One of the fundamental challenges of the green energy transition is moving energy from where it is generated to where it is needed. While hydrogen has been used for many years for industrial purposes, the large-scale green generation of hydrogen as a fuel and for electricity generation is still in its nascency. In this article, we discuss some of the issues Insurers should have in mind when considering these risks, relating to production, storage and transportation.
90% of the hydrogen produced in the UK is so-called 'grey hydrogen', which is produced from natural gas without any carbon-capture elements. This produces carbon dioxide. Electrolysis is a process that allows the production of hydrogen from water without carbon dioxide output. There are currently nine LEG hydrogen clauses that deal with specific points of failure in modern electrolysis technology, such as fluctuation in power, below specification feedstock and failures with specific parts of a standard eletrolyser. For example, in 2019 an explosion at a hydrogen electrolysis plant in Gangneung, South Korea was caused by, amongst other things, failures in the electrolyser membrane caused by power fluctuation.
If stored properly, hydrogen can he held almost indefinitely without loss of energy. However, when stored at normal temperatures in gaseous form, it takes up a huge amount of space by volume. It can be stored in liquid form, but to do so it has to be cooled to -253 °C, which is expensive to reach and maintain. If stored in gaseous form, it can be pressured up to to 700bar, but storage designed to operate at those pressures is expensive. Further, as well as the usual risks of working with high pressure vessels, hydrogen storage poses specific risks, most importantly: (i) hydrogen embrittles metal, which means alternative materials need to be considered for constructing storage vessels and also increases maintenance requirements, (ii) hydrogen has a very small molecule size, which makes storage more prone to leaks, and (iii) storage at a high pressure means that, in the case of a leak, localised concentration of hydrogen can reach dangerous levels very quickly. In a 2007 explosion at the Ohio Power Company, for example, it was established that the leak of hydrogen lasted for only ten seconds before igniting.
Traditionally hydrogen has been moved by vehicle. The obvious limitation of this is the limited capacity it offers given against the volume issues discussed above, which naturally increases costs. Further, the operation of transport provides a potential point of failure. For example, an explosion at a hydrogen transfill facility in Santa Clara, CA in June 2019 was caused by a driver attempting to fix a faulty valve on a transport truck. The other option is the use of pipelines. While these can deliver large volumes, there is plainly a vast capital expenditure required, particularly if it is intended to deliver to end-use consumers / retail outlets. Further, the issues of metal embrittlement (amongst other issues) make it difficult to transport hydrogen through existing pipework.
Insurers should carefully consider any projects proposed for insurance that involve the production, transportation or storage of hydrogen and be mindful of the particular challenges involved, alongside the more traditional engineering safety issues that all insurers of process plants will already be familiar with.
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