Hydrogen: The hidden benefits of clean energy

25 July 2008

Building the world’s largest hydrogen-fired power plant will provide many advantages for Abu Dhabi aside from its lower environmental impact than conventional facilities.

In the search for clean-burning alternative energies, increasing attention is being paid to the use of hydrogen gas for electricity generation.

On the face of it, hydrogen would seem to be an obvious candidate to become the alternative fuel of choice.

It is abundant, albeit not in its natural state, highly flammable, and has a high energy density compared with its mass.

Most importantly, burning hydrogen creates no harmful emissions, making the element one of the cleanest-burning fuels available.

Yet for all its advantages, the commercial take-up of hydrogen energy has been slow.

While hydrogen is readily available in substances such as water and fossil fuels, it is expensive and energy-intensive to extract - far more so than conventional fuels such as coal and gas.

However, all this is set to change with the advent of the world’s largest hydrogen-fired power plant in Abu Dhabi, which is being developed by Hydrogen Energy, a joint venture of the UK’s BP Alternative Energy and Australia’s Rio Tinto, in partnership with Abu Dhabi’s Masdar initiative.

It may seem strange that a region with the world’s most plentiful oil and gas reserves should play the role of pioneer in advancing alternative energy.

But a closer look at hydrogen energy shows the technology is a good fit for the Middle East.

One drawback of hydrogen energy is what to do with the carbon dioxide (CO2) created from the decarbonisation process.

Normally, it would have to be stored underground, which is expensive. But in Abu Dhabi and other Gulf states, the CO2 can instead be injected into wellheads to shore up reservoir pressure.

This has the twin advantage of both freeing up gas used for the same purpose and increasing the field’s operational lifespan and crude output.

“There has been enormous interest in the region since we announced the project [in January this year],” says Lewis Gillies, chief executive officer (CEO) of Hydrogen Energy.

“Hydro-gen energy is a sweet spot for the countries here. The difference is not in the cost of power generation, but in the cost of the fuel.

If you take the fact that you are liberating oil and gas, then the Middle East has all the attributes that make it [hydrogen energy] economically sensible.

Regional uptake will depend much on the success of the Abu Dhabi project. The $2.2bn scheme, likely to be located at Ruwais, will have a total low-carbon electricity export capacity of 420MW, or about 5 per cent of the emirate’s total demand.

It will also have its own captive desalination plant with a capacity of about 20-25 million gallons a day.

Under the proposed configuration, the plant will be supplied with 100 million cubic feet a day (cf/d) of natural gas by Abu Dhabi National Oil Company (Adnoc). The gas will be split or reformed into carbon monoxide - and later CO2 - and hydrogen, with the latter used to power the turbines to create electricity.

The primary emission from the hydrogen-burning process will be harmless water vapour.

The CO2 will be sold to Adnoc through a long-term offtake agreement, with Masdar responsible for the cost of setting up and operating a CO2 transportation network.

This will free up to 60 million cf/d of gas used for reinjection, extend the life of the oil field and increase the amount of recoverable crude by 10-15 per cent.

Product pricing

But there are several challenges that will have to be overcome for this and similar schemes to succeed.

Because such facilities will be developed on a concession basis, project sponsors need to ensure the right offtake and fuel-supply agreements are signed to get a return on investment.

Key to this will be the offtake cost of the CO2, for which there is no real mechanism for pricing.

However, with the use of CO2 injection potentially increasing lifetime output from an average-sized field by 1-2 billion barrels, the gas will clearly have a strong inherent value.

Project sponsors will also likely need to attach a premium to their plants’ electricity output to offset the greater investment costs compared with a conventional independent water and power project.

For example, Hydrogen Energy is negotiating with Abu Dhabi Water & Electricity Company (Adwec) to settle on the optimum pricing tariff.

“No one would expect us to sell a premium, clean product at the same rate as dirty energy,” says Gillies.

Masdar agrees. “The low-carbon power will warrant a premium to conventional power generation due to the additional operational and investment expenses required to capture the carbon,” says Sultan al-Jaber, CEO of Masdar.

Crucial too is the financing model. Unless the power plants are state financed, much of the debt will have to be sourced from banks, some of which may not be keen on exposing themselves to what may be regarded as too high a technological risk.

All the evidence so far suggests this fear is unfounded.
“Based on early discussions with banks, there is an appetite for these types of projects, so we are quietly confident that the market will be supportive,” says Gillies.

The Abu Dhabi plant is not the only hydrogen energy scheme announced in the region.

Earlier this year, Dubai Electricity & Water Authority (Dewa) said it was planning a similar project with three international partners.

Potentially much larger than the Abu Dhabi scheme at 2,000MW, the Dewa facility will adopt a different approach regarding feedstock by importing synthetic gas (syngas) from a coal gasification facility in the US.

Coal is viewed as the feedstock of choice for hydrogen-fired power generation because its high carbon content delivers the most CO2 for well injection.

But hydrogen plants can use several feedstocks, ranging from coal and natural gas to syngas and high-quality petroleum coke.

What does not change is the fact that carbon has to be transported at any one point of the process regardless of whether the end fuel is created on or off site.

“Other countries are progressing plans for hydrogen-fired power stations with carbon capture and storage (CCS) that are based on solid fossil fuels such as coal or petroleum coke - a by-product of the refining process,” says Al-Jaber.

“Using coal in this way, with CCS, is important because coal is a more carbon-intensive fuel than natural gas, and rapidly growing economies such as India and China are, and will continue to be, heavily reliant on domestic sources of coal for power generation.

“The Masdar plant will use natural gas, which requires different technology - reformation of the gas - to create the streams of hydrogen and CO2, whereas solid fuels have to be gasified to create these gases.”

Premium cost

On the Dewa scheme, problems over the coal supply cost and issues with the electricity offtake are understood to have led two of the original partners to exit the project.

The problems highlight the challenges faced by such schemes when there is no obvious indigenous feedstock available, or if CO2 injection is neither suitable nor required.

Similar issues would arise if the state utility could not be convinced to pay a premium for clean energy.

Ideally, say sources at Dewa, the Dubai utility is looking for hydrogen gas that can be used in turbines at existing power stations.

Unfortunately, the technology does not yet exist for this to happen easily. Hydrogen gas has a lower ignition value and, when combusted, flows at different rates to natural gas.

Moreover, there are questions over the corrosive affect of hydrogen on the metal turbines. Hydrogen-fired power plants must use specially tailored turbines.

However, the project sponsors are confident that the technical hurdles can be overcome.

“There are no real challenges to hydrogen-based fuel as the production of hydrogen is a proven process, applied for a long time in fertiliser production plants, and the petroleum refining industry is used to handling large volumes of hydrogen,” says Al-Jaber.

“The burning of syngas in modified gas turbine engines is a proven process.

The necessary metallurgy is proven and the hydrogen is mixed with nitrogen to keep the temperature at which the gas combusts from being too high.”

There are some obvious technological and economic challenges to the development of hydrogen energy, but it is clearly an option that many Gulf states will explore.

It will not be easy, but the region has an opportunity to become a leader in the field, and in doing so also increase its hydrocarbons potential. For the decision makers of the region, that can be no bad thing.

For a full Q&A with Masdar’s chief executive officer go to: www.meed.com/power

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