Many factors contribute to the cost of hydrogen in heat treatment, and many of them are controllable. Of particular interest are the costs associated with delivery, including trailer leasing, transport costs, hazardous materials fees, and others. Combined, these costs can constitute up to 55% of the cost of hydrogen.
On-site hydrogen generation offers the potential to dramatically alter the cost picture by reducing or eliminating transport costs. Several on-site hydrogen generation technologies are currently available, and the challenge is to optimize these systems to maximize cost savings.
Rethinking traditional gas procurementTraditional methods of delivering hydrogen-transport via tube trailers and cylinders-have served the industry well for years. However, today's cost-conscious environment presents a challenge to eliminate inefficient processes and potentially unsafe activities, both of which can drive up costs. Key issues include:
- Higher labor costs and safety concerns associated with the high frequency of cylinder changes for many plants.
- The complicated logistics of moving tube trailers in and out of a site. For many sites, this means maneuvering through tight spaces, close to pipes and critical equipment, which is time consuming and risky.
- The possibility of higher gas prices for customers located in "remote" areas (more than 150 miles from their industrial gas supplier).
Alternative gas supplyAlthough on-site generation of hydrogen gas is still in the early stages, one alternative that has matured considerably in recent years is reforming of natural gas into hydrogen. In this process, natural gas enters a humidification chamber and reacts with a catalyst, which transforms the gas into a hydrogen-rich reformate. The reformate flows to a compressor where it is pressurized, and finally enters the pressure swing adsorption unit, which dries and purifies the hydrogen into the final product.
The technology, which originated during the development of a fuel cell project, has been successfully demonstrated in the field. Currently, Plug Power has installed more than 400 reformer-based fuel cells, and they have logged more than 2-million hours of field runtime. Fuel-cell reformer reliability has topped 98%, and the technology has substantial support in government and industry; organizations such as the U.S. Department of Defense, U.S. Department of Energy and various state agencies are bolstering efforts for further improvements.
With this technology, on-site reforming systems have found use in demonstration projects during 2004, with commercial units just beginning to enter the market. All of these systems will help address the biggest initial challenge facing the technology.
The cost challengeThis major challenge-ironically for a technology that may hold the key to lowering the cost of hydrogen-is cost. Researchers are striving toward the development of on-site reforming systems that will produce hydrogen at a cost lower than today's delivered cost of hydrogen. Delivered cost of hydrogen is extremely variable, depending on the customer's location to the nearest hydrogen supply, the end user's relationship with the supplier and whether or not the end user purchases other gases from the supplier. From the standpoint of location, on-site hydrogen systems currently can compete for the end user's business at and beyond the geographic "fringe," defined as 100 to 150 miles from the traditional supplier's hydrogen source. Beyond this fringe, the traditional supplier's cost, and thus its price to the end user, increases dramatically.
On-site systems have made tremendous strides in cost performance. The last year alone has seen nearly a 50% decrease in the cost of hydrogen generated by reformers. Further demonstration projects and commercial sitings, as well as continuing performance data from fuel cells in the field, are expected to result in improvements, which, in turn, will lower the cost of hydrogen-even to the point where on-site hydrogen systems can compete for business regardless of end user proximity to the traditional supplier's hydrogen source.
The value for heat treatmentIn the immediate future, on-site reforming technology can be particularly useful in several key applications including heat treatment of metals. A growing number of steel mills and commercial heat treaters are using 100% hydrogen for annealing. According to industry sources, some 500 work bases for bell-type annealing furnaces using 100% hydrogen atmospheres have been installed at about 50 locations in the United States. The increase in the use of hydrogen increases the pressure to maximize cost-per-scf efficiency. The cost advantages of reforming technology, when fully realized, can multiply this effect.
Future of hydrogen useA crucial question is what does the future hold for hydrogen use? It appears that the market for hydrogen will expand as improvements in technology drive the development of ever higher purity and capacity at increasingly lower costs. Fuel cells could well play a key role. For example, remote customers who often encounter problems with grid reliability could be the first to adopt the use of fuel cells and the on-site reformers that fuel them.
It is expected that reforming technology will be one of several options for hydrogen supply in an increasingly cost-sensitive industry. The largest users will always have a need for tube trailers and liquefied hydrogen. All users will want to maintain some on-site hydrogen storage for use during reformer downtime and maintenance. Other on-site technologies, such as electrolysis, can play a role when purity requirements are particularly stringent.
Ironically, such a mosaic points to a single point of distribution for most of these technologies: the tried-and-true industrial gas supplier. In a mature industrial gas market, long-established suppliers already have their distribution networks firmly in place. Even more important, they know their customers. It makes economic and business sense, therefore, for industrial gas suppliers to distribute on-site generation options as well as trucked-in hydrogen.
Whatever the specifics, hydrogen users are looking at a bright future: more options for hydrogen delivery (in many cases, all of it delivered by a long-standing vendor), more security and control over hydrogen supply-and substantially lower costs. It is an optimal situation for energy users and industrial gas suppliers alike.