| The Hydrogen Economy: An Objective Look -- Part 2: Hydrogen and Utilities | ||||
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The Current Hydrogen Economy
Hydrogen is already used heavily in the oil and chemical industries. Firm numbers are hard to come by, but estimates for U.S. hydrogen consumption range from 9 to 15 million tons per year. About half is used to produce ammonia for fertilizer. Most of the other half is used in oil refining. It breaks heavy crude oil fractions into lighter products such as naphtha, kerosene, and diesel fuel in a process known as "hydrocracking". A milder process, known as "hydrotreating" or "hydropurification" is used to remove sulfur and other "hetero-atoms" from crude.
The need for hydrogen in these applications will be increasing rapidly in the coming years, as supplies of "sweet light crude" diminish and refiners are forced to turn to grades that are heavier and/or have higher sulfur content. By some estimates, the need for hydrogen will increase four-fold over the next ten years. Where will it come from? That’s an interesting question.
In North America, nearly all hydrogen used in the oil and chemical industries has been made from natural gas, by steam reforming. But gas production in North America has peaked. Many of the older and larger fields which have supplied the lion's share of North American gas have declined sharply or stopped producing altogether, and many others are nearing that point. While a great deal of gas is thought to remain in the ground, it is now widely dispersed in small pockets that are costly to tap. Newer wells often produce for only a year or two, and barely repay the cost of roads, pipelines, and drilling operations -- to say nothing of their steep environmental costs.
Tightness of gas supplies has driven up the cost of natural gas -- and the hydrogen made from it -- to the point where many fertilizer and some chemical plants in the U.S. have been forced to close. Those that remain in operation are squeezed on their margins. They find it tough to compete with plants in countries where natural gas remains cheap. The infrastructure hurdles associated with increased imports of liquefied natural gas mean that there will be no relief for natural gas prices any time soon.
This in turn means that the present shortage of refinery capacity in the U.S. for heavy crude is likely to persist. North American refiners are reluctant to invest in the new plants and equipment needed to process lower grades of imported crude, when the hydrogen that plays a central role in that processing can be produced more cheaply overseas. It makes more economic sense just to build additional refinery capacity overseas, and import the refined products to the U.S. The result is that, far from reducing our trade deficit and becoming less dependent on oil imports, the natural trend will be for continued job losses, increased imports, and more dependence on foreign supplies.
Reducing Dependency
The reality is that the market, per se, is blind to issues of employment, trade balances, and national energy security. Consideration for those issues can only be imposed on the market by political means. The tools available include taxes and tax incentives, subsidized R&D, low interest loans, and loan guarantees or other programs that reduce risk to investors. All of these tools are "double-edged" and must be used carefully. No program to steer the market can be successful if it simply aims to encourage the use of domestic oil and gas over imports. It would be disastrous, for example, to subsidize the purchase of natural gas by oil refiners and chemical companies so that they could produce hydrogen as cheaply as it can be produced overseas. Since it’s high demand for natural gas relative to North American supply that has caused the high prices in the first place, the last thing one should do is subsidize more consumption.
Any programs aimed at reducing imports and improving energy security must therefore focus on:
Reducing oil consumption mostly means reducing total miles driven and/or improving average mileage. Options for that were covered in Part 1. So let’s now take a look at options for points b) and c).
Reducing Natural Gas Consumption
High prices have already reduced natural gas consumption (or limited its increase) by making it unprofitable to operate businesses that depend on supplies of cheap natural gas. However, forcing businesses to close or move offshore is hardly the solution we want. Cutting back on gas for electrical power generation could also reduce gas consumption, but again, it’s an unappealing solution. Gas offers the most cost-efficient way to generate power, and is far cleaner than coal. If we had a choice about it, we’d want gas to replace coal for power generation, not the other way around. [1]
There are, however, positive ways to reduce gas consumption. One is by developing alternative means for producing hydrogen at affordable prices; we’ll look at that further below. But first, let’s consider the largest single use for natural gas in the U.S.: low grade heating. According to the U.S. Department of Energy’s EIA, residential water and space heating accounts for 24% of gas consumption. Consumption by the commercial sector, which is also mostly low grade heating, is another 14% of consumption. Can we cut these figures?
Most homes built in the last 25 years meet stricter codes for insulation and infiltration, and most older homes have been upgraded as well. There’s still some room for improvement, but we can’t expect to see major gains from the kinds of conservation measures that were effective in the ‘70s. However, there are two measures not yet widely deployed that could make big differences. The most immediately deployable method is the use of geothermal heat pumps (GHPs) [2].
GHP Basics
When a heat pump draws from a thermal reservoir at moderate temperatures, it can easily deliver four times as much output heat as it consumes in electrical energy. The natural gas that its use replaces, when burned in a modern CCGT plant, can produce at least twice as much electrical energy as the heat pump consumes. So every home that switches from natural gas heating to a GHP system effectively frees up for other uses an amount of gas equal to half of what it was previously using. As a bonus, GHPs are also highly efficient as air conditioners. Their use can reduce electrical demand for summer air conditioning by more than half.
Existing homeowners, unfortunately, are unlikely to invest in GHP systems on their own initiative. For new homes, the added cost of a GHP system over a conventional HVAC system is quickly made up in lower utility bills. But for an existing home that already has an installed HVAC system, the cost to be made up is much greater. Utilities and state governments may need to implement incentive programs, in the form of low interest loans or tax credits, to encourage switching.
Utilities might also want to consider offering a new type of service: district thermal ballast [3]. This would substitute for the local ground loop heat exchanger in individual homes -- the most costly component of a GHP system. Thermal ballast water would circulate to each subscribing home in a district. In winter, it would serve as the heat source to the heat pump in each home; in summer it would serve as the heat sink. The service differs from familiar district heating and cooling systems in that the thermal ballast water is never much warmer or cooler than the ground around the buried pipes that carry it. Heat leakage around the pipes and the cost of insulation to reduce it are therefore non-issues.
Local CHP
The other measure that could reduce heating-related use of natural gas is deployment of systems for Combined Heat and Power (CHP) at the level of individual homes. Gas is used to generate electricity, and waste heat from power generation is used for heating. Locally generated power replaces a portion of centrally generated power, and heating tags along for free.
It’s an efficient system. While still not common, the process is beginning to be used more widely in industry. There, gas combustion turbines generate the power, and their exhaust supplies heat. Combustion turbines are not practical for home use, but it’s expected that in the near future, fuel cells powered by natural gas will become cheap enough to make home CHP an attractive option. Many advocates of the hydrogen economy find this vision of a decentralized power infrastructure appealing. It would be very easy to substitute locally produced hydrogen or synthesis gas for natural gas.
There are some significant technical hurdles that have to be overcome before home scale CHP is practical. However, those issues are beyond the scope of this article. Time permitting, I’ll write about them in a future article.
Alternative Hydrogen
Now let’s look at ways to produce hydrogen that don’t require natural gas.
In Part 1, Hydrogen as Transport Fuel, we briefly covered methods of producing hydrogen. Here we’ll look a little more at the economic issues for different approaches. There are three general alternatives to natural gas for producing hydrogen:
Production of hydrogen by electrolysis of water has a reputation among hydrogen detractors as inefficient and grossly uneconomical [4]. The basis of this is the observation that a given quantity of natural gas can produce twice as much hydrogen by steam reforming as it can by being used to generate electricity for electrolysis. The observation is valid, but doesn’t really say as much as those making it may want to claim. It just means that to be an economically competitive way to produce hydrogen, electrolysis needs electricity at half the price of electricity from natural gas. There are situations where that requirement is met. I’ll say more about that shortly.
Chemical production of hydrogen starting from fuels other than natural gas is possible, and economical as long as the fuels are available. It is likely to be the cheapest way to produce hydrogen through at least the next decade. The chemical bond energies for hydrogen, oxygen, and carbon are such that any carbon or hydrocarbon fuel, mixed with steam at high temperature, will produce a similar equilibrium mixture of gases. CO and H2, along with excess steam, will predominate. Smaller quantities of CO2, methane, and methanol, plus traces of other gases, will also be present. The fuel may be anything from heavy crude to coal to biomass.
If the hydrogen is selectively removed, the concentration of the other gases shifts to compensate. The result is to produce more hydrogen. Ultimately, the end effect is that the hydrocarbon fuel is completely "burned" in high temperature steam, producing hydrogen and CO2. But the reaction is strongly endothermic, so heat must be supplied to drive it. That’s normally done by mixing oxygen with the steam, burning a portion of the fuel in a conventional manner. This reduces the amount of hydrogen that can be produced from a given amount of fuel, but it’s the easiest way to do the job. The amount of hydrogen that can be produced is still double or more what it would be if the same amount of fuel were burned to provide power for electrolysis of water.
The possibility does exist to use other means to supply the thermal energy needed to drive the reforming reactions. Doing so might increase the hydrogen yield from a given amount of fuel by 25 – 50%, depending on fuel type and reaction efficiencies. On the other hand, if a high temperature heat source is available, there are a number of closed loop reaction schemes that will produce hydrogen and oxygen from water and heat alone, not consuming any fuel. These are thermo-chemical production methods. One of the most favorable is the sulfur iodide cycle, studied by General Atomics and others for producing hydrogen from nuclear reactors [5].
Economics of Electrolysis
I wrote earlier that there were circumstances where the cost of electricity could be low enough to make hydrogen production by electrolysis of water economical. Currently, that cost is about 3¢ per kilowatt-hour. The average retail cost of electricity in the U.S. is 7.5¢ per kilowatt-hour. How can we get large quantities of electricity at only 40% of the average retail price?
Given an appropriate regulatory environment and IT infrastructure, short term variations in power demand over the course of a day would make it attractive for utilities to run a "spot market" for electricity. When there is supply whose costs have been "sunk" and which would otherwise be wasted, it makes sense for utilities to sell it cheaply for applications that can match their use to available supply. Electrolysis is perfect for that. The capital cost of water electrolysis equipment is not so great that the equipment must be run full time to recoup its cost. Because its power level can be changed instantaneously, online electrolysis capacity can be used for load leveling. It would permit fuller utilization of cheaper baseload electric capacity, and minimize the need for peaking units.
Dispatchable electrolysis capacity also facilitates the integration of wind and solar power into the grid. There will be times, for instance, when wind farm output is high while regular demand is low. Being able to increase power to the electrolysis units at such times allows the temporarily excess supply to be used productively. So long as the amount of hydrogen and oxygen produced this way have a ready market in the oil refining and chemical industries, it isn’t necessary to worry about the comparatively poor round-trip efficiency of hydrogen as a solution for power buffering [6].
Both electrolytic and thermo-chemical hydrogen production have the advantage that they do not consume hydrocarbon fuel and they emit no CO2 -- assuming that the source of electricity or heat is wind, solar, or nuclear energy. When used for oil refining, hydrogen and oxygen produced from water will increase the yield of gasoline, diesel, or jet fuel obtained from each barrel of crude oil. Depending on the grade of crude, the difference can be significant. In the extreme case of processing bitumen from Athabascan tar sands in Alberta, 100 barrels of bitumen will yield 76 barrels of "syncrude" when processed without hydrogen, or 106 barrels when processed with hydrogen [7]. For conventional grades of crude, the difference is less, but it’s still large enough to justify the cost of hydrogen production.
Conclusion
Regardless of how hydrogen fares as a future transportation fuel, the demand for hydrogen is already substantial and is growing rapidly. It will continue to grow in the years ahead, as lower grades of crude must be refined and production of synthetic fuels ramped up.
Natural gas has been the preferred source of hydrogen, but there is currently insufficient supply within North America. A well-formulated incentive program could slash the considerable amount of natural gas now used for low-grade heating, and free up some supply for more economically productive power and hydrogen generation.
In addition, electrolytic production of hydrogen is viable, and has several advantages:
Oil and gas depletion are long term problems that will not go away, and cannot be permanently "solved" by efficiency measures alone. However, the above measures for more intelligent use of natural gas and for alternative production of hydrogen take us in the right direction. They help to get us moving along a path that we will have to take in any case, if we hope to survive the end of cheap oil.
Further Reading
The hydrogen economy is a large and controversial topic. Even in a two-part article such as this, it’s impossible to cover more than a fraction of the relevant issues and options. For a balanced understanding, there are four articles available on the Internet that I especially recommend. One is Twenty Hydrogen Myths by Amory Lovins, a favorite of hydrogen’s boosters. Another is a favorite of hydrogen’s detractors: The Future of the Hydrogen Economy: Bright or Bleak, by Bossel, Eliasson, and Taylor . The last two are critiques of the first two. The articles can be found at the following URLs:
For the hard core, there’s a page at my own web site that has some 40 links, along with short descriptions of each one. These are links to the web sites I drew on for this article. Go to http://www.silverthornengineering.com and click on the "links" navigation button.
End Notes and References
[1] Which, of course, was precisely the plan, until we found that gas wasn’t as abundant and easy to obtain as we’d been led to believe.
[2] A good fact sheet explaining geothermal heat pumps and their operation can be found at http://www.eere.energy.gov/consumerinfo/factsheets/geo_heatpumps.html
[3] http://www.silverthornengineering.com/Tech Papers/ThermalBallast.html
[4] A good technical article that makes this point is by Don Lancaster in his July 2001 Tech Musings newsletter: http://www.tinaja.com/glib/muse151.pdf
[5] http://gcep.stanford.edu/pdfs/hydrogen_workshop/Schultz.pdf
[6] The round-trip efficiency of electricity to hydrogen and back to electricity is currently about 50%. Several other methods, including pumped hydro-electric storage, compressed air energy storage (CAES), and so-called "flow" batteries, manage around 80%.
[7] http://www.eia.doe.gov/oiaf/aeo/issues_4.html
| Date | Comment |
| Len Gould 12.10.04 |
Good to see you injecting some cool
common sense into the debates. Kudos. Especially important is your
statement "the market, per se, is blind to issues of employment,
trade balances, and national energy security. Consideration for those
issues can only be imposed on the market by political means." It
seems unfortunate that most of the tools normally used for the purpose
have recently been given away through international trade agreements eg.
WTO etc. I'd guess its time to relegate domestic refining to the list of
"rustbelt" industries and start trying to figure out how to
organize afterward. Apart from servicing each other's consumption it's
hard to see a role for the large majority of population. Looks like the
elites have figured this out a long time ago.
BTW, love the concept of "district heat sinking". Should be readily doable as a low-cost retrofit if heat-pumps are desireable. I think instead we shouldn't be waiting for residential fuel cells. The easiest is, starting now with northern climates, adding small CHP engine/generators and some thermal storage to each padmount transformer. Pick up nearby nat. gas supply at high enough pressure to supply the burners without costly compressors. Stays under utility ownership / management, no liklihood of injuring linemen. Move meters for electricity and thermal into the padmount where they can be cheaply read remotely with the same simple phone line used to shut them down etc. on grid failures. Easy, no?
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| Roger Arnold 12.10.04 |
In line with your comment, Len, not too
long after I finished and submitted this article, there was a pertinent
news article. It announced that Saudi Arabia was building facilties that
will use hydrogen to upgrade the heavy, sour crudes that apparently
comprise much of their remaining reserves.
It makes sense for them to do so, since they also have a lot of stranded gas for making hydrogen. The investment should pay off nicely for them, because the spread between sweet, light crude and heavy, sour crude is currently close to $10 a barrel. The Saudi plans could be seen as vindication for US refiners, who have been very cautious about investing in facilities for handling heavy, sour crude in this country. But it's yet another hit to our trade balance. We really, really need to be developing industries that will produce viable exports. We can't continue on the basis of arms sales--which are becoming an increasing fraction of what we do manage to export. I vote for energy conservation and alternative energy technologies. They're bound to be growth markets.
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| Murray Duffin 12.11.04 |
Great article Roger! I would question
one point, the extent to which home efficiency opportunities have been
realized. I lived on Long Island in the 1980s and taking advantage of a
LILCO DSM offer I upgraded my attic insulation from about R9 to about
R27. In the winter of '85/'86, when it snowed, every house in a many
block area had bare roofs when I still had snow on my roof. I was the
only house in perhaps 200 that had done the upgrade. Now my daughter
lives in Wilkes-Barre Pa. Last March when I was visiting it snowed.
After a couple of days almost every house roof was bare, but unheated
porch roofs, facing the same way still had near 6" of snow. This
observation applied to by far the majority of houses in WB and Scranton.
My conclusion is that, at least in the NE, the opportunity hasn't yet
been scratched. Murray
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| Roger Arnold 12.11.04 |
I think you're right, Murray. I had second thoughts about that paragraph myself, when I was doing further research on how many BTUs of heat were needed to heat homes in different areas. It's not nearly as related to average winter temperatures as one might expect. There's a strong "leveling effect", indicating that homes in colder climates are much better insulated than those in milder climates. If heating bill are below a certain level that they consider "affordable", homeowners don't bother with measures to reduce heat loss. Quite rational, in one sense, but it practically guarantees crises. |
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