Sustainability Assessment of Large-Scale Green Hydrogen Production Systems for the Energy Transition

Abstract

This research provides a framework for a broader assessment of the sustainability of investment in large-scale hydrogen generation facilities, encompassing ultrapure water units, electrolyzers of type PEM, AEL, or SOEC, and gas purifiers. The results should improve the business case by understanding the level of risk and proposing mitigation options for the most critical impacts on the sustainable development goals. The study included mapping and quantifying the environmental and social impact of these green hydrogen value chain components and a techno-economic review of 29 global technology suppliers. It evaluated the sustainability of a typical corporate financial business model with and without the effects of carbon pricing due to CO2 emissions reductions, the impact of hydrogen leakages, depletion of fresh water, the liabilities for mining metals for catalyzers, and fabrication of water splitting systems, among others. The individual performance of equipment was assessed using the leverage cost of energy and LCA methods. The key questions of this research focused on the environmental externalities of the ultrapure water unit and PEM electrolyzer and their role in the sustainability of large infrastructure until 2050. Other key questions were related to the potential social and environmental impacts on the facility's economy and their impact on the business case. Finally, I tested a hypothesis about the main variables of the levelized cost of hydrogen to understand the effect of direct subsidies on capex versus the cost of renewable electricity and other value chain elements. I performed a financial analysis of the cost of equity that is sensitive for later analysis of levelized costs and a business model built on a spreadsheet. The factors used for liabilities were extracted from the LCA literature review and engineering proxies for estimating H2 leakages into the atmosphere. The forecast for 2030 and 2050 used time series analysis and official projections from the IEA. The research confirmed a levelized cost of hydrogen of 5.11 USD/Kg and a cost of ultrapure water of 0.045 USD/Kg of H2, with a pivotal price of 2.3 USD/Kg to be competitive versus fossil fuel options. The cost of electricity was the most sensitive value in the business case, and the sensitivity analysis confirmed a potential perverse incentive if subsidies continue in an electricity market below 20 USD/MWH. The water cost was irrelevant for H2 production, making reverse osmosis for seawater the option with fewer social and environmental risks. The cost of equity used in the research was 12%, which is adequate for the level of risk from a corporate perspective. The forecast of the potential transformation of fossil fuel consumption in OECD and non-OECD countries, the upgrade of current blue and gray hydrogen, and the coming PtX energy products confirmed an important role of green H2 in the following decades, replacing fossil fuel based global energy systems. Finally, to allow a more transparent comparison of projects and components under an ESG approach, a spreadsheet tool was constructed to incorporate the previous findings to understand the effect of profitability versus the impacts on sustainability. The main output was a comprehensive framework for this category of energy system (>1MW), which is critical for the energy transition until 2050.