Hydrogen wars: Gigawatt projects launch around the world, China in the lead

June 2020


Hydrogen wars: Gigawatt projects launch around the world, China in the lead


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The hydrogen wars have begun. Companies on three separate continents have proposed a handful of gigawatt (GW) scale hydrogen projects using three different power technologies, battling it out to emerge as the first true market leader. The majority of GW scale H2 projects are concentrated in Australia, with three of the top five H2 developments located down under. The most advanced project to date will be in China; the 5 GWac Beijing Jingneng H2 facility is planned to begin construction this year and will be operational in 2021. Shell also recently announced a feasibility study to explore the possibility of wind-powered H2 production off the coast of the Netherlands. Electricity supply cost is critical to the economics of these H2 export projects, as it will represent over half of the levelized cost of H2 (LCOH) by 2025. High electrolyzer utilization is also fundamental to asset economics, as those that can source the lowest firmed levelized cost of energy (LCOE) will be the most competitive. The majority of proposed H2 facilities have chosen a hybrid onshore wind and utility PV setup to maximize electrolyzer utilization. Shell’s NortH2 project is the only exception and will explore the use of offshore wind exclusively. The advantage of offshore wind is its higher capacity factor; however Rystad Energy estimates the capex of offshore wind is over twice that of onshore wind, and four times that of onshore PV, making it less attractive for locations that have reasonable onshore resources.

Remote renewable assets to enjoy MLF increases in Australia

Renewable assets in remote parts of Australia’s power grid will benefit the most from the country’s finalized Marginal Loss Factors (MLF) for the 2020-2021 financial year (FY), as recently announced by the Australia Energy Market Operator (AEMO). Many assets located off the beaten track will see MLF increases, despite generally being at the low end of the rankings in terms of absolute MLFs. Assets located near load, on high voltage transmission lines, will see MLFs remain relatively unchanged and will hold onto the top spots in the country’s absolute MLF rankings. Our analysis shows that the difference in MLFs between solar and wind assets in the 2020-2021 FY will be significant, as the median wind farm in the country will have an MLF of 95.97%, whilst the median solar farm will have an MLF of 89.50%.

Biosar: Another one bites the dust

Another solar equipment, procurement and construction (EPC) company has bitten the dust in Australia, as Biosar recently announced its exit from the market. The utility PV EPC business has faced significant challenges over the past three years, resulting in all of the three of the top four EPCs in the country exiting the market. This includes RCR Tomlinson (the largest Australian EPC), who went bankrupt in 2018 due to cost overruns on solar farms. Downer – previously the second behind RCR Tomlinson – announced their exit from the market in February, and now fourth placeholder Biosar will leave as well. Together, these three EPCs take with them a combined 2.17 gigawatts (GWAC) of construction and commissioning experience, as well as a significant proportion of capacity currently under construction or operating. However, a significant amount of local and international EPCs still remain in the market. Sterling and Wilson are the latest international entrant, having picked up three large projects since 4Q 2019. These include LightsourceBP’s Wellington Solar Farm in New South Wales, which boasts 174 megawatts (MWAC) of capacity, Shell’s Gangarri Project in Queensland (120 MWAC of capacity) and Neoen’s Western Down’s (390 MWAC)