October 17, 2018

Long-Term Energy Storage: Hydrogen Opportunity

Stanford Natural Gas Initiative

Background

Rationale

➢ Growing mismatch of timing of supply and demand due to increasing penetration of renewables

➢ Need for long-term energy storage

➢ Natural gas grid is a scalable and technologically feasible solution

Status

➢ Countries and regions with high share of renewables are actively exploring long-term energy storage alternatives

➢ California regulators and policymakers are becoming increasingly aware of challenges associated with moving to higher RPS

➢ Interest is growing in hydrogen as a scalable and environmentally attractive energy storage solution and carbon reduction pathway

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Growth of Renewables Is Creating Challenges for California Power Market

➢ Curtailments of renewable power have been growing over last several years driven by the time-of-day mismatch of supply and demand and exacerbated by seasonality

➢ In parallel, instances of negative power pricing have been also growing as renewable generators bid below zero in pursuit of value of production tax credits

➢ Current trends are likely to continue as California moves to higher share of renewables in state’s power supply

Curtailments of Renewable Power

Frequency of Negative Power Prices

Note: prices in 5-minute real-time market

Source: CAISO

“When comparing spring months in recent years, the ISO recorded a 147-percent increase in renewable curtailment from the first quarter of 2016 to the same time frame in 2017. In the first quarter of 2017, about 3 percent of the total potential wind and solar generation was curtailed, and about 1 percent of the total potential renewable generation was curtailed. But during certain times of the year, it’s not unusual to curtail 20 to 30 percent of solar capacity. On March 11, 2017, the ISO observed solar curtailment exceeding 30 percent of the solar production for an hour.” – Curtailment Fast Facts, CAISO

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Storage Duration of Batteries Is Predominantly Limited to Four Hours

Power Capacity and Duration of Large Scale Battery Storage

Note: energy capacity data for large-scale battery storage installed in 2017 are based on preliminary estimates. Duration is calculated by dividing nameplate

energy capacity in MWh by maximum discharge rate in MW, except in cases where the maximum discharge rate was not available, in which case the

nameplate rating was used instead.

Source: U.S. Energy Information Administration, Form EIA-860M and Form EIA-860

PJM CAISO Rest of the U.S.

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Hydrogen is a Scalable Energy Storage Solution for Low-Carbon Grid

➢ Energy storage is emerging as a critical element of transition to low-carbon energy mix:

• Provides grid stability

• Avoids economic disruption of power market

• Provides benefits to rate- and taxpayers

➢ Hydrogen may be the only scalable solution to address long-term energy storage need

• Batteries are mostly limited to duration of four hours

• Pumped hydro lacks scalability due to shortage of suitable sites and environmental permitting challenges

• Storing energy in chemical form as hydrogen or synthetic methane is scalable and has no losses over time

1 As hydrogen or synthetic methane

Source: IEA Energy Technology Roadmap, Hydrogen and Fuel Cells

Discharge Duration

Min

ute

Ho

ur

Da

y

We

ek

Se

aso

n

10 GW

1 GW

100 MW

10 MW

1 MW

100 KW

10 KW

1 KW

Hydrogen storage 1

Pumped hydro

Compressed air

Bat

tery

Flyw

hee

l

Super capacitor

Cap

acit

y

Comparison of Energy Storage Alternatives

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Hydrogen: Global Momentum

➢ International Energy Agency has identified hydrogen as instrumental in diversifying the global energy mix and reducing emissions

➢ Shell is predicting that hydrogen will be a major energy carrier from 2040

➢ McKinsey estimates that hydrogen could account for up to 18% of global energy demand by 2050

➢ Keele University explores hydrogen blending into is private gas network beginning 2019 (up to 20% hydrogen blend)

➢ Leeds, one of the largest cities in the UK, launched a project exploring feasibility of transition to hydrogen from natural gas (Citygate H2)

➢ Hydrogen Utility (H2U) and Thyssenkrupp are planning to build an electrolyzer plant with a 5MW hydrogen fuel cell and a 10MW hydrogen-fired turbine

➢ A $15-billion Asian Renewable Energy Hub project in Australia is planning to use part of its wind and solar capacity to produce hydrogen using electrolysis. Backed by CWP Energy Asia, Intercontinental Energy and Vestas, the project is targeting a final investment decision by 2021

➢ AGL Energy and Shell partner with Japanese groups on a $375m Hydrogen Energy Supply Chain (HESC) project to import liquefied hydrogen to Japan

➢ Engie employs hydrogen energy storage for solar power (2018)

➢ Environment and Energy Management Agency announces goals of 10% decarbonized hydrogen in industrial energy use by 2023 and 20 - 40% by 2028

➢ Toyota, Honda, Nissan, Tokyo Gas and others form a JV “JHyM” to expand hydrogen fueling station network in Japan; 900 stations are expected by 2030

➢ Japanese companies such as Kawasaki, Iwatani, J-POWER and Marubeni are investing in hydrogen production projects in Australia and Brunei

➢ DEWA (Dubai Electricity and Water Authority) and Siemens sign MOU to pilot region’s first solar-driven electrolysis facility (Feb 2018)

➢ Gov. Brown signs executive order setting the target of 200 hydrogen refueling stations in the state by 2025

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Policy Momentum for Hydrogen Is Building in California

➢ A growing number of thought leaders sees hydrogen as the critical part of a low-carbon energy solution:

• Ernest Moniz, Secretary of Energy 2013 - 2017

• Stephen Chu, Secretary of Energy 2009 - 2013

• Spencer Abraham, Secretary of Energy 2005 - 2009

• Daniel Yergin, founder of CERA consultancy and author of “The Prize”, a definitive book on global energy

➢ International activity in hydrogen is ramping up:

• Germany

• France

• Japan

• South Korea

• Australia

• China

➢ Hydrogen has support among California’s policymakers:

• Gov. Jerry Brown (200 hydrogen stations by 2025)

• Mary Nichols (ARB)

➢ Policy makers and industry leaders worldwide are recognizing hydrogen as a major component of low-carbon future

➢ California’s leadership is becoming increasingly attuned to hydrogen role

➢ Time is right for a focused and coordinated policy, regulatory and commercial effort to advance adoption of hydrogen in California

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Multiple Pathways of Zero-Emissions Hydrogen Production

Water Electrolysis / Power-to-Gas

➢ The use of electricity (e-) to split water (H2O) into hydrogen (H2) and oxygen (O2)

Using Renewable Natural Gas and Water

➢ Using renewable natural gas (e.g., dairy methane) in a steam methane reformer (SMR) to produce renewable hydrogen (H2)

Renewable Electricity

H2O

Electrolyzer

Carbon Capture Utilization / Storage

➢ Using natural gas in a SMR to produce H2 and capture CO2

➢ CO2 can be used as a feedstock for production of valuable materials (CCU) or stored in geologic formations (CCS)

➢ Applicable to fossil-fuel natural gas and RNG

ReformerH2O

ReformerCH4 H2O

Carbon Fibers, Fuels, Concrete, Chemicals, etc.

Underground Storage

Renewable CH4

Zero emissions hydrogen

Zero emissions hydrogen

CCS

CCU

Zero emissions hydrogen

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Zero-Emissions Hydrogen Can Decarbonize Multiple End-Use Sectors

Enable renewable energy Decarbonize End Uses

Hydrogen Transport, storage, End uses in transportation,

production and distribution energy, buildings and feedstock

Sources: Hydrogen Council, McKinsey & Co.

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