Cost declines are seen as being critical to meaningful penetration of low carbon hydrogen – and this has been leading to ever more ambitious long term targets. In a March 11 Future Energy Outlooks Special Report, S&P Global Platts Analytics discussed challenging industry targets of renewable hydrogen cost of Eur1.50/kg by 2030 in Southern Europe – noting the need for consistently low power prices and a sharp reduction in electrolyzer capital cost.
In Asia, Australia policymakers have set a goal of “H2 at $2”. The most recent, more aggressive cost targets have just been set in North America, as the US Department of Energy (DOE) on June 7 unveiled a hydrogen initiative geared towards cutting the energy carrier’s cost by 80% to $1 per kilogram within one decade or ~$9/ MMBtu. The initiative, dubbed the “Hydrogen Shot,” is the first of the DOE’s newly launched “Energy Earthshots” initiative series that aims to advance the development and drive demand of lower-emitting energy sources, according to an agency news release.
The DOE estimates hydrogen from renewable energy currently costs about $5/kg, or roughly $44/MMBtu. By comparison, on June 4, Platts Hydrogen California PEM Electrolysis (including CAPEX) assessment was $34.79/MMBtu. Lower than the DOE estimate but significantly higher than the regional natural gas hub in California, PG&E, which settled at $4.01/MMBtu. (For more on Hydrogen Technology) Platts Analytics looked at what would need to happen to make renewable hydrogen competitive compared to existing methods of producing hydrogen with gas, referred to as grey hydrogen or blue hydrogen if the facility has a way to capture the CO2 byproduct.
The report Despite Steep Electrolyzer Cost Declines, Economics of Renewable Hydrogen Remain Very Challenging, is based on the premise of that there is an inverse relationship between technology production costs and cumulative installed capacity to understand whether the rate of decline in CAPEX costs is enough to make renewable hydrogen competitive. The main takeaway from the analysis is that in the absence of a carbon price, low-cost power will be required for renewable H2 to compete economically with incumbent fossil H2 or even with blue hydrogen.
Under a 2040 moderate technology paradigm, power prices would need to average as low as $10/MWh for renewable H2 to be cost-competitive with contemporary fossil+CCS H2 production pathways. ELECTRIC POWER | ENERGY TRANSITION 15 Jun 2021 | 16:00 UTC Listen: Rise Light & Power CEO lays out the challenges of turning New York City into a hub for clean energy Featuring Jared Anderson Commodity Electric Power, Energy Transition Length 20:14 Topic Energy Transition,
Environment and Sustainability New York has one of the most aggressive decarbonization plans in the country through its Climate Leadership and Community Protection Act, which sets goals for building several gigawatts of renewable energy capacity, including offshore wind, battery storage and the transmission lines to connect those resources with urban demand centers.
In this edition of the Platts Commodities Focus podcast, Jared Anderson, senior writer with S&P Global Platts, speaks with Clint Plummer, CEO of Rise Light & Power, whose company is retooling one of the oldest fossil fuel-fired power plants in New York City into a renewable energy and storage hub. Plummer, an industry veteran who helped develop the country’s first offshore wind project, discusses challenges and potential solutions associated with bringing incremental renewable energy capacity into the physical and electrical island that characterizes New York City.
ELECTRIC POWER Platts Forward Curves – Gas and Power Learn More CRUDE OIL, COAL , CORONAVIRUS, NATURAL GAS S&P Global Platts Client Analytics Seminar 22 Sep 2021 | 00:00 UTC Register ELECTRIC POWER 18 Jun 2021 | 19:27 UTC Cal ISO extends flex alert to a second day as extreme heat blasts the region Author Kassia Micek Editor Haripriya Banerjee Commodity Electric Power HIGHLIGHTS Peakload averaging 40% higher week on week Excessive heat warnings, heat advisories remain Mid-C July,
August packages reach record highs The California Independent System Operator extended its statewide Flex Alert 18 asking consumers to conserve electricity during the evening to reduce stress on the power grid as extreme heat hits the region, driving up demand and prices. Not registered? Receive daily email alerts, subscriber notes & personalize your experience. Register Now The flex alert, in effect for 6-9 pm PT June 18, is a voluntary call to conserve electricity during anticipated energy supply shortages to avoid power outages, such as the Aug. 14-15, 2000 rotating outages that were the first since 2001.
The first flex alert of the season was for 5-10 pm PT June 17. “The ISO is continuing to monitor weather and grid conditions and will have additional announcements as information becomes available,” an ISO statement said. “Precise hours for a flex alert depend on hourly demand and supply forecasts and can change as conditions warrant.” The ISO forecast peakload around 41.389 GW June 18. Peakload reached 41.081 GW June 17, a more than eight-month high, but 4% lower than the forecast, according to ISO data.
Peakload averaged 38.62 GW June 15-18, a jump of 40% week on week. The all-time peakload record is 50.27 GW reached July 24, 2006. Excessive heat warnings and heat advisories remain in effect across much of California, Nevada, Arizona and Utah, according to the US National Weather Service. Temperatures are expected to once again reach record-breaking highs across much of the region, with several records likely to fall on June 18-19. “Under such conditions, evening is the most difficult time of the day for grid operations,
especially in persistent hot weather when evening temperatures stay warm, because demand for electricity remains high as solar energy diminishes,” an ISO statement said. During past flex alerts, consumers cut back electricity use and helped California avoid or limit power outages that can, if conditions persist or worsen, become necessary when demand for electricity outstrips capacity. In August and September 2020, consumers reduced electricity by 1 GW to 3 GW during flex alerts.
The ISO already declared restricted maintenance operations from noon to 10 pm daily over June 15-18, which requires generators and transmission operators to postpone any planned outages for routine equipment maintenance, ensuring all grid assets are available for use. Climbing prices Wholesale power prices have eased after spiking earlier in the week. SP15 on-peak day-ahead locational marginal prices slipped 37% day on day to $81.71/MWh for June 18 delivery, according to ISO data. SP15 jumped to $129.59/MWh June 17, the highest level since the nationwide February winter storm.
NP15 on-peak day-ahead LMP dropped 39% on the day to $82.44 for June 18 delivery, after climbing to $134.26/MWh for June 17, the highest level since the February storm. In the Northwest, Mid-C on-peak day-ahead reached $238.60/MWh June 17, a three-year high, according to S&P Global Platts pricing data. Likewise, Palo Verde on-peak day-ahead sank 91% day on day to $142/MWh for June 18-19 delivery, down from $1,575/MWh, the highest level since reaching a record high of $1,643.25/MWh on Aug. 19, 2020, according to Platts pricing data.
Power forwards Power forwards were more moderate after reaching package highs. SP15 on-peak July slipped 16% from the package high of $160.05/MWh on June 10, to the mid-$130s/MWh by June 17, which is still 255% higher than where the 2020 package was a year ago, according to Platts data. Likewise, the SP15 August package slipped from a package high of $175.50/MWh on June 5 to the mid-$150s/MWh for June 17, which is still 251% higher than its 2020 counterpart a year ago.
In the Southwest, Palo Verde on-peak July was in the low-$250s/MWh June 17, 436% higher than the 2020 package a year ago, even as the 2021 package slipped 6% from the package high of $267.80/MWh reached on June 10, according to Platts data. The August package was in the low-$240s/MWh, 350% higher than its 2020 counterpart a year ago but down 8% from the package high of $262.85/MWh reached May 13. Likewise, Mid-C on-peak July reached a package high of $162.05/MWh June 16, 427% higher than the 2020 package last year,
as the August package reached a high of $200/MWh on June 16, 391% higher than its 2020 counterpart a year ago. ENERGY | ELECTRIC POWER 17 Jun 2021 | 12:15 UTC Insight Conversation: Toby Ferenczi, founder, EnergyTag Author Raymond Shi Commodity Energy, Electric Power Topic Energy Transition Toby Ferenczi is founder of the EnergyTag Initiative, an independent, non-profit, industry-led initiative to define and build a market for hourly electricity certificates that enables energy users to verify the source of their electricity and carbon emissions in real-time.
EnergyTag’s founding advisory board members include large European renewable producers such as Engie, Vattenfall and Iberdrola, as well as consumers, grid operators, and key organizations in the energy certificates market. Ferenczi talked to Raymond Shi about the underlying principles of the initiative, the benefits of moving towards increased granularity, and the first EnergyTag demonstrator projects. Could you explain what the EnergyTag Initiative is and how the concept originated?
The driver for the EnergyTag initiative is a global trend towards increased demand for renewable energy coming from consumers and businesses. More consumers are expressing a desire to buy renewable energy but question how to really buy renewable energy when all power plants are connected to the same electricity network. Toby Ferenczi, founder of EnergyTag Toby Ferenczi, founder, EnergyTag Today, we use a system of Energy Attribute Certificates (EACs) that serves as a very important accounting mechanism. It is essentially a system that tracks every unit of [renewable] energy that is generated through a certificate and is structured in such a way to prevent double counting.
The certificate then enables you to accredit the environmental attributes of energy to a consumer. Having recognized the important of these certificates you also realize there is a flaw in the way they are used today. They rely on annual matching which means you match your annual consumption to certificates that were produced within the same 12-month period, and that enables you to claim that you are 100% renewable. That system worked very well when certificates were introduced 20 years ago. As there were no renewables on the grid, you were always displacing fossil fuels, so the timing wasn’t so important. But today timing is everything.
For example, once you have more than 30% of renewables on the grid you have times of the day when you have massive overproduction of renewables and other times when you lack renewables and rely on fossil fuels. That temporal aspect is lost in today’s certification system. It does not reflect the real-world availability of renewable energy, so that is why we have developed the initiative.
We set up the EnergyTag initiative last year to address this and are working alongside leading industry organizations to define the first standard for hourly energy certificates and set market guideline for issuing and trading certificates. These are to work within the same principles as current EAC system with the key difference of an additional timestamp, so you know not just where the electricity is produced but when it was produced as well. In parallel, the initiative will stimulate the first voluntary markets by curating a series of demonstrator projects spanning across six different countries and will showcase existing technologies for real-time renewable energy tracking.
What are the benefits of increasing the granularity of certificates? One of the key benefits is improving the perceptions around renewable energy claims by linking production to consumption in real time and making the certificate system much more reflective of the physics and economics of the grid. A second aspect is providing a new market signal for energy storage and demand response. The design allows these certificates to be priced differently throughout the day depending on the time and corresponding supply and demand of renewables.
The price should be zero or very small when there are lots of renewables available and it should be more expensive during periods when less renewable generation is available. The difference between the two is the price signal that energy storage technologies could use, such that they would be able to buy these certificates when they are cheap, store the energy and corresponding certificates and put them back onto the market when there is less renewables available. A third benefit is that it could support a new carbon accounting methodology.
There are more people revisiting the topic of carbon accounting because people use these certificates for their Scope 2 carbon emissions reporting. More granular EACs would provide a new method to drive more impact and to empower the right behaviors that maximize carbon savings. Why would hourly certificates send a different price signal to existing Guarantees of Origin? If we consider why Guarantees of Origin (GOs) are so cheap today relative to power, a key reason is because they are very easy to use, because you can generate them in the summer and use them in the winter so there is an abundance in supply.
If you consider the existing system of annual matching, you can claim to use solar energy at nighttime because there is no verification mechanism that tells you where your power is from on a granular basis. A more granular system makes certificates slightly harder to use because you can only claim a certificate if you show you are consuming at the same time. What that will mean is that there will be some hours where the certificates will cost close to nothing because of an abundance of renewables, while other times of renewable shortfall they should be significantly more expensive and that is the price signal you want to send. The price will be for the market to decide but I think that these hourly certificates will send a much more accurate and useful price signal to the market that will help drive decarbonization. Is there a specific price target you see for Guarantees of Origin?
If you look at the price of current GOs it is difficult to predict where it will end up. Demand is going up but so is supply because there are a lot of renewables being built. For granular certificates it is very hard to forecast because markets are only just being established. I would expect a different pricing regime compared to current GOs because they will be zero at certain times of the day and non-zero at other times. There would be some correlation with the power market because wholesale power prices are driven to some degree by availability of renewables. For example, the famous duck curve shows that when you have a lot of solar during the middle of the day, power prices are pushed down for those hours.
Thus, you would expect the price of these hourly certificates to be correlated to the power price and provide another price signal on top of that. With some correlation to power markets, do you see a relationship between GOs and carbon prices? With respect to EU Allowances, the big difference is that hourly certificates are all about consumption-attributional accounting whereas carbon credits are a mandatory tax on production of CO2 at the source. I think there will be some correlation between the two markets over time. What we are currently seeing is that the carbon price is pushing up power prices. As it lifts the cost of marginal generation it is raising power prices for everyone and even pushing up the price of PPAs.
Even people buying renewable energy and GOs are still impacted by the cost of carbon when intuitively you would think they would be more insulated because they are consuming electricity from carbon free sources. With normal GOs it is more difficult to determine the correlation with the power market because of annual matching. If you moved to these hourly certificates, they would certainly be much more closely correlated with power markets. The intention is to make the certificate market much more reflective of the real-world availability of renewables. Platts Atlas of Energy Transition The certificate market was established to promote investment in renewable technologies. Is the aim of hourly certificates also to facilitate renewable investment? I think when corporates decide their renewables procurement strategy they are focused on additionality.
They want to know when I purchase renewables, I am creating a positive impact by ensuring a new renewable [wind/solar] installation is built. It is actually very hard to show this even if you sign a Power Purchase Agreement due to issues like price cannibalization but that is what people are looking to prove. We are suggesting that it is not just about new renewables but there is a wider infrastructure needed to switch to clean energy. The question should be “how can we consume more when renewables are abundant, and less when they are not?” The more appropriate solution to maximizing the carbon impact may be greater storage and flexibility.
We want to maximize carbon mitigation and accelerate the transition to 100% renewable energy. I like to use the phrase “carbon cannibalization”—if you have a grid that already has a lot of solar, putting in more solar produces more renewable energy at a time of day where the carbon intensity of the grid is already very low. The greatest carbon impact may come from installing a battery that can store solar energy during the day so that it can be used in the night when you would be running a greater proportion of fossil fuels.
Granular hourly certificates help you capture this temporal dynamic. Do you think the primary mechanism is the price signaling from certificates? What are the other factors to consider? I think the primary drivers are a combination of the price signal and greater transparency. That increased transparency is going to underpin the demand for certificates which then sends the price signal to the supply side. On the supply side, people should respond by building more renewables at the right time of day and prioritize energy storage technologies. In terms of demand response,
they already respond to price signals coming from the power market as well as shorter time signals from grid operators such as frequency response. This would provide another price signal for demand response aggregators and that could lead to shift in people’s load and corresponding consumption profiles. Is there a role for hourly certificates in hydrogen development, by differentiating between different types of hydrogen? Hourly certificates would facilitate the development of green hydrogen, specifically the labelling of green hydrogen. Green hydrogen refers to hydrogen that was produced using electrolysis powered by renewable electricity.
Hydrogen is already widely used for many industrial processes, however most hydrogen is produced using coal. Coal gasification is very carbon intensive so if you can replace coal with renewable electricity there can potentially be a big benefit. If you want to buy green hydrogen as opposed to grey or blue which come from less clean sources, you need a certification system to verify that hydrogen was produced using green electricity. Hydrogen can act as a storage medium on the grid only if you are able to correlate the time of [renewable] production with consumption. You do not want hydrogen electrolysis to occur at peak times of demand on the electricity grid, instead you want production at periods of high renewables and low demand. Do you see the use of hourly certificates leading to more local consumption of GOs?
This is a broader fundamental question about the GO market—over what distance you should be able to trade these certificates. Currently in Europe you can trade them through any member state in the AIB which includes Iceland which has no interconnector. There is no physical flow of electricity between Iceland and the rest of Europe, but you can claim GOs. What we are doing is adding a timestamp that makes the certificate market more reflective of the physical flows of electricity on the grid. Whether the system should limit trading of certificates to physical flows on the grid is an interesting debate that is discussed regularly but would ultimately be for the European Commission to decide. There is an interesting angle within local flexibility markets which is emerging to solve problems with local grid congestions, and you can imagine using these hourly certificates as an important instrument in those markets. How has the implementation process of the initiative been so far?
We have six demonstrator projects that are launching now, and these will be up and running by the end of the year, so that the market is starting from now. We have a further four projects which are expected to start later this year. It is difficult to predict the volumes of these certificates, volumes will begin quite small at the end of this year and gradually increase through next year into the following year. The pace will be ultimately dictated by demand from the market. What challenges do you see for EnergyTag in 2021?
There are a few challenges to the process. A lot of technology platforms are already out there that have this capability so there aren’t necessarily too many technical hurdles. However, getting access to granular hourly meter data is always a challenge, but there is already a lot of progress in Europe to centralize TSO data. Making sure to link the system with the existing certificate schemes is another challenge. This is something that we spend a lot of time thinking about, and there are several solutions that have been presented here.
We plan to publish another report at the end of the year which will have a more detailed set of guidelines based on learnings and feedback that we are getting from these demonstrator projects. It is an iterative process—the guideline for the current GO framework also changed regularly. How would you define success for EnergyTag—would this be integration into the existing GO framework? Success for us would be for the guidelines we have developed to be adopted by the European Commission, the AIB in Europe or other REC systems internationally.
EnergyTag is an industry initiative meant to accelerate the development of the market. We are trying to focus on adding a timestamp to existing certificates to facilitate this market to emerge, whilst providing a respected forum for discussion. Environmental markets start off as voluntary markets and then become regulated. Even GOs in Europe which are now part of European legislation started off as a group of companies that got together and developed a mechanism to enable people to buy renewable energy.