Power-to-Gas: Technology and Business Model Progress Presentation to the IPHE Workshop Daryl Wilson Chief Executive Officer Hydrogenics Corporation 1
Technology & Business Model Progress The Key Points Upfront The Problem: How to get the flexible electric grid assets we need The Solution: Only Hydrogen Systems can meet this challenge The Barriers: Complexity, Technology, Business Models The Enablers: Governments play a critical role to remove barriers The Prize: Finally hydrogen technology delivers value
New Energy WORLD NATURAL Energy World Cyclical / Seasonal Intermittent Stocks / Storage Reserve Abundant Excess / Surplus Wild / Dynamic Uncontrolled
Surplus Baseload is the new Reality of Renewable & Nuclear Generation Surplus Power 1,500 MW Average Wind 2,500 MW Must-Run Hydro 12,000 MW Nuclear Data from Ontario Canada, Population 10M
Not the biggest, most expensive or most important part of your car Dynamics & Capacity But try driving without 4 good ones!
Power-to-Gas is a scalable solution which can deployed where needed that taps into the unparalleled storage capacity of the natural gas system 8000 Source: KBB underground 6000 (MW) This much could be fed into an underground hydrogen reservoir (2 M m3salt cavern): 600,000 MWh 4000 2000 0 Pumped Hydro Storage Potential Source: GM presentation, Freese, May 13, 09 Oct 1 CAES Potential Oct 3 for Oct 5 Oct 7 Oct 9 Oct 11 Oct 13 2 Mm3 Salt Cavern Only hydrogen offers storage capacity for several days or weeks 6
Power to Gas: Two key attributes High Capacity Storage + Rapid Responsiveness 300 Hydrogenics Demonstration of its Electrolyzer in IESO study 250 System Power (kw) 200 150 100 50 0 14:55 Power Measured 15:10 15:24 Power SET 15:38 15:53 Faster response than AGC Signal 16:07 16:22 16:36 Note: IESO signal test completed 2011 7
Power-to-Gas breaks the silos A Power-to-Gas Solution brings new economic and technology flexibility between the traditional energy silos of power grids, gas pipelines and transport Source data: National Energy Board secondary energy demand forecast, Rethinking Energy Conservation in Ontario, May 2010 report 8
Power-to-Gas represents a new Energy Storage paradigm Surplus RE Power Power-to-Gas Solution CNG Transport Fuel Energy Capture Energy Storage Energy Transport Energy Discharge Converts power to hydrogen and banks the energy Distributed In the existing natural gas infrastructure Electricity (wherever needed) Low Carbon Heat 9
Adoption Path Where are we now? Renewable Energy Generation > 10% Grid Congestion Investigation / Trial of Storage or Alternatives 1 st Pilot Projects Germany USA Canada Felt need of Independent Grid System Operator Combined Gas / Electric Utilities We are Here Now 10 MW Plants 100 MW Plants Multi-sites & Fueling 10
Technical Aspects 11 11
Hydrogenics is supplying the electrolyzers for E.ON s 2MW Power-to-Gas demonstration project in Germany Hydrogenics Electrolyzers Courtesy of E.ON AG Over 1500 On-Site Hydrogen Generators worldwide since 1948 7kW to 2.5MW Turn-key containerized pressurized electrolysis Alkaline Electrolyzers Conversion efficiency: 80% (HHV) Robust industrial technology Hydrogen purity: 99.999% Next Generation PEM Electrolyzer Plans to scale-up to 1MW Higher efficiency Significantly smaller footprint 12
INGRID: Green Energy Storage system 7partners, 24Mio. (Enel, Tecnalia, Puglia region, ) 1MW Electrolyser Electricity (Puglia, Italy) 1 000kg H2 storage (metal hydrides) 33MWh storage H 2 Fuel Cell demand leveling Transport Gas network
Power to Gas: Technology Roadmap Elements MTTF Dynamic Response, Idle to 100% Power Availability Plant Efficiency @ Max. Load Plant Cost Product Scaling Startups Performance Black Start Response Operational Current Density Stack Life Degradation Dynamic Load Cycles Dynamic Range Plant Targets Confidential - Do not duplicate or distribute without written permission from Hydrogenics Corporation 14
Levers of Cost Reduction Economy of Scale Lever Mechanism Required Competency Global Market Share Hydrogenics Established Leadership Position Stack Design Architecture Fuel Cell -Like Design 17 Years of Fuel Cell Experience Operating Conditions High Current Density Materials and Catalyst Expertise Simplified BOP Design Value Engineering Years of System Integration Experience Intelligent Material Selection Value Engineering Over 2000 Fielded Products Scale Factor for Water Treatment Plant Design In-house Experience Confidential - Do not duplicate or distribute without written permission from Hydrogenics Corporation 15
Business Model Elements 16 16
The Equation that must be solved Energy Monetizable Solution Solution System + Solution + α = Cost + Provider Need Value (Cap + Op) Expected Return Flexible Fractured Government Technology Power System Assistance Roadmap System Benefit To Bridge Assets Accounting 17
Bulk Storage Improves Levelized Cost of Electricity High renewable penetration could increase need for curtailment Levelized Cost of Electricity (LCOE) rises with lower capacity factors (CF) Power to Gas Improves CF for both renewables & gas plants on renewable fuel Source: Wind and the Electrical Grid, Ontario Society of Professional Engineers, March 14, 2012
Power-to-Gas is comparable to Offshore Wind on the basis of CO2 abatement cost Power-to-Gas n/a est. 145 Source: The Price Isn t Right: Electricity Pricing in Ontario presented to Ontario Energy Association June 2010 by Donald Dewees, Faculty of Law, University of Toronto for renewable energy sources under FIT. Power-to-Gas estimate based on CCGT output.
The Challenge - Complexity Energy Capture Energy Storage Energy Transport Energy Discharge ISO Dispatch Load Dispatch Power Generator Power T&D Surplus Renewable Deliver Power Peaking Power Gas T&D Store Gas Gas Pipeline Distribute Gas Power-to-Gas Developer Produce Hydrogen Frequency Regulation Methanization (option) Inject Hydrogen Inject Syngas Sell Energy Gas Retailer Retail Green Gas Comm & Res Customer Low Carbon Heat CNG Fueling Station CNG Physical Flow Transaction 20
Multi-factor value sources Energy Services + Commodity + Capital Deferral Benefits of Distributed Power-to-Gas Solution Integrate Renewables Produce Hydrogen Energy Storage &Transport Illustrative Use Waterfall graph Ilustrative Ontario economic development? and/or Dispatchable Load Ancillary Services Sale of Hydrogen Banked Energy¹ Pipeline and Storage Deferred Transmission Capex Enable New RE Projects Total Value ¹ Energy banked in natural gas system as either green synthetic natural gas (methanation process) or as hydrogen directly 21
Projected Business Model Economics¹ (US$000 s) Grid-Scale Power-to-Gas Power In Electrolyzer Gas Out Other Value (α) Economics Market: Germany Capacity: 10MW P2G: Banked Energy 3.5 /kwh Load Factor: 25% Op Cost/yr: $426 $8/GJ Balancing Reserves Frequency Regulation Deferred Tx Capex ROI: 14% Biogas Plant Methanation Power In Electrolyzer Gas Out Other Value (α) Economics Market: UK Capacity: 900kW P2G: Biomethane 10 /kwh Cost/yr: $719 Load Factor: 91% Op Cost/yr: $48 $36/GJ Revenue/yr: $890 Flexibility of renewable fuel ROI: 9% Windgas Cooperative Power In Electrolyzer Gas Out Other Value (α) Economics Market: Germany Capacity: 5MW P2G: 2% Green Gas 12.5 /kwh Cost/yr: $4,563 Load Factor: 83% Op Cost/yr: $266 5/month on residential gas bill Greening pipeline ROI: 15% Captive Wind H2 Fueling Power In Electrolyzer Gas Out Other Value (α) Economics Market: Japan Capacity: 10MW P2G: Hydrogen Fuel 8.0 /kwh Cost/yr: $2,453 Load Factor: 35% Op Cost/yr: $527 $9/kg Revenue/yr: $5,259 Renewable hydrogen for transport ROI: 15% ¹Based on future projected Electrolyzer Capex of 1000 per kw Confidential - Do not duplicate or distribute without written permission from Hydrogenics Corporation 22
The Enablers Role: What can governments do? Policy: Continue to mandate renewable portfolio standards BUT Compliment generation program with storage incentives Enforce the link - green transportation with Hydrogen & Storage Funding: Next step scale power to gas demonstration 10-50MW Coordination: Break down barriers to realize the value of system assets for grid flexible operation Agency Integration: Renewable, Energy Policy, Utility Regulation & Control, Fiscal incentives ( USA e.g. NREL, DOE, EPRI, FERC) Incentives: Shift from generation to flexible grid asset support bridge the gap Recognize multiple business models (Fuel, Biogas, Hythane, etc.) Rules: Simplification of regulatory frameworks Create Sandboxes to Experiment
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Power-to-Gas will improve the flexibility of operating the power grid and create a significant new source of clean renewable gas Load-Following Renewables Surplus RE Large scale ramping Rapid, dynamic response Flexible deployment wherever gas and power grids intersect New option even when gas-fired resources not dispatched New option for dispatchable renewable generation Dispatchable CCGT with Renewable Gas Produce Hydrogen Hydrogen energy Renewable fuel as hydrogen, or biomethane Seasonal Storage Vast storage in NG infrastructure Overcomes limitation of daily peak shaving Year-round flexibility Transport Energy Relieve transmission congestion May also defer Capex for transmission line reinforcements P2G is a scalable solution 25
Power-to-Gas is a scalable solution that offers virtually unlimited storage capacity using the existing natural gas infrastructure¹ Energy Storage Location Scale Batteries Anywhere Up to 0.06 GWh Pumped Hydro Compressed Air Energy Storage Power-to-Gas Elevated lake or reservoir Underground cavern Anywhere both gas and electric supply available Up to 60 GWh Elevated lake or reservoir Up to 7 GWh Underground cavern Economical to scale Virtually unlimited storage TWh seasonal capability Since existing third party assets utilized and no additional capital investment is required, the incremental storage costs are low ¹ Energy banked in natural gas system as either green synthetic natural gas (methanation process) or as hydrogen directly 26
Power-to-Gas is a hybrid solution which: a) integrates renewable generation while helping to stabilize the grid, b) converts surplus renewable generation to hydrogen using electrolyzers, c) banks the energy using the existing natural gas infrastructure, and d) enables the discharge of the stored green gas at any time and place it is needed as gas turbine power, low carbon heat or CNG transport fuel Power-to-Gas Hybrid Solution A Energy Capture Energy Storage Energy Transport A Energy Discharge 27
PEM Stack Dynamic Cycle Testing is Essential More than 10,000 demanding cycles without significant impact