Ibrahim Dincer [12]. The 3S stands for service, system, and source. In this report, it will instead be renamed to demand, supply and energy source. The demand is in this case defined as different hydrogen applications. The supply is defined as the hydrogen supply chain, including production, storage, and transport of hydrogen. Lastly, the energy source is defined as the source of energy needed to produce hy- drogen. Because the scope of the study is hydrogen production combined with the use of an SMR, the focus of the energy source will be on nuclear energy and SMRs. How the approach has been utilised can be read further in chapter 2. Chapter 2 describes the research method. The general research approach has been to source literature and to interview experts on the subjects of hydrogen and SMR. The 3S approach has been used to find synergies of the utilisation of SMRs for hy- drogen production. Chapter 3 describes the applications creating a hydrogen demand. This includes ex- isting hydrogen applications and potential future demands. The applications have mainly been divided into industrial applications and transportation applications. 5 1. Introduction Chapter 4 describes the key components included in the hydrogen supply chain. This includes the main production methods of hydrogen, both those used today but also the main low-carbon method proposed for the future. It also includes other important factors, such as storage and transport of hydrogen, which are important to consider when evaluating the competitiveness of the complete system, or the com- plete supply architecture. Chapter 5 describes source of energy needed for hydrogen production. Because of the scope of the study, the source described in this chapter is nuclear energy and more specifically SMRs. The general concept of SMR is explained as well as the economics, current development and key barriers that need to be overcome. Other energy sources have been analysed to some extent, to compare the complete SMR and hydrogen production system with alternative systems. These alternative sources will however be described in chapter 6. Chapter 6 identifies synergies of SMRs that can have a positive effect on the hy- drogen demand and/or the supply. This means the identification of some major factors that can make an SMR competitive in terms of hydrogen production. The main alternatives to produce low-carbon hydrogen are also analysed using SWOT analysis. This has been done to compare what an SMR does well in comparison with other sources and their respective hydrogen supply architectures. Chapter 7 evaluates the competitiveness of the SMR and hydrogen alternative in comparison to other low-carbon production methods under a set of assumptions. The assumptions do not mirror every individual case but rather reflect under what general conditions an SMR can become a competitive alternative. Chapter 8 is a discussion on hydrogen, SMR, and the combination of the two. It discusses the general development of hydrogen demand for industrial and transporta- tion applications, as well as identifying some key needs and requirements for them. Next, the general development of SMRs and the main existing barriers needed to be solved for the concept to become fully realised is discussed. Lastly, the combination of the two topics is discussed. It outlines in which way the supply, as well as how this can bring positive effects towards the hydrogen demand. It also discusses in which way the hydrogen market can help the concept of SMRs overcoming its individual barriers. Finally, a discussion on the overall results and the research approach is presented, as well as a general discussion on ethical considerations regarding the study and its topics. Chapter 9 concludes the study as well as highlights areas that could be of interest for future studies. In the appendix, an electrolyser benchmark and an SMR benchmark can be viewed. 6 2 Research Approach This chapter outlines the research approach used to answer the research questions. First, an overview of the research approach is given, followed by more detailed descriptions of the stages and how they were used to answer the research questions. 2.1 Overall Research Approach The overall research design for this thesis is visualized in an overview below. It is divided into method stages as well as what the methods are intended to be used for. The research method is inspired by the book The Good Research Guide (2014) by Martyn Denscombe [13], which served as practical guidance in the execution of the different stages. A literature study and an interview study were chosen to be the primary tools for gathering information. The literature study answered the two first overall questions posed in the study, while the interview study served to confirm these findings, as well as to provide more nuanced information in form of future predictions and opinions. In the synthesis the third and fourth question was answered. 1. Literature study (a) Find hydrogen applications with needs and requirements for competitive- ness. (b) Find and research main components in the hydrogen supply chain. Cur- rent status and future trends. (c) Define and clarify the concept of SMRs, functionality, current develop- ment, barriers to deployment, and how they differ from conventional nu- clear power. 2. Interview study (a) Confirm and clarify findings from the literature study. (b) Gather additional information in the form of challenges, opportunities, projections, and opinions. 3. Data synthesis and analysis (a) Identify synergies between hydrogen supply and SMRs. (b) Consider under what conditions hydrogen production with the help of an SMR is competitive. (c) Compare competitiveness with the most recognised low-carbon hydrogen supply architectures. (d) Use the result and findings from interviews to discuss the future of SMR and hydrogen production. 7 2. Research Approach 2.2 Literature Study The literature study was focused on three main areas; hydrogen demand, hydrogen supply and SMRs. Regarding the topic of hydrogen demand, the intention was to find current and future applications for the energy-carrier and how it can benefit different sectors such as industry and transportation. Similarly, information on cur- rent supply, including production methods and distribution networks was pursued, both current and future supply scenarios. Finally, information on SMRs and the maturity of the technology was a part of the literature study. The focus was on the characteristics and commercialization of SMRs as well as the technical features relating to the production of hydrogen. To perform the literature search in a systematic way a methodology adopted from Denscombe was followed [13]. First, the scope of the study was decided. Then, the search itself was conducted. To gain the necessary information several sources of documentary data were used, including scientific journals, articles, and books. The databases which was used were Chalmers Library, Scopus, and Google Scholar. The search were divided in the three main categories (demand, supply, and SMR). Examples of keywords that were used in the search can be seen in table 2.1. Table 2.1: A selection of keywords used in the initial literature search Hydrogen Demand Hydrogen Supply Small Modular Reactor Hydrogen Application Hydrogen Use Hybrit Steel Processing Ammonia Aviation Hydrogen Hydrogen Fuel Fuel Cell Cars Hydrogen Production Electrolysis Alkaline PEM SOEC Hydrogen Storage Hydrogen Transport LCOH Small Modular Reactor SMR Concept SMR Designs SMR Economics Nuclear LCOE Nuclear Hydrogen Production To find further information, sources that are within the scope and referenced in texts found was also pursued. An example of this is the "International Journal of hydrogen energy", where several hydrogen articles were found. On the topic of SMR, AFRY also aided by providing several sources containing relevant informa- tion. Other sources of information were also required, including governmental data, official statistics and company websites. The sources found were continuously cate- gorized and saved. Secondly, the quality of the information was evaluated and sources were screened for relevance [13]. Certain criteria were used to limit the possible sources and to ensure their quality and relevance. A checklist adopted from Denscombe was used to ensure the credibility of the sourced documents [13]. The basic screening questions were for example; has the credibility of the source/author/sponsorship been considered, have website sources been evaluated in terms of their accuracy and how recently 8 2. Research Approach they have been updated, and is possible bias taken into account. An example is information regarding current and future status. Here a search filter has been used to exclude sources not published within the period of 2015 to 2021. Primarily, the literature study answered the first and second research questions. The goal was to provide an output that details hydrogen applications, key components in the hydrogen supply chain and outlines the basic principles of SMRs. The infor- mation found was used as input to the interview study, and was also confirmed by the interview study which will be detailed next. Finally, the information acted as an input to answer the third and fourth research questions in the synthesis of the study. After the interview study, new information and areas discovered meant the literature study had to be revisited. For example, several experts provided different types of literature which had to be further investigated. This was done using the same method as described in this section. 2.3 Interview Study The subject of SMR and hydrogen can be considered a capital-intensive and niche market and is therefore quite narrow. There are several key and complex variables across different areas that all play an important role when investigating the area. It was therefore determined that a interview study was suitable for the thesis. The interview study was used for three purposes with an emphasis on the final two, these are: • First, certain information was confirmed. In the study, this was mainly in terms of requirements for the hydrogen applications and production methods. • Second, the interview study clarified certain information that was touched upon in the literature study. As an example, certain functionality regarding hydrogen production methods or SMRs were explained further. Also, clarifi- cations were given on how hydrogen is used in different processes. In other words, topics that were unclear or hard to explain by only sourcing it from literature. • Third, the interview study provided additional information that is hard to come by when only sourcing literature. This was meant to enable developing thoughts around subjects such as challenges, opportunities, projections, and opinions. To achieve these points, the main method was to perform semi-structured inter- views. This means that certain questions were asked to confirm already known information, and to some extent clarify or expand on it. The main purpose of per- forming interviews in this study however, was to better grasp the complexity of the topics, and the potential connection between them. For this, the interview had to be unstructured to allow the interviewee to speak their mind [13]. 9 2. Research Approach The information gathered in the literature study served as a basis for structuring the interviews to confirm rather clear and brief information statements. In addition, it was used to understand the explanatory thoughts of the interviewee. In addition to helping structure the interviews, the input from the literature study was utilised in sampling interviewees. A non-probability sample of participants was necessary for the study. The objective of the study was to explore two complex topics, meaning individuals who have key information regarding them were neces- sary to achieve that. Theoretical sampling was also utilised, meaning that as more primary and secondary data was revealed, additional participants were identified. This further lead to a form of snowball sampling where participants recommend or recruit further participants that they feel are relevant to the investigated topic. This was performed to some degree, but mainly the participants recommended additional literature to source, instead of actual people. This continued until a data saturation point was reached. Another source for sampling was webinars and online confer- ences. Although the information provided during webinars were rather general, the participants were individuals with deep knowledge and connection to the relevant industries. The interview subjects has been categorised under two main areas, one with a focus on nuclear energy and one on hydrogen, and can be viewed in table 2.2. However, some crossover between the areas exists in the interviews. The interviewees will be referenced by their assigned letter for the continuation of the report. Table 2.2: Interview subjects Area Interviewee Subject Role Sector and Country A Policy, Licensing, Financing Lawyer, Advisor in the area of energy Energy, US B Licensing, Financing, Hydrogen Researcher Nuclear, UK C SMR, Economics, Licensing Researcher, Professor in Reactor Physics Nuclear, Sweden D SMR, Safety, Licensing Safety Consultant, MSc Nuclear Engineering Nuclear, SwedenNuclear Energy E Licensing, Policy, Hydrogen Political Advisor, PhD Reactor Physics Energy, Sweden F Steel industry, Storage, Hydrogen market Head of R&D at energy company Energy, Sweden G Steel industry Senior Process Engineer Metals and mining, Sweden H Process industry, Refining Consultant/Manager Process Industry, Refining, Sweden I Electrolysis, Fuel cells Associate Professor Fuel Cells, Electrolysis, Sweden J Economics, Policy Consultant/Manager Hydrogen, UK K Carbon capture & storage Research Engineer Carbon capture & storage, Sweden/Norway Hydrogen L Biorefining Senior Process Engineer Biorefinery, Sweden 10 2. Research Approach The interviews were recorded and transcribed. The analysis of the data was done through organising it under main topics. Each transcription was analysed and im- portant parts were highlighted. The findings helped connect different hydrogen production methods and their dependencies, and was utilised in the data synthesis part. This, in turn, helped to answer research questions three and four, as well as confirming and clarifying research questions one and two. 2.4 Synthesis and analysis The main objective in the synthesis and analysis was to connect the information from the literature study and the interview study. This was done for each of the topics of this study, hydrogen, and SMR. As mentioned in section 1.6, the approach was inspired and adapted from the 3S approach introduced by Canan Acar and Ibrahim Dincer [12]. In their article "Review and evaluation of hydrogen production options for better environment", the 3S stands for service, system and source. In this report, this has been translated into demand, supply and energy source. The approach is illustrated in figure 2.1. Figure 2.1: The research approach illustrated in this study. The demand was analysed first to find what general needs and requirements the hy- drogen demand put on production. This entails what is demanded by the production of hydrogen for it to become competitive in various applications. As stated, these are general needs and requirements such as amount, price, production rate, and location. These could be uniformly illustrated for all the applications researched in this study. For individual and more comprehensive requirement specifications, every application would have to be analysed in detail. The applications were also analysed to discuss their future potential. The supply contains analyses of the current and future supply chain surrounding hydrogen. The areas touched upon are not a generic supply chain that works in every case but rather supply chain parameters that can build a particular supply architecture. Depending on which source of energy is being proposed, different sup- ply architectures were created to fulfil the requirements expressed from the demand. All the different options in regards to supply have not been covered. Instead, the 11 2. Research Approach study has focused on those most discussed in the literature and during interviews. The hydrogen supply was analysed to find uncertainties and/or synergies where the strengths of an SMR could contribute towards, or make a case for, a competitive hydrogen supply chain. The demand part and supply part together answers research question one. The energy source can contain a number of different energy source alternatives such as renewables, natural gas, and nuclear energy. Since this study focused on finding opportunities for the utilisation of an SMR, this is what has been analysed. It has focused on researching the general concept of an SMR and what strengths nuclear energy has in comparison to other sources. This was done to find opportunities for creating a competitive supply architecture. It was also analysed at what stage the concept is in development and what barriers might exist. This was used to discuss the future of utilising an SMR for the purpose of hydrogen production. The energy source part answers research question two. As mentioned, the choice of energy source affects the final supply architecture. This can in turn play a part in whether the needs expressed by the applications can be fulfilled. Therefore, the final part of the study included how the strengths of utilising an SMR as a source can have beneficial synergies for the demand and supply of hydrogen. Together, the energy source and the supply create a supply architecture. Except for a supply architecture utilising an SMR, two main alternative low-carbon supply architectures were also analysed using SWOT analysis. This was done to compare a potential SMR and hydrogen supply architecture with the two most recognised low-carbon hydrogen supply architectures. They were compared in terms of production cost and the final delivered cost (accounting for the total cost of the supply). Finally, the two topics were discussed with the help of the result of the analysis and information gathered from interviews. The analysis of the complete overview (demand, supply and source) and the discussion regarding the two main topics answers research questions three and four. 12 3 Hydrogen Demand Hydrogen is already used in many applications with the current demand being dom- inated by use in oil refining and production of ammonia. About 33% of hydrogen produced globally is used in refineries, over 27% is used for synthesizing ammonia, methanol production is using 10%, and some 6% is used by other industries [14]. The use of hydrogen in all sectors is predicted to increase. One report, initiated by the EU commission, envisioned that hydrogen could provide up to 24%, or up to 2250 TWh, of the total energy demand in the EU by 2050 [15]. This chapter describe the demand part from the overall structure, as illustrated in figure 3.1. This includes some of the many current, as well as future, applications of hydrogen. By describing these, the potentially massive demand for hydrogen in the future is illustrated, as well as what is required for hydrogen to become competitive with other substitutes. Figure 3.1: The chapter describes the demand part of the overall structure. 3.1 Industrial Applications Global hydrogen use today is dominated by industrial applications, over 90% of hydrogen consumed today is used as an industrial feedstock. It is utilised in oil refining, ammonia (NH3) production, and methanol (CH3OH) production. Except for the applications mentioned above, many future applications could also become large consumers of hydrogen. These applications include using hydrogen in energy- intensive industries where high-grade heat is required, such as in the steel industry. This could prove to be a more efficient route to decarbonization than electrification [16]. Much of the current demand for hydrogen relies on fossil energy sources and will most likely have to reduce their emissions. Experts, including interviewee A, D, E, and J, therefore predict that the largest demand for low-carbon hydrogen will be in industrial applications in the forthcoming years. In these applications, the demand 13 3. Hydrogen Demand is certain and predictable. Interviewee F, G, and J further predict that demand from the steel industry will increase with the many investments and projects currently planned and in progress. In the following sections, hydrogen demand from industrial applications will be outlined. Oil-refining was not a part of the study due to its connection to fossil fuels and the focus being on future applications. 3.1.1 Ammonia Production Today, the second-largest demand for hydrogen arises from the production of am- monia at 31 MtH2/yr [17]. Ammonia is produced by combining H2 and N2 through the Haber-Bosch process at about 250 - 350 bar and at a temperature of 450-550 °C [14]. Out of the total demand for ammonia, over 80% of the ammonia produced is used in fertilisers such as urea and ammonium nitrate [14, 17]. The remainder is used for explosives, synthetic materials, and other speciality materials. Again, most of the hydrogen today is produced using fossil sources of energy, with the produc- tion of ammonia emitting about 2.5 tonnes of CO2 per tonne ammonia [18]. The production of ammonia stands for 1-2% of global energy consumption [19] and to decarbonize this sector could provide large environmental benefits. Ammonia could also be used in many other applications than the ones mentioned above. For ex- ample, it could help to decarbonize sectors like aviation and shipping in the future, something that was stated by interviewees B and J. Combining hydrogen and nitrogen to create ammonia solves some of the challenges hydrogen faces as an energy carrier and fuel in the applications mentioned above. Interviewee J explained how converting it implies a cost in energy, but opens up for easier storage and more applications. Ammonia is in liquid form much closer to at- mospheric pressure, and stores almost twice as much energy compared to hydrogen, easing storage and transportation issues [3]. Ammonia can also be burned in ship engines with little modifications, and be used to power long-distance transport such as heavy trucks and trains [3]. Demand for ammonia in existing applications is predicted to increase by 1.7% per year up to 2030, and then continue to rise. If ammonia is established as an energy carrier and used as a fuel in its own right, the increase in demand could be much larger and the industry could have a role similar to oil refineries today [17]. One initiative to improve the sustainability of the production process comes from the world’s largest ammonia producer, YARA. The company is assessing the feasibility of using hydrogen produced by electrolysis in their operations [20]. The main challenges with producing ammonia, and doing it sustainably, is the ex- treme pressure and temperature required for the Haber-Bosch process. Extensive research in the sustainable synthesis of ammonia has been performed without suc- cessfully finding a low pressure and low-temperature process [19]. 14 3. Hydrogen Demand In 2030 it is estimated that the demand for hydrogen to produce ammonia will be 37 MtH2/yr [17]. The price of hydrogen at which ammonia could be competitive as an end fuel product, is calculated to be between 0.90-1.50 $/kgH2 [3, 18]. 3.1.2 Methanol Production Methanol is another chemical, made from hydrogen, which is used for a diverse range of industrial applications and predicted by experts, including interviewees B, J, and L, to play a large part in future demand. End products include adhesives, plastics, and as a component in fuels [18]. Similar to ammonia, low-carbon methanol is also predicted to play a large part in the decarbonization efforts of hard-to-abate sectors such as transport and industry, and as an energy carrier as it is easy to store and transport [21]. Methanol can be used directly in internal combustion engines with only small modifications or could be blended with diesel or gasoline to reduce emissions [14]. Methanol production is the third-largest consumer of hydrogen, us- ing more than 12 MtH2/yr [17]. The production of methanol mainly relies on the hydrogenation of carbon dioxide (CO2) at a pressure of 50-100 bar and at a tem- perature of 250°C [21]. To produce methanol from hydrogen, a source of CO2 must be added. The CO2 can come from direct air capture, or carbon-capturing from industrial plants [18]. Depending on the way the CO2 feedstock is acquired and on the use of the methanol, carbon sequestration varies [18]. The release of carbon when methanol is used as a fuel for combustion is a challenge. Another challenge lies in using a hydrogenation reaction to produce methanol, which require a lot of energy [21]. One initiative in using hydrogen as feedstock to produce methanol is in Iceland at Carbon Recycling International´s George Olah plant. Hydrogen produced from electrolysis and CO2 captured from a power plant is used to produce 4000 tonnes of methanol per year and recycle 5500 tonnes of CO2 in the process [16]. The demand for methanol from existing applications is predicted to increase by 3.6 % per year up to 2030, up to a demand of 19 MtH2/yr. A larger increase in de- mand is to be expected if methanol is established as an energy carrier or as a fuel [17]. The price at which low-carbon hydrogen for methanol production can compete with fossil sources is 0.80-1.50 $/kgH2 [18]. This estimation is dependant on many factors, region and carbon price being two. 3.1.3 Metallurgical Industry In the metallurgical industry, hydrogen can be used as a reducing agent, for metal alloying, and the production of carbon steels. The method to produce steel from iron ore using hydrogen is called DRI and is the fourth-largest source of hydrogen demand today [17]. Low-carbon hydrogen is expected to replace fossil feedstock in steel manufacturing, where coke is the traditional feedstock [14]. Interviewee G 15 3. Hydrogen Demand explains how most large steel manufacturers in Europe include DRI in their future roadmaps aiming to reach the Paris agreement. Reducing iron ore with low-carbon hydrogen instead offers a huge potential to reduce GHG emissions in the carbon- intensive steel production [14]. Today, steel production is one of the largest emitters of CO2 accounting for about 7-9 % of global emissions [18]. Producing one tonne of steel results in direct emissions of 1.4 tonnes CO2. Interviewees F and G outlined the process of using DRI with hydrogen and what requirements are implied on the supply of hydrogen in the process. About 600-700 cubic meters of hydrogen is needed per metric tonne of DRI. The gas circulates in the reactor and system but is continuously consumed in the process of reducing oxygen from the iron ore. The gas will also have to be heated to a temperature of around 900-1000°C, depending on the design parameters. The requirements of the hydrogen supply is further that it can be supplied continuously, since a steel plant operates at least 8000 hours per year and has low flexibility in varying the production. Interviewee G further explained that the large volumes, high energy demand of around 3.5 MWh/tonne, and price-competitive market imply a certain sensitivity to price. There are many initiatives around the world to reduce emissions from steelmak- ing and implement a more sustainable alternative utilizing hydrogen. One example is HYBRIT, a collaborative effort between SSAB, LKAB, and Vattenfall [22]. In 2030, LKAB expects to be able to produce 2.7 million tonnes of DRI per year [23]. HYBRIT estimates that the energy demand of the process will be 3.5 MWh/tonne crude steel [22]. The cost of the finished steel is estimated to be 20-30% higher com- pared to conventional methods [24, 25]. Interviewee F confirmed that this number was from the beginning of the project in 2018, and primarily depended on three factors. The factors highlighted were the price of coking coal, the price of emitting carbon, and the price of electricity. One additional important factor emphasised by interviewee G, is that the concept and end-product are estimated to be more attractive in the future due to the higher cost of emitting CO2, and an increase in demand for more sustainable products [25]. Finally, with insight into the project of HYBRIT, interviewee F talks about the challenges in the project. One of these chal- lenges, or uncertainties, is the large-scale transport of hydrogen where the final cost is still not known. The transport of hydrogen, as well as the storage solution, is due to be tested in different pilot-project during the coming years. Other than HYBRIT, European steel making companies such as Voestalpine, Liberty steel, and Salzgitter, are all investing in hydrogen direct reduction as a future alternative [24, 26]. One of the challenges to driving a sustainable transition in the steel industry has been that heavy industry sectors (such as steel) often work in a business-to-business market [24]. End-customer preferences for sustainability have thus been left out in favour of cost and availability as key business-drivers. 16 3. Hydrogen Demand The Hydrogen Council, a consortium of over 100 leading companies with an interest in hydrogen, calculates that to reach a lower cost than conventional blast furnaces coupled with carbon capture and storage technology (CCS), a hydrogen cost of 1.20-2.30 $/kgH2 is required, depending on region. Further more, according to the International Energy Agency (IEA), to compete with natural gas coupled with CCS a hydrogen cost of 0.7-2.0 $/kgH2 is required [17]. The demand for hydrogen used in steel production is estimated to 8 MtH2/yr in 2030 [17]. 3.2 Transportation Applications Regarding the area of transportation there are many prospects of the use of hydrogen in the future, but already today there are hydrogen vehicles in operation and have been for some time. Applications range from cars, busses, and trains driven by electricity generated from hydrogen in fuel cells to applications in aviation and shipping. The consensus among experts in the area, is that hydrogen will be the most beneficial alternative for longer ranges and applications, such as long-haul trucks, busses, and trains. As previously stated interviewees B, D, I, and J predict that current industrial applications will be the first adopters of low-carbon hydrogen. With cars, trucks, busses, trains, ships, and aviation following in the years and decades after. Important to remember is that the applications within transport will play an important role, especially in hard-to-abate sectors such as aviation and shipping, discussed below. 3.2.1 Fuel Cell Electric Vehicles (FCEV) Cars driven by electric motors have seen a growing popularity in the latest years. The energy for the electric motors can be supplied from different sources, either from batteries or from fuel cells utilising hydrogen to generate electricity. Many large car manufacturers are currently developing and even selling hydrogen vehicles including Hyundai, Honda, and Toyota [27]. Electric hydrogen vehicles utilise a fuel cell stack as their energy source. A hydro- gen fuel cell is an electro-chemical device that transforms the chemical energy in hydrogen to electricity driving the electric motor [28]. Fuel cells are categorised af- ter the electrolyte they use, with the most common one being the proton exchange membrane (PEM) fuel cell. It utilises a solid polymer as the electrolyte and porous carbon electrodes containing platinum as the catalyst [28]. The reason PEM fuel cells are preferred in transportation applications is their short start-up time, low operating temperatures (60-80 °C), system robustness, and high power density [29]. Except for the energy in the form of electricity, only water and heat are generated in the fuel cell [28]. The Hydrogen Council, sees great potential in FCEVs. In a report, the council pre- dicts that by 2030, 1 in 12 cars in prominent regions such as Germany, South Korea, and California will be powered by hydrogen. In 2050, they predict an increase to 25% globally or about 400 million passenger vehicles to be powered by hydrogen 17 3. Hydrogen Demand [16]. As mentioned, many car manufacturers believe in the future of the fuel cell electric vehicle. Today, several models are available such as the Toyota Mirai, the Hyundai NEXO, and the Honda Clarity [14]. The benefits of no tailpipe emissions for FCEVs is obvious, but FCEVs can also ben- efit from a higher efficiency than the conventional internal combustion engine (ICE) [28]. This, the lower running cost, together with a lower maintenance cost because of fewer moving parts makes FCEVs competitive with conventional ICE vehicles [14]. FCEVs have also proven to have some unique benefits relative to their closest competitor, the battery-powered electric vehicle (BEV). The high energy density of hydrogen provides FCEVs to drive for a long range [28]. To give a competitive range of 500 kilometers, around 5 kg of hydrogen needs to be stored under high pressure (around 700 bar) in the tank of a car [30]. The tank to store hydrogen could also be manufactured at a lower cost than if compared to a battery [28]. Finally, a vehicle with a hydrogen tank allows for fast refueling, comparable to filling a gasoline or diesel vehicle [14]. Two of the main challenges FCEVs faces are regarding the refuelling infrastructure and the competition against other technologies, such as BEVs. Regarding the refu- elling infrastructure, there will be little incentive for customers to buy a FCEV until a refuelling station network has been established. On the other hand, it will not be commercially viable to construct a network until enough FCEVs exist on the road [14]. This is one of the reasons interviewee I believes that the industrial applications will have to lead the way, to then allow more decentralized demands to benefit from the already built infrastructure. Further challenges exist in that hydrogen cannot use existing distribution networks for liquid fuels, meaning large investments at high risk will be required [14]. This is driven by the requirement for refuelling stations to be placed close to main roads and in a decentralized structure to reach a large share of consumers. Regarding BEVs, the rather high cost of the fuel cell as well as the higher efficiency of the BEV are the main challenges. The efficiency of a BEV can be around 60% "well-to-wheel", while FCEV reach around 30% [16]. This leads to the BEV being a more competitive option for short to medium range applications [18]. In a report by the Hydrogen Council [18], in collaboration with the consultancy company McKinsey & Company, the cost that different hydrogen applications need to reach to be competitive was analysed. It was concluded that the hydrogen option, when compared to BEVs and ICE vehicles, is predicted to first become competitive in applications where long range is needed (500km+) [18]. This could be large family SUVs or larger vehicles for commercial use such as taxi fleets. This view was shared by interviewees I and J, who believes that FCEVs will be competitive only in certain demand patterns. The report suggests these applications could be competitive as soon as between 2025-2030 [18]. 18 3. Hydrogen Demand In conclusion, FCEVs have benefits in allowing for long range, quick refueling times and being price competitive with conventional ICE vehicles. The main challenges exist in establishing a refuelling network, and in competing with BEVs, which ben- efits from higher efficiency. The potential demand could be significant, but is also highly uncertain and depends heavily on the development of competing alternatives. 3.2.2 Internal Combustion Engines (ICE) In addition to utilizing fuel cells to generate power, hydrogen can also be burned di- rectly in a combustion engine. This was how some of the first ICE were powered over 200 years ago [17]. The development has come a long way since then, and today’s H2 internal combustion engines (H2ICE) can reach increasingly high efficiencies, keep emissions well below regulations, and reach satisfactory power outputs [14]. Using hydrogen in ICEs opens up many advantages. The vast production infrastruc- ture and the mature industry surrounding ICEs are examples. Also, ICEs provide fuel flexibility, provided the engine control is suitably adapted [31]. "Flex-fuel" ve- hicles could ease the transition from fossil fuels to hydrogen and allow the refuelling network to be built over this period of transition [31]. Further advantages of utilizing H2ICEs in vehicles is their tolerance to lower hydrogen purity, leading to cheaper fuel [31]. Finally, they could be introduced relatively easily, with a possibility of retrofitting engines, and the technology does not rely on any rare materials [31]. Both FCEVs and BEVs require a ramp-up of production of scarce materials, which has proven difficult. Which gives H2ICEs an advantage [31]. Between the years 2000-2010, several concept cars were developed by various auto- motive manufacturers. Many were adopted from previous models to run on hydro- gen, with the BMW H2 7 being the most well-known, produced in 100 units between 2005-2007 [14]. Due to some major challenges of H2ICEs, further commercialisation has not been pursued. Research has continued, with a focus on advancing the ma- turity of hydrogen engines. The challenges include the difficulty to make ICEs running on hydrogen both ef- ficient, adequately powerful, and durable at the same time [31]. Also, the engine characteristics put demands on the onboard storage of hydrogen. The infrastructure required is, as in the case of FCEVs, a principal challenge. Instead, many researchers believe that using hydrogen to chemically create a liquid fuel. That is both easier to store and distribute is the way forward, and is what should be researched [31]. Another way hydrogen ends up as a part of the supply chain of fuels is when pro- ducing renewable fuels, such as bio-diesel. Interviewee H explained that in refining, hydrogen is used in the hydrogenation of renewable fuels to bind to, and get rid of oxygen. An increased amount of hydrogen is required when refining renewable fuels in comparison to refining conventional fuels. Interviewee H gave an example of a large project on the west coast of Sweden where Preem will produce 700 000 tonnes of renewable fuels per year. 19 3. Hydrogen Demand 3.2.3 Buses, Trucks, and Trains As explained earlier, utilising hydrogen in fuel cells for powering vehicles can come with several benefits. It allows for a simple system with relatively low weight, al- lows for long range, and also for fast refuelling. These characteristics prove to be even more advantageous when applied to means of transportation that operate over longer distances and more continuously [16]. With FCEVs facing increased compe- tition from BEVs, the focus in FCEV development has shifted towards heavy-duty applications. Where a central refuelling structure infrastructure can be utilised, and where the high energy density introduces less weight than BEVs [14]. These char- acteristics highlight the promising potential of fuel cell-powered buses, trucks, and trains in the future [32][33]. This view is shared by experts in the field, including interviewees B, I, and J. In a cost analysis by the Hydrogen Council, it was concluded that hydrogen buses and trucks are the most cost-efficient way to decarbonize the respective segments in the short to medium term [18]. This view seems to be shared when also look- ing at the automotive industry. Where several manufacturers are developing fuel cell trucks, including Toyota, Daimler, Volvo, Hyundai, and Nikola Motor Company [34, 35, 36, 37]. Fuel cell buses have been in use for some time and have a great advantage in that they reduce emissions locally in city centres. This advantage cre- ates and even bigger opportunity for both buses and trucks when diesel engines are planned to be banned in many city centres for several countries [14]. Regarding trains, there are examples of companies already operating hydrogen- powered trains. One example is Alstom in Germany, whom has developed hydrogen running trains that can reach speeds of around 140 km/h and ranges of up to 1000 km, sufficient for an entire day [14]. Further, many countries and companies are in- vesting in a future with hydrogen trains, including Vivarail in UK, Inlandsbanan in Sweden, Pesa Bydgoszcz SA in Poland, and Stadler Rail Group (Switzerland) sup- plying California with hydrogen trains [14]. According to present plans in France and the UK, diesel trains will be replaced by fuel cell trains by 2035 and 2040 respec- tively [38]. Trains powered by hydrogen fuel cells are best suited for longer routes, not already electrified, and with short downtimes allowing little time for charging. Interviewee I highlights examples of train routes in northern Norway where hydro- gen trains are the best potentially fossil-free option. Routes that have a relatively low frequency of operation is also especially well suited for hydrogen trains [18]. Fuel cell trucks, busses, and trains face some of the same problems as fuel cell cars. For example, the challenge of infrastructure for refuelling. But these applications have an advantage in allowing for a more centralized infrastructure, with long ranges and defined routes [39]. As an example, some estimates that only 350 refuelling sta- tions could cover the whole United States [39]. Nikola Motors (together with Shell, Air Liquide, Hyundai, NEL, and Toyota) further plan to build their infrastructure with 700 stations, which they will allow rivals to use, by 2028 [38]. The cost of fuel cells and hydrogen storage system is also a challenge. But prices are predicted to drop in the coming years [14, 38]. 20 3. Hydrogen Demand Regarding the cost perspective, reports show that hydrogen buses can out-compete battery-powered buses when the range exceeds 400km [18]. In these applications, a long range decrease down-time and thereby reducing cost. When it comes to total cost of ownership (TCO), fuel contributes up to 25% and will be the largest oppor- tunity to reduce the total cost [18]. It was calculated that a price of 4-5 $/kgH2 was required to reach cost parity [18]. Similarly, regarding trucks, fuel costs are a significant part of the TCO of up to 60% [18]. In 2030, at 4-5 $/kgH2, medium and long-range fuel cell trucks could become a more competitive alternative to BEVs and ICEs [18]. Finally, fuel cell trains are already today more competitive than electric trains over longer distances and for low-frequency routes [18]. 3.2.4 Aviation In a report by Fuel Cells and Hydrogen Joint Undertaking (FCHJU), backed by the European Commission, the potential of hydrogen propulsion in aviation was assessed [40]. The conclusion of the report states that "hydrogen propulsion has the potential to be a major part of the future propulsion technology mix", but that "it will require significant research and development, investments, and accompanying regulation" [40]. There are several options to power an airplane with hydrogen. It could either be used directly for combustion, in fuel cells, or in the production of synthetic or bio-fuels [18, 41]. With regards to climate impact, using hydrogen for combustion could reduce the impact by 50-75%. For the usage of fuel cells or in the production of fuels these numbers stand at 75-90% and 30-60% respectively [40]. Aircraft utilising hydrogen for propulsion are most competitive for short-range and medium-range routes, including regional and commuter aircraft [18, 40]. Long-range aircraft would require new designs, such as increasing the airframe length to accom- modate fuel tanks, if they are to run on hydrogen [40]. For larger aircrafts the most realistic option is to replace the fossil fuels used to produce jet-fuel kerosene with synthetic alternatives that have been produced using hydrogen [18]. One man- ufacturer aiming to develop hydrogen aircraft is Airbus, with concepts for short-, medium- and long-range [42]. Hydrogen in aviation faces much of the same problems as other applications, such as lack of infrastructure and storage issues [41]. Another challenge lies in the de- velopment of the design and layout of the aircraft itself. Increasing power density, reducing cost, and extending the lifetime of fuel cells are pointed out as important factors for the future [41]. Regarding cost competitiveness of the fuel, the Hydrogen Council estimates synfuel could become cost-competitive with bio-kerosene in 2030 [18]. Given a bio-fuel cost of 1.50 $/liter, hydrogen must reach a cost of 2.70 $/kgH2 [18]. FCHJU estimates that in 2050, aviation’s demand for liquid hydrogen could grow to 40 million tonnes a year [40]. 21 3. Hydrogen Demand 3.2.5 Maritime Applications As a whole, the international shipping and maritime sector stands for 2.5% of global carbon emissions [18, 17]. According to current trends, international shipping is further expected to more than triple by 2050 [17]. The sector is reliant on heavy oil fuels and affects the air quality around ports. Hydrogen is seen as the leading option for tackling these issues and decarbonizing this sector [17]. Ships powered by fuel cells are most relevant for passenger ships. Bringing positive benefits such as decreasing local emissions, and reduces both water pollution and noise [16]. In larger-scale operations, such as international shipping, hydrogen-based fuels such as ammonia, are believed to be the best option, with many research projects and demonstration projects ongoing [17, 43]. Ammonia has a higher energy density than for example liquid hydrogen and current engines could be modified for the usage of this fuel. Availability and cost of bio-fuels are also uncertain, since the demand for biomass is expecting to grow in other sectors as well and there is a limited supply [17]. Several companies and countries see the potential of utilising hydrogen as a fuel for shipping in the future. Projects are underway in Sweden, Norway, and France [14]. ABB is collaborating with Hydrogène de France to develop large-scale fuel cell-powered ships [14]. The CEO of Maersk, the largest container shipping line and vessel operator in the world, said that they will have small-scale ships running on fuels such as ammonia and methanol before 2025 [44]. Utilising hydrogen as a fuel for ships comes with some challenges. Although some of the infrastructures for ammonia already exist, a huge scale-up of both distribution and production would be required. To satisfy shipping demand in the long term, it is estimated that 500 Mt/year of ammonia is required, three times today’s global production [17]. Another challenge is the storage volume required, with ammonia requiring three times the volume of conventional oil-based fuels. This would either require a redesign of the ships, shorter distance trips, or reduced cargo capacity [45]. The application does however benefit from some infrastructure already existing. Synergy effects with material handling in ports (forklifts, trucks, etc), and the de- mand being more centralised to fewer locations are also added benefits [17]. For smaller applications, such as ferries, it is estimated that they could become com- petitive with fuel cells in 2030-2035 [18]. For larger-scale operations, a CO2 price of up to 326 $/tCO2 would be required to make ammonia a cost-competitive fuel [17]. For further data on the price-point of where hydrogen is used to produce ammonia, see section 3.1.1. 22 3. Hydrogen Demand 3.3 Hydrogen for Power Generation and Grid Bal- ancing A final application of hydrogen that will be outlined in this report, is the use of hydrogen generation and storage to use for power and balance an electricity system. Hydrogen’s potential for storing large amounts of chemical energy, which can easily be transformed to electricity, makes it interesting in the context of balancing grids [46, 47]. Hydrogen can be stored in different ways and can thereby also balance seasonal variations or a larger share of RES in the overall energy system [17, 46]. In the context of nuclear power generation, benefits from producing and storing hy- drogen have been investigated [46]. Operating a nuclear plant at a constant level is simpler and cheaper in terms of fuel and maintenance, and producing hydrogen to compensate for variations in demand could increase the operating life [46]. Hydrogen generated by electrolysis can be stored in a number of ways, further de- scribed in section 4.3. To reconvert hydrogen to electricity internal combustion engines, gas turbine power plants, or fuel cells are all possible options [47]. The hydrogen could also be used directly in industry or as fuel for vehicles [47]. One challenge, highlighted by interviewee B, is induced by the low round-trip efficiency of converting electricity to chemical energy and then back to electricity again. Producing hydrogen in order to balance the power system could have an important role in the future. But is heavily dependent on developments in electrolysers and large-scale storage [46]. Experts, including interviewee J, see a challenge in this solution relating to the problem of optimising hydrogen production of RES to hours of low energy cost, and the storage thereby needed to be able to supply a steady demand of hydrogen. 3.4 Summary of Hydrogen Demand The chapter has provided an overview of the many different applications hydrogen is used in and where it could be used in the future. There are some applications where the demand is more certain, such as ammonia and methanol production. Other sectors, such as the transport sector, have a potentially larger demand for hydrogen but is more difficult to predict. Regarding cars for shorter distances the FCEV faces competition from BEVs. For longer distances and larger-in-size applications the hydrogen alternative seems to be more competitive. No expert can say for sure which applications will have the largest demand but some estimations has been given through the chapter. The demand from different sectors is summarised in table 3.1 below. The estimations is gathered from the previous sections, from interviews with experts, and from reference [17] and [18]. It is aimed at giving an overview of the current status. The total demand from the selected applications is summarised in the table and is estimated to be up to 450 MtH2/yr in 2050. If not including FCEVs, which by many experts is deemed the most uncertain, the demand is still 150 MtH2/yr. The next chapter contains different ways meeting this huge demand. 23 3. Hydrogen Demand T ab le 3. 1: Su m m ar y of hy dr og en de m an d H yd ro ge n D em an d W he n? P ot en ti al si ze of de m an d P ri ce of co m pe ti ti ve ne ss $/ kg H 2 Lo ca ti on of de m an d O pp or tu ni ti es C ha lle ng es A m m on ia Pr od uc tio n N ow 37 M tH 2/ yr (2 03 0) 0. 90 -1 .5 0 C en tr al ise d Im po rt an t ro le in ha rd -t o- ab at e se ct or s N o em iss io ns w he n us ed as a fu el Ea sie r to st or e th an hy dr og en H ig h pr es su re an d te m pe ra tu re ne ed ed in pr od uc tio n M et ha no lP ro du ct io n N ow 19 M tH 2/ yr (2 03 0) 0. 80 -1 .5 0 C en tr al ise d Im po rt an t ro le in ha rd -t o- ab at e se ct or s Ea sy to st or e an d tr an sp or t C an be us ed in in te rn al co m bu st io n en gi ne s N ee d a so ur ce of ca rb on R el ea se s C O 2 w he n us ed En er gy -in te ns iv e pr od uc tio n M et al lu rg ic al In du st ry 20 25 8 M tH 2/ yr (2 03 0) 0. 7 -2 .3 0 C en tr al ise d D ec ar bo ni se ca rb on -in te ns iv e in du st ry N ee d co nt in uo us an d la rg e su pp ly Pr ic e- se ns iti ve Fu el C el lE Vs 20 30 U p to 30 0 M tH 2/ yr if hy dr og en we re to co ve r to da y’ s to ta lf os sil fu el de m an d D ep en ds on ra ng e, co ul d be co m pe tit iv e at $ 5/ K G H 2 D ec en tr al ise d Sh or t re fu el lin g tim e Ze ro ta ilp ip e em iss io ns Lo w m at er ia lf oo tp rin t Lo w we ig ht /s to re d en er gy H ig h co st of fu el ce lls Lo w effi ci en cy R ef ue lli ng in fra st ru ct ur e la ck in g C om pe tit io n fro m BE Vs Bu ss es ,T ru ck s, an d Tr ai ns 20 25 C en tr al ise d Lo ng ra ng e po ss ib le Sh or t re fu el lin g tim e C en tr al ise d re fu el lin g R ed uc es em iss io ns in ci ty -c en tr es H ig h co st of fu el ce lls R ef ue lli ng in fra st ru ct ur e la ck in g C om bu st io n of H yd ro ge n - - - D ec en tr al ise d U til ise ex ist in g in fra st ru ct ur e C ou ld al lo w "fl ex -fu el " Av oi ds ex pe ns iv e fu el ce lls D iffi cu lty to m ak e hy dr og en IC Es effi ci en t, po we rfu l, an d du ra bl e Av ia tio n 20 40 40 M tH 2/ yr (2 05 0) 2. 70 C en tr al ise d C ou ld re du ce em iss io ns su bs ta nt ia lly fro m ca rb on -in te ns iv e se ct or N ee d sig ni fic an t re se ar ch , de ve lo pm en t, an d in ve st m en ts M ar iti m e A pp lic at io n 20 30 50 M tH 2/ yr (2 05 0) 0. 90 -1 .5 0 C en tr al ise d R ed uc e em iss io ns an d wa te r po llu tio n Po ss ib le to m od ify cu rr en t en gi ne s H ig h st or ag e co st Lo st ca rg o vo lu m e Ba la nc e of Po we r Sy st em 20 30 - - C en tr al ise d Ba la nc e el ec tr ic ity sy st em Ea sy to re st or e to el ec tr ic ity Lo w effi ci en cy O pt im isi ng iss ue s T ot al de m an d U p to 45 0 M tH 2/ yr 24 4 Hydrogen Supply As illustrated in the previous chapter, today hydrogen is mainly used for ammonia production, oil refining and the production of various other chemicals. In 2018, around 74 million tonnes of hydrogen were produced for this purpose [17]. Out of this 74 million tonnes, only five percent was produced using a low-carbon production method. The rest was produced using fossil fuels [48]. If the hydrogen use is to grow as projected, then the supply also needs to shift towards low-carbon production. This chapter aims to describe the supply part of the overall structure, as illustrated in figure 4.1. This includes an overview of the main ways of producing, transporting, and storing hydrogen. A description of the most prominent ways of production will be presented with the main focus on the most discussed low-carbon method, elec- trolysis. Different ways of storing and transporting hydrogen will be also described. After storage and transport, hydrogen techno-economics in the form of levelised cost of hydrogen (LCOH) will be presented. The focus will be on the production of hydrogen using electrolysis. The LCOH for other production methods and also cost for storage and transport have been gathered directly from literature. Finally, a summary of the chapter is presented. Figure 4.1: The chapter explains the supply part of the overall structure. 4.1 Hydrogen Production - Fossil Fuel This section describes the two most prominent ways of producing hydrogen using fossil fuels. These are steam reforming and gasification. Although gasification stands for a significant share in producing hydrogen, it is not as widely used outside of China, whereas steam reforming is used on a more global scale. Therefore, both methods will be described in short but only steam reforming will be further analysed throughout the report. Producing hydrogen as a by-product from various industries using fossil fuels has also fallen outside of the scope of this study. 25 4. Hydrogen Supply 4.1.1 Steam Reforming Today, steam reforming is the most widely used method for producing hydrogen, accounting for almost 50% of the total hydrogen production [48, 49, 50]. Steam reforming is an endothermic process (requiring heat) that reforms a hydrocarbon and steam into syngas (a mix of carbon monoxide and hydrogen) [49, 51]. The most widely used hydrocarbon for this purpose is methane, the primary building block of natural gas. Natural gas is thus used as a feedstock and as a source of heat. The biggest advantage of using steam methane reforming is that it is one of the cheapest ways of producing hydrogen, typically producing hydrogen at a cost be- tween $0.9-3.2/kgH2 [17]. Therefore, the production cost of using steam methane reforming is often used as a benchmark to compare the competitiveness of other methods. The primary factor determining the cost is the availability of natural gas. Large and centralised production is also needed to reach this cost range. This is why several industrial consumers of hydrogen (ammonia, refineries, etc), uses this method to produce hydrogen on-site. Table 4.1: Levelised cost of hydrogen based on steam methane reforming produc- tion. All numbers are shown $/kgH2 Region: Capital Cost Operation Cost Natural Gas Prod Cost Capital Cost (w/ CCS) Operation Cost (w/ CCS) Natural Gas Prod Cost (w/ CCS) USA 0.40 0.10 0.50 1.00 0.60 0.40 0.50 1.50 EU 0.30 0.20 1.25 1.75 0.60 0.40 1.35 2.35 RUS 0.30 0.20 0.50 1.00 0.60 0.40 0.60 1.60 CHN 0.60 0.40 0.75 1.75 0.60 0.40 1.40 2.40 ME 0.30 0.20 0.40 0.90 0.60 0.40 0.45 1.45 The biggest drawback of using steam reforming is that it releases large quantities of carbon dioxide [51]. Estimates suggest that the method releases about 10 tonnes of CO2 for every tonne of hydrogen produced [52]. To counter this, the future for this method includes a high degree of installed carbon capture, and storage (CCS) technology [52, 53]. CCS can reduce emissions by up to 90% [52, 54] but will in turn also raise the cost of production, illustrated by table 4.1 [17, 52, 53]. The table compares production cost estimates for steam methane reforming with or without CCS. The levelised cost of hydrogen (LCOH) is here indicated as the cost of pro- duction. For a more detailed description of the LCOH, see section 4.5. The data is taken from reference [52]. There is also a further cost increase in transporting and finally storing the captured CO2 [54]. According to a study made for the US region, they found that transporting CO2 with pipeline would range between 2-38 US dollars per tonne CO2 depending on the distance [54]. While, on average, the long-term and large-scale CO2 storage would cost $8/tCO2. In Europe, interviewee K explained that the Norwegian North- ern Lights project is currently the most viable way of storing CO2. Their ambition 26 4. Hydrogen Supply is to reach a cost of between $36-65/tCO2, which includes shipping to, and storing, the CO2 in their North Sea storage facility. Future cost increase for this method could also be dependent on carbon prices and taxes [53]. However, with a capture rate of 90%, carbon taxes on the remaining 10% will have a limited effect on final cost. 4.1.2 Gasification Gasification is similar to steam reforming except that it also uses oxygen in the pro- cess. The feedstock, oxygen and steam, react to form hydrogen, carbon monoxide- and dioxide [49]. The CO2 can further be reacted with steam to form additional hydrogen, in a so-called "water-gas-shift". Typically the feedstock that is used is coal. Today, around 19% of worldwide hydrogen production is done using coal gasi- fication [48]. 80% of these facilities are located in China [52]. Similar to steam methane reforming, gasification has a low production cost [49], estimated at $1.2-2.2/kgH2 [17]. The drawback is similar as well, in that it releases large quantities of GHG emissions. The future for this method also includes the instalment of CCS. Another option is to use biomass (such as industrial, agricultural, and forestry residues and waste) instead of coal as a feedstock. Although the process is some- what more complicated, it can be considered more environmentally friendly since it uses biomass and not coal [55]. However, according to interviewee L, biomass is also being proposed as a feedstock for a wide range of other applications. For example, different kinds of synthetic fuels. When discussing this subject further with inter- viewee L, they believed that biomass can have a higher value than only using it for pure energy purposes. 4.2 Hydrogen Production - Electrolysis Although the technology for electrolysis has been around for several hundred years the method still only takes up 4% of global production [48, 56]. The reason being that it is a more expensive method than those using fossil fuels. But because of the increased concerns in regards to climate change, the method has seen new life recently. Electrolysis of water only requires energy in the form of electricity and/or heat and the process does not release emissions. Any low-carbon energy source, such as nuclear or renewables, can thereby potentially reduce the emissions of producing hydrogen. With cost increases for fossil-fuel-based production methods and cost decreases of using electrolysers, this method may potentially also compete econom- ically in the future [51]. In may 2021, the IEA published a comprehensive study on how the world can reach a net-zero energy system (removing the same amount of GHG emissions from the atmosphere as is released) by 2050 [57]. According to the study, 54% of all hydrogen should be produced using low-carbon electrolysis in 2030 to reach this goal. By 2050, this number is increased to 62%. 27 4. Hydrogen Supply This section will first describe the basic concept of electrolysis. Then give an overview of the three most prominent electrolysis technologies. These are alkaline electrolyser (AEC), proton exchange membrane (PEM), and solid oxide electrolysers (SOEC). The overview will contain general functionality, strengths and weaknesses, and current and future status for each technology. Several other low-carbon hydrogen production methods exist. Some of which include microbial electrolysis, photosynthesis, radiolysis, and others. However, all these have a relatively low technology readiness level and have thus been excluded from this study [58]. Electrolysis of water has also been deemed the main method to produce low-carbon hydrogen during interviews and several studies. 4.2.1 Basic Concept Electrolysis is an oxidation-reduction reaction (redox reaction for short). A reaction where electricity is used to make a chemical change happen, that would not happen otherwise. Electrolysis of water is one such reaction, where hydrogen and oxygen together form a water molecule. This water molecule is not going to separate into its core elements again without applying electricity and/or thermal energy. The process is performed in an electrolytic cell and the full reaction can be seen in formula 4.1 below [56]: 2H2O + Energy → 2H2 +O2 (4.1) Although there are different configurations of an electrolytic cell, it basically consists of two electrodes (an anode and a cathode), and an electrolyte. From formula 4.1, the hydrogen is formed at the cathode and oxygen is formed at the anode. See fig- ure 4.3-4.5 for a visual representation of the process. To separate the elements, the required energy demand can be determined using the change in enthalpy, illustrated in formula 4.2 below [56]: ∆H = ∆G+ T ∗∆S (4.2) ∆H represents the change in enthalpy, or the required energy needed for separating the elements. ∆G is Gibbs free energy which represents the necessary electrical energy. T represents temperature, ∆S represents the entropy for each molecule and together these correspond to the necessary energy in the form of thermal energy. Holding ∆H constant means that if thermal energy, T ∗∆S, is increased, the nec- essary electrical energy can be decreased, and vice versa. This relation, between the total energy demand and electric and thermal energy for separating water is visualised in figure 4.2. The figure have been taken from reference [59]. 28 4. Hydrogen Supply Figure 4.2: Graph illustrates the relation between electrical and thermal energy, based on equation 4.2. It is also worth mentioning that an electrolyser is often referred to as a stack. A stack is built out of several electrolytic cells and its production capacity is often measured in MW, the maximum electrical power that can be applied. When buying commercial units, stacks are multiplied to reach the desired production capacity of an entire facility [56]. For example, a stack made up of several electrolytic cells has a maximum production capacity of 1 MW. To reach the desired production capacity of 10 MW for the entire facility, you would need to install ten stacks. The amount of oxygen or hydrogen that can be produced (in cubic meters) from 1 MW of electrical power is determined by the type and performance of the electrolyser. 4.2.2 Alkaline Electrolyser (AEC) Figure 4.3 illustrates the basic functionality of an AEC. It has been made looking at a similar image published in reference [56]. The cell typically consists of two elec- trodes (the anode and the cathode), a separator, and an electrolyte. The electrolyte consist of an aqueous caustic solution, typically containing potassium hydroxide (KOH) [60]. When power is applied the water reacts at the cathode forming hy- drogen and OH- ions. The OH- ions travel through the separator and react at the anode. The electrons are separated from the OH- ions forming oxygen and water. The electrodes travel through the anode closing the circuit. The formed hydrogen at the cathode, and the oxygen at the anode, travels up through the electrolytic solution as gas bubbles where it is collected. The separator separates the oxygen and hydrogen from reacting with each other [61], partly for the sake of efficiency, but also for safety reasons. The AEC typically operates at temperature between 40-90 ◦C [56, 60, 61]. 29 4. Hydrogen Supply Figure 4.3: Schematic of the AEC functionality. Strengths & Weaknesses The major strength of the AEC is that it has the lowest capital cost out of the three mentioned in this study electrolysis technologies [62]. The reason being its relatively simple design and technical maturity [56]. Today, some commercial stacks can pro- duce up to around 1000 m3 hydrogen per hour [60, 61, 63, 62]. In addition it also has a longer lifetime compared to other electrolysers, ranging from 60,000-100,000 hours [60, 61, 63, 62]. These numbers have been based on previously published articles and a small benchmark that can be seen in appendix A.1. The main weaknesses can also be explained by the simple design. Firstly, the sepa- rator does not completely separate the two gases from remixing, meaning they could react and turn back into water. As a consequence, this lowers the overall efficiency. It can also cause a potential safety hazard, where mixing of highly flammable gases such as H2 and O2 can cause an explosion [56, 61]. The risk of this occurring increases at lower power loads [61]. Not being able to handle dynamic power loads makes it less suitable for coupling with renewable energy sources (RES), because of the in- termittent power supply. The AEC also operates under lower pressures, meaning that the hydrogen needs to be further compressed when transported and/or stored [60, 61]. This in turn raises the overall delivered cost of hydrogen. Lastly, since it needs a separator and uses a liquid electrolyte. It receives larger losses compared to other electrolysers, reducing the efficiency further [61]. The operating efficiency is usually between 50-75% for large-scale commercial units [51, 56, 58, 60]. Small-scale, best-practice units can reach an efficiency of 80-85% [56, 58]. The spe- cific energy consumption for the entire system is 4.5-7.5 kWh/m3 [60, 61, 62]. Current & Future Status Compared with other electrolysers, the AEC has a high degree of technological ma- turity and commercial success. It currently has the lowest capital cost that ranges between 1200-1400 $/kW (depending on scale of plant) [62]. It is also more available and more durable. This makes it currently the most viable option for large-scale hydrogen production using electrolysis. As of 2020, the Japanese company Asahi Kasei started the operation of the world’s largest single-stack AEC demonstration 30 4. Hydrogen Supply project, named the Aqualizer [64]. The Aqualizer has a capacity of 10 MW and is able to produce 1,200 m3 hydrogen per hour. Current R&D is focusing on increasing the operating pressure, increasing the cur- rent density, and making it more suitable to handle dynamic power loads [62]. From 2030 it is projected that the capital cost of AEC will be around $900-1000/kW [65]. Other sources found it to be able to go as low as $500/kW, depending on the level of scale-up and further R&D [62]. According to interviewee I, although unsure of specific cost numbers, it is unlikely that the technology will receive large cost reduc- tions. Mainly because it is already a highly mature technology. The same goes for the lifetime, which in 2030 is projected to be around 90,000-100,000 hours [66]. 4.2.3 Proton Exchange Membrane (PEM) Figure 4.4 illustrates the basic functionality of a PEM. The figure has been made looking at a similar figure in reference [67]