NanoSUN Partner Interview Special: Octopus Hydrogen

Green Hydrogen as an End to End Service

NanoSUN speaks with Octopus Hydrogen Co-Founder and Chief Engineering Officer, Ben Eaton, on Octopus Energy’s move into the Hydrogen Sector and its ‘Hydrogen as a Service’ model to deliver green hydrogen as an all-inclusive end to end service.

This year, we saw Octopus Energy enter the market with its new Octopus Hydrogen arm and its 100% green hydrogen fuelling solution. Tell us, what motivated this move into the hydrogen industry?

The Octopus Hydrogen business model aligns with two key group level goals. Firstly, hydrogen production and supply enables a viable means of decarbonising hard to abate sectors such as heavy transport, specifically regional buses, heavy goods vehicles (HGVs), aviation, rail and marine.

Secondly, our focus is on decentralised hydrogen production where the co-location of electrolysis with renewable infrastructure reinforces the demand for additional renewables on the electrical grid. This onsite demand increases the commercial viability of marginal renewable projects, which in-turn, increases the net amount of renewable power on the grid.

Can you tell us about Octopus Hydrogen’s business model to supply a 100% green hydrogen fuelling solution?

Octopus Hydrogen is pursuing the model of decentralised green hydrogen production and supply, where the cost per kilo includes all elements of the value chain, up to the point fuel is dispensed into the vehicle. We call this ‘Hydrogen as a Service’. By co-locating electrolysis with renewables, we are able to supply the lowest cost of production of green hydrogen for use in hard to abate transport sectors.

Octopus Hydrogen

Utilising our software platform, we can assess multiple parameters and cost factors when producing hydrogen, we can rationalise the myriad of data inputs required in the production of hydrogen. By considering factors such as the power price, weather forecast, available storage and demand, we can create the cheapest possible kilos of hydrogen on a rolling half hourly basis with demonstrable green credentials. With this in mind, our Hydrogen as a Service model has been specifically developed to mitigate the production and logistics complexity for the downstream user to allow them to transition to zero emission operations without the need to invest time and capital, which is ultimately a distraction from their core business.

We believe that this model also offers a wider benefit to the green economy, as it incentivises increased deployment of renewables on the grid and offers energy developers a viable, longer term alternative revenue stream via behind the meter, onsite demand. This ultimately contributes to reducing the reliance on fossil fuels to supply power to the UK grid network, which in-turn will reduce exposure to price fluctuation.

How will Hydrogen as a Service help heavy-duty vehicle developers adopt hydrogen as a clean fuel?

Our Hydrogen as a Service offering provides the complete value chain, from engineering and installation to production and distribution, all wrapped up in the cost per kilo of hydrogen. We are also considering the inclusion of vehicle leasing to deliver all aspects of the service in one complete package. This principally allows our customers to buy kilos of hydrogen as required, without the need to finance and engineer the full value chain for their own specific use case. In doing this, we’re able to essentially hedge our customers’ exposure to variation on fuel costs for the long term.

Why did Octopus Hydrogen choose the Pioneer Hydrogen Refuelling Station?
Pioneer Hydrogen Refuelling Station

NanoSUN’s mobile Pioneer Hydrogen Refuelling Station delivers a fundamental part of the Hydrogen as a Service offering in that it allows us to support ad-hoc demand, negating the need for onsite deployment of fixed assets. This is particularly advantageous for customers who want to conduct trials and R&D projects. The mobile flexibility of the Pioneer allows us to further support operators across the UK, offering huge redundancy value as the operator can remain agnostic as to where the hydrogen was produced.

We don’t believe public hydrogen fuelling will become widespread and therefore depot based/private solutions will prevail. Enabling operators to adopt green hydrogen at their depot without the need for costly, permanent and long timeline infrastructure is why we chose the Pioneer.

What sort of heavy-duty applications will Octopus Hydrogen be serving and how will the Pioneer be used as part of the Hydrogen as a Service model.

Hydrogen as a Service is designed to predominantly support city bus operators and HGV operators who have the foresight to take a lead in fleet decarbonisation, improve air quality and adopt the technology. However, we also support aviation development programs such as the ZeroAvia flight test programme with the view to supporting their transition to commercial scale flights.

As part of the service, there will be three use cases for NanoSUN’s Pioneer Hydrogen Refuelling Stations.

1. To support large operators on the start of the journey to green hydrogen as a transport fuel.

2. To supplement our depot based bus and HGV refuelling operations by mitigating the impact of refuelling downtime due to fault or planned maintenance. This is a key strategic addition which ensures the operators of hydrogen powered vehicle (HFCEV) fleets have the assurance they need to continue operations.

3. To support small operators where their demand may never require high volume infrastructure.

We have a number of upcoming projects already in the pipeline, which have recently been announced.

Horiba Mira

Horiba Mira Technology Park Hydrogen Refuelling Infrastructure
MIRA Technology Park

Octopus Hydrogen will be an on-site supplier for Horiba Mira, which provides product engineering, research, testing, information and certification services to the automotive sector; from prestigious vehicle manufacturers, such as Bentley, to city taxi companies and UK universities. The site is scheduled to come online in Q1 2022 and combines electric vehicle charging and hydrogen refuelling, producing in the region of 300 kilos of fuel cell grade hydrogen per day. This allows Mira and their tenants to develop the next generation of zero emissions vehicles onsite without having to consider the need for refuelling infrastructure.

Stanton Media, Courtesy of HyFlyer

ZeroAvia HyFlyer II Project

Octopus Hydrogen is also very excited to be supplying green hydrogen to the zero emission aviation HyFlyer II project for ZeroAvia. We will provide green hydrogen to ZeroAvia’s R&D centre at Cotswold Airport in Kemble where they will complete the testing, certification and first commercial operations of their zero emission hydrogen-electric aircraft powertrain technology. We are in the process of developing the production site located next to ZeroAvia’s hangar where we will be utilising a rainwater harvesting solution to supply the necessary water for electrolysis.

It’s clear Hydrogen as a Service will be significant in delivering a much needed hydrogen refuelling solution to these applications, but what more do you feel can be done when it comes to providing hydrogen to these customers?

There are a number of impediments currently constraining hydrogen production. From our experience, there is a huge wave of demand on the horizon, which is great, but the expectations around end to end project timelines need to be considered. In order to scale at the rate required by the market, all the components in the production process, particularly electrolysis, need to be manufactured at production scales and rates. The current rate of production is likely to hinder the supply of hydrogen. Equally, without valid, bankable projects I can appreciate why there would be reluctance to commit to the vast equipment orders required to meet this demand, hence the reason for Octopus attempting to seed the market with our Hydrogen as a Service model.

Octopus Hydrogen can also offer green hydrogen at a cost which is approaching parity with diesel. Yet, even with the lower cost of maintenance on fuel cell HGVs, the total cost of ownership (TCO) of these vehicles is currently too high, which is blocking rapid adoption of hydrogen vehicles. This needs to change, because whilst we can ultimately provide hydrogen fuel not far off the equivalent to the cost of diesel, the price of vehicles is pushing operators away.

So, what can we do to make hydrogen affordable?

A significant proportion of the cost when producing hydrogen is the energy required per kilo, so incremental improvements in efficiency will help enable the production cost of green hydrogen to fall.

Green hydrogen at diesel parity is very much possible and will most likely plateau once achieved. There would be no incentive for the price of green hydrogen to continue below this point, as given the recent fluctuation in energy prices, achieving a Power Purchase Agreement of much below 6p/kwh would be unlikely, (current approximations 62kwh per kilo h2 @ 380 bar).

For context we can achieve a price per kilo of £5.50 for a delivered kilo of hydrogen, which is close to diesel parity. For hydrogen to be supplied to the gas grid, it would need to be approximately £0.50 per kilo to be comparable to Methane. This is why we fundamentally believe that we should be electrifying everything where possible and only using hydrogen for areas for which there is no viable alternative such as the heavy-duty sector.

Can you tell us then, why you think heavy-duty applications, in particular, are better served by hydrogen over electricity?

The two most significant drawbacks of battery electric HGVs are payload and utilisation. Currently, 44 tonnes is the limit for a HGV on UK roads. Where weight is a constraint, using a portion of that limit to carry a battery will ultimately require the operators to increase the fleet size to offset the constraint.

Hydrogen Trucks

Furthermore, current heavy-duty vehicle utilisation factors are often in the range of 85-90% and as automation becomes more prevalent, this could increase further. Therefore, being forced to reduce the revenue generating element of the operation due to the need to charge the vehicle will increase the total cost of ownership for the operator, as it may offset the savings made by the reduced cost of electricity.

A further, more fundamental constraint is the availability and cost of a sufficiently sized grid connection and transformer required to support the short duration charging. It is possible that proponents of battery electric HGVs find it difficult to obtain the scale of grid connections needed to facilitate this level of power, particularly with the UK’s current historic grid network. The local grid networks may not be able to tolerate the demand of heavy-duty vehicle operators looking to charge their vehicles overnight and still demonstrate the power is renewable. It’s therefore possible that operators may have to look at implementing power reinforcements, such as transformers, which will be expensive to finance and will result in more upfront costs and should be included in their TCO model. Combined with our feedback from operators, it is for these reasons we believe hydrogen powered fuel cell electric HGVs have an advantage over battery electric HGVs.

Moving forward with Hydrogen as a Service, what does the future look like for Octopus Hydrogen & NanoSUN?

The team at NanoSUN have demonstrated the agility and foresight we at Octopus Hydrogen emulate. We think it is important to push the boundaries and demonstrate the Hydrogen future is closer than people think, ad-hoc deployment for the purposes of demonstration can help us do this. As an example, NanoSUN has taken onboard some of our operational requirements to improve the remote capability of hydrogen refuelling, which we see as a win-win.

The NanoSUN founding team have a great deal of experience in the industrial gas sector and have designed and built a unique product in the Pioneer, which will ultimately help Octopus Hydrogen grow into larger scale fixed supply contracts. We are confident we can continue to build on this relationship we have established as NanoSUN’s first customer, such that we can both take our product offering into Europe and further afield in the near future.

Find out more about Octopus Hydrogen and the 'Hydrogen as a Service' business model here.

Find out more about NanoSUN and the Pioneer Hydrogen Refuelling Solution.

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