While grid-connected electrolysis projects can ensure high capacity-factor, efficient utilisation of hydrogen production, they should generally not be labelled as 'Green Hydrogen'.

There is a confusing spectrum of colours of Hydrogen, including:

• Black / Brown Hydrogen - produced through the gasification of coal / lignite.
• Grey Hydrogen - derived via the steam methane reforming (SMR) of natural gas, like around 99% of the world’s hydrogen is produced today.
• Blue Hydrogen – where the CO2 by-product of SMR is captured and sequestered. Although has been controversial due to lifecycle emissions impact (see AFR: Blue hydrogen may be a white elephant: ISS).
• Turquoise Hydrogen – derived from natural gas by a process called pyrolysis, where the solid carbon by-product can be buried.
• Yellow Hydrogen – produced from mixed grid powered electricity via electrolysis.
• Green Hydrogen – produced electrolysers utilising renewable energy (i.e. solar or wind energy, hydro, geothermal, tidal or even biomass energy could be applicable under the right conditions).

As confusing as these classifications may be to the layperson, those in the industry have these classifications etched into their memory. Projects claiming to produce Green Hydrogen (i.e. zero-emissions electrolysis from renewables), can only be legitimately produced in a handful of ways:

• Utilising onsite renewables: which means low and variable capacity factors, given that solar operates at around 20% of capacity and wind around 40%. This results in low utilisation of electrolyser equipment and means that the unit cost of the hydrogen will have to absorb the unutilised capacity overhead.
• Connection to a 100% renewable electricity (RE) grid, where with constant electricity supply the electrolyser could run at close to maximum capacity. Yet however simple in theory, very few countries are even close to this level of RE.
• Time-matched renewable electricity from grids, via power purchase agreements (PPAs) or renewable energy certificates (RECs) that are tied to the actual operation of the electrolyser. A system could run at higher capacity factor if utilising a diversity of resources across types and location.

To get around the low capacity-factors, some projects claiming to produce Green Hydrogen plan to utilise grid connected electricity and buy carbon credits. This makes sense from a commercial efficiency perspective; as the industry goal is to maximise the electrolyser capacity to get the price of H2 to its lowest cost / price.

However, buyers should be aware of what they are buying. Electricity purchased from the grid is blended renewable and non-renewable generation. And, many types of credits purchased will not likely incentivise any new RE generation (a concept known as additionality), so should hardly be considered Green.

Sellers should be aware that climate-concerned buyers will likely be able to understand the provenance of hydrogen. And, will discern to purchase hydrogen from projects that are able to demonstrate they legitimately produce zero-emissions hydrogen.

As a final thought to ponder in our energy, and capital constrained world. My favourite energy-finance analyst, the proverbial Green Chicken (aka: Doomberg) recently, commented "even though nuclear is totally carbon-free and ideally suited to run electrolyzers around the clock, hydrogen produced using nuclear power must never be called “green.” Instead, it is labelled “pink” hydrogen." This will raise war-cries in environmental circles, given the history of the technology and security and safety concerns over nuclear. However, nuclears role in the future energy mix is something that needs to be considered.

Written by: Michael Salt, Energy and Economics Consultant. Email him at ms101consulting@gmail.com

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