ITM Power has announced that fit out of its 1GW/yr ‘Gigafactory’ at Bessemer Park has now reached ‘Practical Completion’ – contractors have handed the completed building and manufacturing can begin- having suffered only a minor delay from the Covid-19 pandemic. ITM Power says its Gigafactory is a ‘blueprint’ for a high capacity, semi-automated PEM electrolyser manufacturing facility, which can be readily replicated, enabling a local facility to be planned and rapidly deployed in response to large order volumes.
Graham Cooley, ITM chief executive, said: “We have made solid progress over the last few months in operations as we gear up for the step change in manufacturing volumes enabled by our move into the world’s largest electrolyser production facility. Designing the factory and the manufacturing processes, followed by the fit out, has been a two and half year journey, which has produced a blueprint for additional Gigafactories when justified by order volumes. We are pleased and proud to be in our new home.”
In June 2020 New Power interviewed ITM Power’s Graham Cooley – read the full interview below
Last time New Power Report interviewed ITM Power chief executive Graham Cooley, in 2016, the hydrogen economy was still of interest mainly to specialists. ITM was rolling out its first ‘power to hydrogen’ filling stations, using electrolysis to provide transport fuel.
Four years later, the world has moved on. Energy minister Kwasi Kwarteng described green hydrogen as a “key technology” for the future, saying that “the question is how we can produce hydrogen cleanly”. He set out the benefits of hydrogen, as well as CCS, in maintaining security of supply and reducing whole-system costs – and developing export markets for UK manufacturing. “At the moment our exports are services, and we are not exporting [for example] wind turbines. That shows the nature of the problem,” and the UK needed domestic manufacturing and markets for these technologies so it could develop export markets. It is also high on the agenda for the EU.
The reality of new government impetus on green or blue hydrogen remain to be seen, when the White Paper finally sees the light of day. Meanwhile the balance of activity within ITM has shifted, with game-changing investment and the needs of industrial users now leading the hydrogen development stream.
An example is the Shell Rhineland Refinery in Wesseling, Germany, where ITM is installing and Shell will operate a 10MW hydrogen electrolyser. The Refhyne project is funded by the European Commission’s Fuel Cells and Hydrogen Joint Undertaking (FCH JU).
Cooley says, “What this project showed us, is that to scale this business we need an EPC partner and that’s one of the reasons we partnered with Linde. To attack this market we want to concentrate just on making electrolyser modules and the EPC will be done by Linde.
“So we have built the modules. There are five sized at 2MW. The building is nearly up and the electrolysers are built and will be installed on site as soon as we emerge from the [CV-19] restrictions.”
That is a drop in the ocean, he says. On a macro level, Cooley cites a raft of reports that put demand for electrolysers in the tens of GW within the decade. Europe will need 80GW by 2030 and the UK alone will need 6-17GW.
Why the demand? Today the two biggest uses of industrial hydrogen are in ammonia production and in refineries and they will soon have to comply with new environmental restrictions. Cooley says, “Refinery hydrogen is being included in the EU Renewable Energy Directive. It’s the first type of hydrogen that has been included in the directive and it requires oil and gas companies to make 6% of their product renewably. So electrolysers at refineries are a great entry point for large-scale electrolysis.”
Although the Refhyne electrolyser will be the current world-beater – the largest PEM electrolyser in the world – it provides just 1% of the hydrogen to its host refinery. “They would need a gigawatt to decarbonise the hydrogen at that refinery and that is one refinery of one company. The market for green hydrogen at refineries [is huge]. If you only used 10% green hydrogen that is a €90 billion market in electrolyser capital investment,” says Cooley.
He cites figures from a Hydrogen Europe report. “The current demand – which is all brown hydrogen – is 400TWh/yr. That is equivalent to 150GW of electrolysis at a 50% load factor. Today industry is already using that much hydrogen. Hydrogen Europe estimates that will go to 2250TWh in 2050. That is 840GW of electrolysis at 50% load factor.”
Cooley reflects on the scale-up of an industry that is being built – like PV or battery storage – by mass replication of small modules. “ITM Power has been at the business of electrolysis for over 20 years. We have gone from defining and building our first product in 2011 to 10 MW products and that is three orders of magnitude in less than 10 years”, says Cooley.
The company itself has also passed a watershed, Cooley explains: “In October of last year we raised £58.8 million in investment and got a strategic investor in Linde, the largest speciality gas company in the world. They now own 20% of ITM. We formed a 50:50 joint venture called ITM Linde Electrolysis [ILE] based in Dresden.”
Around £8 million of the new funding is going towards fitting out a new factory making ITM’s ‘PEM’ electrolysers. Its output in terms of electrolysis will be 1GW/yr. “It’s the biggest in the world and it is in the UK, in Sheffield,” says Cooley “I have to pinch myself”. Construction is under way and it was originally due to start up in August, but he says, “It was delayed by the pandemic and we are now saying it will be in November.”
From mega to giga
The next step up for the partners is a Humberside project called Gigastack, where ITM Linde Electrolysis is doing a feed study on a 100MW plant and jointly with Orsted and Phillips 66.
Why Humberside? Cooley says, “It is the most carbonising industrial cluster in the UK. Also the main substation in Humberside – right next to Phillips 66 – is where the Hornsea One offshore wind farm [rated at 1.2GW] is being connected and the power will also come from Hornsea Two [1.4GW] to that substation. So it is the perfect place to put a large electrolyser to connect direct to the offshore wind and decarbonise the refinery. That’s the rationale: we have the end user, the renewable energy supplier and the EPC contractor and electrolyser supplier all in one project.”
Down the cost curve
Cooley says there are just three drivers to reduce the cost of green hydrogen. The levelised cost of the electricity that goes in is the most important thing – and that is driven by reductions in the renewable energy price. The other two issues are the capital cost of the electrolyser and the electrolyser load factor. Modularisation should allow electrolysis to get green hydrogen down the cost curve as fast as possible.
The Immingham project is using the same 2MW modules as Refhyne, to be fabricated in the new Sheffield factory, but Cooley describes them as ‘third generation’. The fourth generation – also being funded by Gigastack – will step up from a 2MW to a 5MW module.
I ask whether there are risks in scaling up a successful module design – large battery installations, for example, simply stack tiny units. Cooley says the risk is outweighed by the cost reduction opportunity. “What it does is decrease the cost of installation and balance of plant, as well as the cost of electrolysis. The number of interconnections, bus bars, pipes, connections and sensors you need is vastly reduced”. Part of the Gigastack investment will fund semi-automation in the factory, which will also reduce costs.
Cooley thinks stepping up electrolyser module size from 2MW to 5MW, “is about where we should be for plants up to about 500MW.”
ILE has begun a second project with Orsted, investigating whether an electrolyser could be placed inside the tower of an offshore wind turbine, producing hydrogen which could be piped ashore. Orsted says hydrogen pipework would be cheaper to fabricate and install than laying power cable (see article, this issue, about the risks of offshore cable connections). Cooley says that although some of the partners are the same, “doing anything with electrolysers offshore is years off.” The hydrogen turbine tower is a development project “but Giga Stack is a real deployment project,” he insists.
With hydrogen firmly on the future energy roadmap, there are competing options for its supply.
The jargon dubs hydrogen produced by electrolysis as ‘green’. The so-called ‘blue’ option would see hydrogen produced from methane via steam reforming, with carbon dioxide as a by-product that has to be dealt with using carbon capture and storage (CCS). Half that technology – steam reforming – is in common use. CCS has been regarded as a necessary technology for years but making it work on an industrial scale in the UK has proved problematic. Energy minister Kwasi Kwarteng implied in his May remarks that Blue hydrogen was an ambitious option, available “once we have landed carbon capture and storage”. More CCS funding was promised in the budget and Kwarteng said, “We have committed to it twice [with funds, now reallocated, for demonstration projects]… It’s not a promise we can easily climb down from and I expect to see progress.”
Is blue the wrong direction?
But Cooley says that blue hydrogen is the wrong direction. “It captures a certain amount of carbon but it retains a big infrastructure and it retains the existing methane infrastructure. And that infrastructure leaks – small leaks eliminate the advantage of using hydrogen.” CCS also requires financing for carbon dioxide transport
Also CCS requires huge investment before the first installation. “To do a CCS project you have to spend billions. You have to spend hundreds of millions just doing the FEED study. With electrolysis you can start with tens of megawatts and build up to hundreds of megawatts because it is modular. You can incrementally introduce green hydrogen, whereas with blue hydrogen you have to introduce a very large scheme,” Cooley says.
“The point about that is that the amount of risk you take on is very high. When you go down the cost curve, the technology that you pick becomes a self-fulfilling prophecy. So the important thing for the UK government is to invest in green hydrogen from day one. And the reason you invest in green hydrogen to go down the cost curve is that it is the net zero solution. You have to start where you want to end up.”
I compare this to the huge investment of time and expertise, long development time and high cost hurdle, that makes a nuclear project so hard to deliver even if it will result in an equally huge amount of capacity. In that case, more PV capacity was installed and the technology cost fell dramatically, because it could be done in tiny increments with low barriers.
It is no surprise that Cooley likes the analogy. He adds, “On nuclear, we signed a long term contract at 93p/kWh and when the contract was signed it looked great in comparison to renewables.” The price quickly looked unwarranted, “And the reason was that they did not look at the way cost reduction is accelerating for renewable power. They looked at it as a snapshot and it only took five years for everyone to say ‘we told you so’”.
Looking at the cost curve for green hydrogen Cooley says, “In the long term the very long run EU target price for electrolysis is €400/kW. We will achieve that in the mid 2020s. In the last three years we have halved the cost of our electrolysers and we now sell at €0.8M/MW if it is over 10MW. That is achieved by the new [5MW] stack and by volume through the factory.”
He says with a 50% load factor at Hornsea, Orsted will be able to produce hydrogen at the Immingham for 4p/kWh. And he believes that a pathway to get to lower cost than methane “Is very achievable: it requires further reduction in the capital cost of the electrolyser, a high load factor and low cost renewables. If you get these together, the Hydrogen Council says the lowest cost energy gas will be green hydrogen.”
With industrial hydrogen use taking centre stage, where does that leave ITM’s original automotive interest? The low-carbon transport offering remains – government has firmly announced the end for new fossil-fuelled vehicles and the debate is over when that will be achieved. While pure electric vehicles are expected to take the lion’s share of the transport market, hydrogen is viewed as an important solution for heavy haulage, trains etc.
The company has responded by restructuring and setting up a new division - ITM Motive – to be “driven to profitability”. He says, “Heavy goods, buses, trains are great applications for hydrogen. They always go back to the same places to refuel, they value payload, they value long range and being refuelled quickly – all the things you do with hydrogen”. And loading a train with hydrogen fuel, for example, is a better solution in some areas than electrifying the track.
Cooley explains how they markets work together: “The demand centre is the existing uses of hydrogen – ie industry. If you are decarbonising a large industrial process with a big electrolyser you can also use some of that for transport, which is a high-value application. So you can combine a high-value application with a high-volume application and you have the high-volume one taking the main volume and then take some of the hydrogen for a high-value application.”
A third potential market lies in replacing methane in the existing gas distribution networks. That’s a language change, Cooley says: “The UK government needs to give a level playing field between green hydrogen and biomethane. We don’t have an incentive for hydrogen right now and there has to be some way to incentivise commercial companies to provide green hydrogen for the gas grid.”
But Cooley notes that with local electrolysis there is less need for a hydrogen transport infrastructure, because you can use the electricity grid: “You can put an electrolyser down by the customer, you don’t have to transport the hydrogen.”