The promise of a hydrogen economy to replace fossil fuels is commonly centered on the potential for “green hydrogen,” generated via electrolysis of water with carbon-free electricity. But the vast majority of today’s industrial hydrogen production is “gray,” made from natural gas via steam methane reforming — a process that emits carbon dioxide but at a low cost that electrolysis will struggle to beat over the coming decades.
But natural gas can also be converted to hydrogen without the carbon emissions, via another spectrum of the hydrogen palette. These include “blue hydrogen” — steam methane reforming with carbon capture and storage — or another technique, methane pyrolysis, that had earned the moniker of “turquoise” for merging blue and green.
That’s the target of C-Zero, a startup that’s won the backing of venture capital investors to take its approach from lab tests to pilot plant scale. On Tuesday the Santa Barbara, Calif.-based company announced an $11.5 million Series A round led by Bill Gates-founded Breakthrough Energy Ventures and Eni Next, the venture investing arm of Italian oil company Eni. Other investors included AP Ventures and Mitsubishi Heavy Industries, the Japanese industrial giant investing in a high-profile project aimed at creating a hydrogen hub for the Western U.S.
The company has also won $3 million through two grants from the U.S. Department of Energy, and a $350,000 project with California utilities Pacific Gas & Electric and Southern California Gas to test certain elements of its pyrolysis reactor design. The new investment is meant to fund its first pilot-scale production facility, CEO Zach Jones said in an interview.
C-Zero is competing in a field of heavyweights. Chemicals giant BASF is building a turquoise hydrogen pilot plant in partnership with a consortium of German companies and research organizations. Australian company Hazer Group has won government backing to build a pilot plant testing its own pyrolysis process. And U.S. -based Monolith Materials, which has also won investment from Mitsubishi, is producing hydrogen and carbon black for industrial uses at a plant in Nebraska.
Different approaches to turquoise hydrogen
But C-Zero differs from these competitors in a few key ways, Jones said. First is its chosen method of methane pyrolysis, a high-temperature process to convert methane into hydrogen gas and solid carbon in the presence of a catalyst. That carbon can be “bound” in a solid form, avoiding gray hydrogen’s emissions and blue hydrogen’s technical and cost challenges of capturing it as a gas.
BASF and Hazer use carbon and iron ore as their catalysts, respectively, while Monolith uses high-temperature plasma that yields “beautiful carbon black for tires and other stuff,” he said. C-Zero, after experimenting with molten salts and metals, settled on a molten-nickel-based catalyst in a continuous flow process, he said.
C-Zero’s “secret sauce” is extracting the carbon from the high-temperature melt, he said. While Jones declined to get into specifics, the process involves a circulation loop that allows the carbon to be deposited in a section of the reactor as a gas-solid suspension, which can then be extracted by a variety of existing industrial processes.
The second big difference for C-Zero is the decision to forgo trying to make solid carbon into a potentially valuable byproduct. Instead, the company wants “to have the lowest-cost hydrogen production, even to the extent that we have to put into our cost structure landfilling the carbon.”
That choice comes with costs. While hydrogen makes up about 60 percent of the energy contained in methane, carbon makes up the remaining 40 percent — energy that’s lost in converting it to a solid rather than combusting it. Finding ways to get paid for it in solid form is an economically sound concept in a world where the value of carbon-free energy isn’t being rewarded.
Choosing a process that optimizes hydrogen production at industrial scale at the expense of a high-quality carbon byproduct, on the other hand, “seemed like a gamble three years ago, but now hopefully looks like the right decision,” he said.
Comparing the potential of green hydrogen
That’s because C-Zero expects its process to yield hydrogen at a cost of about $1.50 per kilogram, about the same as gray hydrogen, he said. That’s well below the cost of green hydrogen via electrolysis today, which ranges from $4 per kilogram and up.
That price is bound to drop as massive government mandates and incentives drive a boom in global electrolysis capacity. National hydrogen strategies in Europe and Asia have set targets totaling 66 gigawatts of capacity, according to Wood Mackenzie’s new report, 2050: The Hydrogen Possibility — a scale that will exceed existing global demand for the gas absent a major growth in end uses for heating, electricity generation and fuel for ships, planes and long-haul road transport.
This growth is spurring green hydrogen project developers to stake claims to costs that will be competitive with gray hydrogen by the end of the decade or earlier. These cost declines will depend on several factors, including increased efficiencies and economies of scale from electrolyzers, and of course, the cost and availability of carbon-free electricity to supply them.
But Jones pointed out that the electricity required to generate a kilogram of green hydrogen equates to roughly seven times the equivalent amount of energy contained in the natural gas used to make a kilogram of turquoise hydrogen. Then, of course, there’s the issue of how often renewable energy can be cost-effectively diverted to making hydrogen instead of serving loads.
And because much of the power generation sector’s plans for hydrogen center on using it to replace natural gas, installing a C-Zero reactor at the point where existing natural-gas pipelines feed into power plants could be a far less capital-intensive solution than building or retrofitting a pipeline to carry hydrogen from far-off sources.
To be clear, the company emphatically does not claim its process is “going to be cheaper than steam methane reforming,” Jones said. “We do think we’re going to be cheaper than steam methane reforming plus carbon capture,” however. “We don’t think about this as what’s the cost of hydrogen production — we think about it as what’s the cost for avoided CO2.”
While some cleantech investors may question the wisdom of investing in technologies that continue to make use of natural gas, “if you’re sitting on billions or trillions of dollars of natural gas reserves, what are you going to do with that? We see ourselves as being the bridge from existing natural-gas assets and reserves to a low-carbon future.”
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