Current Discussions: William Rowe of Octopus Hydrogen on Electrolyser Costs and the Need for Green Hydrogen
Since its launch in April 2021, Octopus Hydrogen has announced a number of major projects, positioning itself as a key player in the emerging green hydrogen sector in the UK.
More recently, this includes a project with Octopus Renewables – another branch of the Octopus group in the broad sense – and the MIRA technology park for the development of a charging forecourt for hydrogen and electric vehicles. In October, it announced a strategic partnership with Innova Renewables and Novus to roll out green hydrogen production across the country.
Running± recently sat down with Octopus Hydrogen Founder and CEO William Rowe to talk about the company’s decentralized model, the cost of green hydrogen and the next steps for the business.
Could you tell me a bit about the origins of Octopus Hydrogen and the thinking behind it?
Gregory [Jackson] the founder of Octopus Energy has, I guess, always been relatively skeptical of hydrogen. And I think so, because much of the current debate around hydrogen, especially in the UK, is really about hydrogen derived from fossil fuels with carbon capture and storage and then home heating. . And I don’t think these things make sense.
So on this front there is a good reason to be skeptical of hydrogen. But as we started to get more and more interested in it, we realized that in fact, for some applications, decarbonation won’t happen without some form of its own molecule. Whether it is hydrogen or synthetic fuels.
And so because of that, and because of our belief in moving to a 100% green electricity grid, if you can take the excess electricity when it has very little value for the grid, turn it into hydrogen and use it to decarbonize something that otherwise wouldn’t. It’s not done, you feel like you’re really helping the system. That’s why it sort of became “Okay, hydrogen in the right way is really valuable, but we have to avoid a lot of bad ways that have been considered.”
Can you tell me a bit about Octopus’ decentralized model for hydrogen?
There are actually three models for producing green hydrogen. The first is that every bus station or petrol station on the highway will have its own facility for producing hydrogen, so that it would be produced, stored and then refueled in vehicles. The challenge with this is that effectively you have to get three times as much electricity at this site as you would if you were to put it directly into the vehicle in the form of electricity. So it’s incredibly network-intensive to do this, and you’re not giving the network any benefit. Besides the flexibility of when you do it, you’re actually just a big drain on the network and an inefficient drain. So that’s a very bad way to do it, in my opinion.
And then the other model is made up of massive gigawatt-scale projects. And I think they make economic sense and can be done in places where the natural resources in terms of wind and solar energy are really good. So the ones in Australia or Morocco, those things will have merit, I think, and I guess we’ll do stuff like that too in due course.
But the specific goal for us is that most of your grid related issues are at 33kV [primary substation], so your DNO level problems. And so if you can take a solar site that goes to a DNO region and allow that solar to be built and efficiently produce green hydrogen there and help change the export profile of the solar site or the wind site, then you are effectively producing less expensive hydrogen because you are not paying all of the network balancing costs. That’s almost 45% of the cost of a kilowatt hour of electricity that is unrelated to generation, so you mitigate all those costs and then you allow things to happen on the grid that could not have been produced. do it differently.
So for us this is the level that we are focusing on at the moment, which are reasonably large projects but at the DNO level, where we can help balance the grid at that DNO level, and bring in more renewables. . So the necessary problem that we have is to transport this hydrogen to deliver it to our end customers. But it also means that we can deliver to many customers.
Do you think there are still significant cost reductions needed for green hydrogen to compete with blue?
Oh yeah, I mean, my God, they’re so expensive. One thing I would like to note is that for applications where you burn hydrogen, the purity of hydrogen is not as important. Blue hydrogen therefore has a cost and a competitive advantage in the gas network. And I think green hydrogen, if I’m honest, will struggle to compete with that.
So if governments want to go down the path of trying to mix hydrogen into the gas grid, which I don’t agree with, but if they did, I think it would be necessary some time before the green hydrogen can compete with the blue over there. Due to scale, lack of purity, lower pressure, all kinds of blue advantages.
While for green for mobility applications, the idea of taking methane, trying to store the carbon in it, then you have to purify the hydrogen, probably three more times to get it to the fuel cells of quality, then [run it through the] compressor. By the time you’ve done all of this and then handed it out, it’s honestly about the same price green hydrogen is today. So I don’t really see our competitor in the transportation space being blue hydrogen. Our competition is really only the interim of diesel.
Again, we’re not competing for electrification, because we always tell every customer we work with if you can electrify it, do it. It’s cheaper and easier to use electricity, if you get the grid connection and can do the route you want for the vehicle that’s available today, do it.
What is the argument in favor of green hydrogen over storage?
So many of our sites will be wind or solar, battery and hydrogen. Batteries make a lot of sense at the grid level, that’s for sure
Green hydrogen does not offer the same potential sources of income as a battery. So you cannot access the flexibility market to the same extent. But what you can do is things like day-ahead balancing, you basically have deeper storage, so you can get rid of more power, whereas with a battery everything what it contains must come back.
With hydrogen ideally what we’re going to do is oversize the production, so if we were to produce one tonne per day we would build an electrolyzer that could in theory produce two tonnes per day if it was running 24 hours a day. and 7 days a week, but we design it to only run 12 hours a day.
So if it was a particularly bad day i.e. there is a lot of demand for electricity, we can really try to push it when it’s going to be done at the best times, then maybe that we could run it for six hours that day but downright. And another time you could run it baseload, so we can really get some flex. So I would say that it was complementary to the batteries which were not competing.
What’s next for Octopus Hydrogen?
What we want to do in the short term is that we have two projects under construction right now, we will be pushing on the third, which will be on a larger scale. This will provide enough green hydrogen to decarbonize probably around 300 to 500 vehicles, which is great.
From there, the main thing for us is to start figuring out how to bring the benefits of what we have done in the UK to other countries. So specifically targeting Europe, Australia, potentially Japan, but let’s say Europe and Australia are the focus right now because I think from a value proposition perspective we are convinced that we can add value to these markets.