High uncertainties about climate-neutral dispatchable power plants

Various options exist for decarbonizing dispatchable power plants. Low-carbon (blue) hydrogen and natural gas combustion with on-site carbon capture and storage (CCS) can lead to lower electricity production costs than renewable (green) hydrogen, depending on full-load hours and cost scenarios. On the other hand, domestically produced renewable hydrogen may reduce dependence on energy imports. And it is also climate-neutral, whereas the other two fuel options still produce residual emissions. A complete comparison of the options, including infrastructure requirements, can therefore only be made by considering the integrated system.

In the research report “Decarbonization Options for Dispatchable Power Plants” by the Institute of Energy Economics at the University of Cologne (EWI), Michaele Diehl, Dr.-Ing. Ann-Kathrin Klaas (project manager), and Philipp Theile analyze various technical, economic, and regulatory aspects of the fuel options renewable hydrogen, low-carbon hydrogen, and natural gas with CCS. The analysis was funded by the Funding Initiative Hydrogen and Molecules of the Gesellschaft zur Förderung des Energiewirtschaftlichen Instituts an der Universität zu Köln e. V..

Levelized cost of electricity vary greatly depending on the scenario and full-load hours

The levelized cost of electricity (LCOE) of the three fuel options differ in particular in terms of cost structure. While investment costs in the power plant have the greatest impact for natural gas with CCS, depending on the scenario and full-load hours, fuel costs are the biggest drivers for renewable and low-carbon hydrogen. In the analysis, the LCOE for natural gas with CCS vary between approximately €240/MWh for high full-load hours in the low cost scenario and €660/MWh for high costs and low full-load hours. The costs for low-carbon hydrogen range between €270 and €460/MWh depending on full-load hours and cost scenario, and the production costs for renewable hydrogen vary in this analysis between just under €400/MWh and over €600/MWh.

“In the considered scenarios, hydrogen could be the most cost-effective option at low full-load hours, while natural gas with CCS becomes competitive at higher full-load hours due to a lower share of variable costs,” says Dr. Ann-Kathrin Klaas, Head of Research Area at EWI. “However, the full-load hours and the future costs for power plants and fuel are subject to a high degree of uncertainty.”

Development of technologies and infrastructure is required

Fuel production and power generation technologies must be developed for all three fuel options under consideration. While CO₂ capture at gas-fired power plants is close to market readiness according to the IEA, only prototypes currently exist for large-scale hydrogen power plants. Meanwhile, the IEA states that steam methane reforming technology with integrated CO₂ capture for hydrogen production is at an intermediate stage of development compared to electrolysis technology, which is almost ready for the market. In addition, the infrastructure requirements differ. Renewable hydrogen only requires one hydrogen pipeline, while low-carbon hydrogen and natural gas with CCS require the development of a CO₂ infrastructure. The fuel options of low-carbon hydrogen and natural gas with CCS carry the risk of maintaining or increasing dependence on natural gas imports.

The development of a CO₂ infrastructure remains subject to uncertainty. Both international transport between Germany and Norway and national transport and storage within Germany are currently not possible. An amendment to the Carbon Capture and Storage Act is currently being discussed. However, CO₂ transport and storage within Norway for the production of low-carbon hydrogen is already possible today. It is also relevant that low-carbon hydrogen and natural gas with CCS still produce residual emissions, which would have to be offset by CO₂ sinks to achieve a climate-neutral energy system.

A integrated perspective of the system is necessary to decide on the development of technologies and infrastructure. In addition to analyzing storage costs and lock-in effects, the system view would also include comprehensive synergies, which arise, among other things, from the ramp-up of hydrogen in other sectors and the associated infrastructure.