Hydrogen-fuelled power could play a key role in keeping the lights on in the UK as the electricity generation sector attempts to decarbonise through increased use of renewables, new analysis from UK-based consultancy Aurora Energy Research shows.

Hydrogen is a competitive option, in terms of capital costs, for low-carbon peaking power generation only called onto the system a few times a year to balance the grid during periods of reduced output from wind and solar, Aurora says. Its analysis also places low-carbon hydrogen ahead of natural gas plants fitted with carbon capture and storage (CCS) at load factors of 11pc down to less the 1pc.

“Hydrogen presents a viable pathway for peaking assets with lower capex that can be recovered over lower load factors, versus the higher capex requirements of CCS conversions,” Aurora says.

26GW – Potential hourly fluctuation in renewables by 2050

The need for fast-ramping peaking generation will grow by over 20GW from now until 2050 as supply volatility increases with the buildout of renewables and overall power demand rises due to growing electrification.

“The growth of renewables will necessitate a higher buildout of faster-ramping generation as intermittent renewables can experience sudden shifts in output between consecutive hours,” Aurora says. By 2050, renewable output between two consecutive hours could fluctuate by up to 26GW, up from 5GW in 2021.

Current storage technologies, including short-duration batteries, would be unable to compensate for the renewable fluctuations, especially in winter months when solar generation is low.

“Hydrogen presents a viable pathway for peaking assets with lower capex that can be recovered over lower load factors, versus the higher capex requirements of CCS conversions,” Aurora

Hydrogen power generation would take the form of combined cycle gas turbines (CCGT), which can run on natural gas or hydrogen, or open-cycle gas turbine peakers running on hydrogen alone, Aurora says. Capital costs for converting existing CCGTs to hydrogen come in at £170-250/kW ($235-345/kW), with newbuilds costing £550-700/kW, similar to standard CCGTs.

Hydrogen plants would need support in the form of carbon prices and other direct subsidies to make them competitive in terms of short run costs, given the much higher cost of hydrogen fuel compared with natural gas.

Aurora puts the cost of green hydrogen today at £140/MWh, while blue hydrogen remains considerably cheaper at roughly £54/MWh. But the cost of gas plus carbon allowances is around £21/MWh.

“To equalise the cost of H₂ to the cost of burning gas in 2035, a carbon price of at least £210/tCO₂ would be required, while in 2050 it will be £200/tCO₂,” Aurora says.

Generate or offset?

Despite the potential of hydrogen, UK policymakers could face a choice between removing the last, most expensive carbon from the power sector or turning to carbon offsets.

“One of the key challenges highlighted by Aurora’s analysis is that, as we get closer and closer to net-zero emissions, the cost of removing each additional tonne of emissions from the system rises—removing the last 1pc of emissions from the power system will cost over £1,500/t (compared to the current price in the UK emissions trading system of around £50/t),” Aurora says. “This raises an important question about the balance between the costs of removing these last few tonnes of emissions from the power system versus utilising carbon offsets such as reforestation and land-use change.”

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Author: Stuart Penson