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January 22, 2024

Making Money Out of Thin Air: Valorizing the Oxygen Byproduct of Green Hydrogen Production

NexantECA - Green Hydrogen blog

Overview

Among the diverse routes to lowering GHG emissions, Green Hydrogen is perhaps the one with the greatest long-term potential.  Hydrogen produced from renewable electricity is – technically at least – among the most attractive options for decarbonizing transport fuels, industry, chemicals production, gas grids and a host of other sectors.  The primary barriers to its uptake at present are availability and cost.  However, as with some other decarbonization options, there is potential for a key byproduct of the Green Hydrogen production process – oxygen – to significantly improve its production economics.

In general, Green Hydrogen is produced via the splitting of water via electrolysis.  In stoichiometric terms, this process produces one mole of oxygen for every two moles of hydrogen, equating (due to differing atomic mass) to roughly eight tons of oxygen for every ton of hydrogen output.  With such a considerable quantity, revenues from the sale of oxygen byproduct can – depending on obtained oxygen prices – significantly improve the economics of Green Hydrogen production, contributing to improved cost-competitiveness against blue, grey or other hydrogen and other alternative options.  Market prices for bulk oxygen currently range from approximately US$ 75 to 100 per ton depending upon location (and significantly more for smaller cylinders e.g., for welding) , implying hundreds of dollars per ton of byproduct revenues (well over US$ 10 million per year) for an assumed 20 000 tons per year Green Hydrogen plant.  Even assuming a low price of US$ 25 per ton (a fraction of the market price currently) implies around $200 per ton of byproduct revenue (around US$ four million per year) for the same plant.   This can greatly reduce the high costs associated with Green Hydrogen, even before any valorization of the product’s carbon intensity reduction, which in itself can be quite substantial.  Oxygen production in other emerging hydrogen-based processes (e.g., Power-to-Liquids) will be smaller but still substantial. 

Notably, fuels derived from Power-to-Liquids processes (mainly Fischer-Tropsch production from Green Hydrogen and captured CO2) are viewed as the most desirable long-term option for the decarbonization of “hard to electrify” sectors such as aviation and marine transport, being theoretically free from the constraints on feedstock availability, or less attractive carbon intensity, that are likely to limit growth in biomass-derived fuels to below than the scale needed to achieve net zero emissions.  However, these products remain, at present, significantly more expensive than biomass derived drop-in fuels, let alone their petroleum equivalents.  In an environment where - as in the case of the European Union’s RefuelEU Aviation regulation – aircraft operators will either comply with mandated consumption shares for e-fuels, or face significant fines, equivalent to twice the difference in price between e-fuels and petroleum jet fuel – any improvement to cost of production, and therefore price, coming from the monetization of byproduct oxygen will provide a significant competitive advantage. 

 

 

What is the problem?

While on paper, a Green Hydrogen producer should find it simple to sell its oxygen byproduct on the market and realise the additional revenues detailed above, there are in reality several obstacles to easy offloading:

  • Demand for oxygen is geographically spread out and logistical costs are very high.
  • The market for industrial gases does not work like many other industries. Deciding whether to build an air separation plant requires dedicated contracts, meaning that products are not sold on the merchant market in the same way as other commodities.  Industrial oxygen is itself frequently produced as a byproduct of air separation, and along with Nitrogen is among the most used industrial gases.  Many existing large-scale customers are locked into long term contracts.
  • Oxygen is used in many different applications, with different needs, including:
    1. Water treatment and water treatment chemicals (e.g. ozone)
    2. Steel manufacturing (e.g. basic oxygen steelmaking)
    3. Combustion (e.g. oxycombustion)
    4. Aerospace (e.g. rocket fuel)
    5. Base chemical manufacturing (e.g. ethylene oxide)
    6. Electronics manufacturing (e.g. semiconductor manufacturing)
    7. Welding (e.g. LOx)
    8. Healthcare and food preparation.

 

 

What is the Opportunity?

Fortuitously for Green Hydrogen, more growth opportunities are arising in relatively synergistic areas.  One such opportunity is in carbon capture, both in precombustion and oxycombustion.  Oxycombustion has potential applications in reducing Scope 1 emissions (due to lower NOX emissions), as well as producing a stream of CO2 that is carbon capture ready, while oxycombustion is pursued widely in both the power and petrochemical sectors.

Another, emerging – and somewhat ironic – opportunity is in the growth in blue hydrogen (and derivative products such as blue methanol and blue ammonia), which also offer potential downstream synergies.  Meanwhile, power and broader petrochemical applications also offer their own obvious upstream and downstream integration potentials respectively.  Additionally, some routes to renewable chemicals and fuels that would be oxygen consumers also show growth potential, although these are not as widely pursued, and have a much more uncertain trajectory.

 

Case Study: Closing the Loop

As PTL processes are inherently large power and CO2 consumers, and oxycombustion has as  a potential market power with carbon capture, there is significant integration potential.  The ABEL Energy project in Australia is doing just this—however anyone with a keen knowledge of chemistry will note that the oxygen is still in excess.  ABEL has stated that they will vent excess oxygen to the atmosphere.

 

 

Key Takeaways

Three key takeaways from NexantECA’s probing of this space:

  • Oxygen valorization can unlock economic opportunities:
    • Green hydrogen (and derivatives such as PTL products) are very high cost
    • Economic competitiveness is greatly aided by even a small value for byproduct oxygen
  • While the overall oxygen market applications are mostly mature, opportunities exist for oxygen valorization and growth in key oxygen markets, in particular oxycombustion – which itself is poised for growth due to a number of drivers:
    • Power decarbonization
    • Trends in carbon capture
    • Integration with PTL
  • Due to handling and logistics, oxygen generation is almost always situated next to consuming locations when they are first planned and commissioned.  Oxygen valorization would therefore require advanced planning and integration of complementary projects to work – while not impossible, this is significantly more complicated than valorizing other chemicals

 

Key NexantECA Insights Reports in the Hydrogen Space

NexantECA consultants have been consistently active in evaluating technoeconomic, carbon intensity, and market developments in the hydrogen space, particularly as it pertains to blue and green hydrogen production and applications.  In addition to significant bespoke consulting work in this area, NexantECA has also published the following related reports that may be of interest to readers:

 

Technology and Costs

Markets and Profitability

    Special Reports

Biorenewable Insights: Sustainable Fertilizers (2023)   ​​

Market Insights: Sustainable Aviation Fuel (2023)

 Sustainable Aviation Fuel: Soaring Over the Blendwall (2023)

Biorenewable Insights: Green Ammonia(2023)

Market Scenario Planning: Renewable Feedstock Availability (2023)

 Low Carbon Intensity Hydrogen: A Technoeconomic and  Carbon Intensity Study (2023)

Biorenewable Insights: Power to Liquids: Transportation Fuels (2023)

Market Scenario Planning: Green Ammonia (2023)

 Low Carbon Intensity Ethylene: A Technoeconomic and Carbon Intensity Study (2022)

Biorenewable Insights: Green Hydrogen (2022)

Market Analytics: Ammonia (2023)

 

TECH: Carbon Capture and Sequestration (CCS) Technologies (2022)

Market Scenario Planning: Green Methanol (2023)

 

Biorenewable Insights: Hydrogenated Vegetable Oil (HVO)  (2022)

Market Insights: Biomethane  (2023)

 

Biorenewable Insights: Renewable Natural Gas (RNG) (2022)

Market Scenario Planning: Carbon Pricing  (2023)

 

Biorenewable Insights: Sustainable Aviation Fuel (SAF) (2021)

Market Insights: Hydrogen (2022)

 

TECH: Blue Hydrogen (2021)

 

 

 

 

The Author…

Steve Slome, Biorenewable Insights Manager

 

 


 

About Us - NexantECA, the Energy and Chemicals Advisory company is the leading advisor to the energy, refining, and chemical industries. Our clientele ranges from major oil and chemical companies, governments, investors, and financial institutions to regulators, development agencies, and law firms. Using a combination of business and technical expertise, with deep and broad understanding of markets, technologies and economics, NexantECA provides solutions that our clients have relied upon for over 50 years.

 

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