Provaris Energy Ltd (ASX:PV1, OTC:GBBLF) has welcomed an independent report produced by ClimateXChange and ARUP for the Scottish Government, which confirms the cost-effectiveness of the company’s hydrogen production pathway.
The report assesses the hydrogen production pathways to Europe by either pipeline, shipping ammonia or shipping compressed hydrogen, and comparison with costs for other regions of supply.
Potential in hydrogen supply chain
The study's outcomes underscore Provaris' potential in the green hydrogen market, particularly in exporting to Europe.
The production scale of the report focused on 1 GW to 5 GW of H2 production.
Section 8.5 of the report, focusing on pathway comparison, confirms Provaris' assessment that compression is the most competitive method for hydrogen shipping. It also highlights the nascent status and cost escalation risks of Ammonia Cracking, a technology still unproven on a commercial scale.
The report highlighted that exporting large scale hydrogen production via shared pipelines is a cost-effective option due to economies of scale.
However, for longer distance, converting hydrogen to ammonia and shipping via dedicated vessels can be economical.
Given how costly recovering hydrogen from ammonia is, this export model is most cost effective where ammonia is the end product.
“Shipping compressed hydrogen could be most competitive, particularly for smaller scale production and via shorter distances, however the technology still needs to be developed and proved,” the report said.
Least expensive option
Provaris' strategy gains traction from the report's findings that compressed hydrogen shipping is not only cost-competitive but, in some instances, the least expensive option.
The flexibility of a compression supply chain to scale with market demand and port facilities, coupled with a significant reduction in capital expenditure compared to ammonia-based systems, positions Provaris advantageously in the market.
The report also draws attention to Germany's import requirement of 3-4 million tonnes per annum (Mtpa) by 2030, as part of Europe's broader goal of 10 Mtpa.
Provaris' ability to start imports by 2027-28 aligns perfectly with Europe's commitment to phase out coal-fired power generation and its broader decarbonisation objectives across various sectors, including chemical, steel, refinery and transport.
The report also underscores the impact of EU carbon pricing legislation, set to increase from 2024-2030.
This legislation will escalate the costs for industries reliant on fossil fuel-based energy, thereby enhancing the appeal of green hydrogen solutions like those offered by Provaris.