From H2 to H2O - Assessing Hydrogen's relationship with Water
By Jack Schaufler, Echo River Capital MBA Intern
Introduction
At Echo River Capital, we are constantly examining the impacts from the intersection of our water system with different industries. We look for emerging trends where innovation is needed to reduce our societal impact on water, and how we can support startups striving improve water security and climate resilience. One fast-growing industry we’ve been tracking recently is Hydrogen, and its potentially negative impact on water. We decided to investigate and take a closer look.
What is H2?
Hydrogen gas (H2) offers a potential solution in the search for an energy dense fuel that can be decarbonized.?Potential applications are industries that rely on medium to high heat (cement, steel, chemicals) that require immense amounts of energy deployed very quickly and currently rely on energy dense fuels (natural gas) to accomplish this. Other industries require a mobile solution that offers a higher energy density than batteries, mobility, especially large-scale transport like aviation, rail and maritime shipping. Hydrogen can be produced using a variety of methods:
Hydrogen can be produced using a variety of methods:
The feed water for current commercialized electrolyzers must be purified, if the incorrect purity of water is used the electrolyser could become fouled or degraded and its output become compromised.
The industry uses a “color” of hydrogen to quickly refer to the type of production, here’s a guide to the industry lingo.
Impact of Hydrogen on Emissions
To understand why there is a push for hydrogen compared to other fuel sources, compare hydrogen to ?other energy sources. The Intergovernmental Panel on Climate Change (IPCC) published a report following a life-cycle assessment of carbon emissions on the most common sources of energy3.?These sources are ranked from least to most emitting across their life cycle. Hydrogen’s emission vary from 26 to 335 g CO2e/kWh depending on the process and sources of energy utilized in the process. Each of the three hydrogen methods compare favorably to fossil fuels. We layered in data from Praxair and IEA to paint the below picture.
Hydropower: approximately 4 g CO2e/kWh
Wind power: approximately 11 g CO2e/kWh
Nuclear power: approximately 12 g CO2e/kWh
Solar power: around 41 g CO2e/kWh
Natural gas: 290-930 g CO2e/kWh
Oil: 510-1170 g CO2e/kWh
Coal: 740-1689 g CO2e/kWh.
Hydrogen - Green: 26 g CO2e/kWh
Hydrogen - Grey: 335 g CO2e/kWh
Hydrogen - Blue: 195 g CO2e/kWh
Grey Hydrogen is roughly on par with natural gas in terms of emissions, lower in some cases but not all. Blue Hydrogen reduces the carbon footprint, but not to the extent of Green Hydrogen.?
Water Consumption of Hydrogen
One of Echo River’s investment themes is water efficiency, which includes the prospect for de-watering energy production processes. The Institute for Global Sustainability at Boston University published a study on the water consumption of various energy sources?below.
Rocky Mountain Institute provides water intensity of Grey, Blue and Green Hydrogen, which is added to this table:
Blue Hydrogen is often touted as a “clean alternative” to natural gas, and while it does offer a reduction in emissions, this data demonstrates it will have a net negative impact on water, consuming nearly 350 L more per MWh of energy generated. Green Hydrogen offers the highest potential to reduce emissions from conventional thermal generation plants while also consuming less water. (N.B. ?Biomass and hydropower were excluded due to variability in the methodology presented by the research referenced.)
Understanding the relationship between emissions and water consumption provides a new lens for analyzing projects for potential investment. For example, there is reduction in emissions when retrofitting Grey Hydrogen facilities with carbon capture systems, but at a cost of additional water consumption that may mean Green Hydrogen is a better solution.
This data is intended to be a tool in determining the tradeoff of transitioning from one energy type to another.
The Market
Understanding the market for Hydrogen is critical to understanding the scale of impact, the direction the industry is heading, and potential fit for venture involvement. Below is market data on Global Hydrogen, including all types, and Global Green Hydrogen, focused on the highest growing segment of hydrogen production.
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The main takeaways from this information:
Drivers of Growth – Green Hydrogen
Causes for optimism behind the high projected growth of Green Hydrogen in North America:
Challenges to Growth – Green Hydrogen
What may slow things down:
Looking at the breakdown of type of investment, later-stage investment into Hydrogen has been the primary driver of the significant spike in capital deployment, but early-stage and seed investments continue to grow at a significant rate.?
Research has found that 97% of venture funding in the Hydrogen sector has been allocated to hardware focused solutions. Digital solutions will play a role, but investors need to have an appetite for the timeline and risks of hardware deployment to invest in Hydrogen.
Analyzing exits to-date, there have not been as many as other climate tech verticals. Experts expect most exits to come in the form of M&A as a few industry leaders emerge. The successful IPOs have exclusively been in the European and Asian markets.
Looking at example investments in the three areas of the value chain:
Of these examples, the supply and production of hydrogen have the most alignment with Echo River’s mission.?
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Echo River’s Perspective
Following this industry deep dive, it is clear that investing in hydrogen without attention to the method of production or what energy source it is displacing can lead to negative impacts on freshwater systems. However, Wgreen hydrogen in appropriate applications can have a positive impact on the water system. Throughout the research conducted, it was disappointing that there is a significant lack of attention to reducing hydrogen’s consumption of water. In fact, in the IEA 2022 “critical” review of hydrogen-production technology, fails to address water supply at all.?Having examined the full value chain of hydrogen, there is significant room for innovation in?de-watering the production of hydrogen via electrolysis.?
Ongoing Efforts:
Of the current efforts, many are at the project development level. While this is not a fit for Echo River investment, it is important to highlight some of the research and efforts here.
Our Focus Moving Forward:
As mentioned in the overview of H2, the water feedstock for current commercial electrolyzers must be purified and often comes from some of our best freshwater sources. Echo River is on the search for companies that are working on technologies to support de-watering electrolysis through the use of wastewater, desalination, or alternative inputs like aluminum. Here are some encouraging examples we found:
Chemergy?– They are developing technologies to convert wet organic and plastic wastes into green hydrogen. This explores the “biological” process of making hydrogen that is currently under-developed.
Maygia?– Maygia is working to develop a modular device for treating wastewater and producing hydrogen, potentially reducing the dependence on freshwater as an input.
GH Power?– They are developing technology to use recycled aluminum as an input in green hydrogen production, it is unclear the impact on this could have on water usage in the end but something to keep track of.
Evolve Hydrogen?– Evolve is working towards affordable green hydrogen electrolysis directly from seawater, an encouraging step towards reducing impact on freshwater systems.
Echo River is keeping an eye out for other technologies that may improve Hydrogen’s relationship with water. So, please introduce us to innovators working at the Hydrogen-Water nexus.
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Sources:
Markets and Markets:
Grandview Research:
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9 个月Good to know!.