Techno-economic assessment of green hydrogen production for decarbonizing the whisky industry on Islay, Scotland

The urgent need to achieve Sustainable Development Goals (SDG) 7 and 12 highlights the critical requirement for transformative changes in energy infrastructures and production methods. Scotland has committed to ambitious net-zero targets by 2045[1], with the whisky industry playing a pivotal role in achieving a 75 % reduction in emissions by 2030. The industry, which contributes £2.64 billion annually to the Scottish economy, emitted 528,792 tones of CO₂ equivalent (CO₂e) in 2018, accounting for 5.3 % of Scotland’s industrial emissions [2].

The Scotch Whisky Association (SWA) has been committed to aligning with the UN Sustainable Development Goals (SDGs), setting regular sustainability targets since 2009 and has targeted climate change, responsible water use, land care and promoting a circular economy. These efforts have led to a 34 % in CO₂ emissions, primarily through efficiency improvements and the adoption of non-fossil-fuel energy sources [3]. Despite Scotland achieving a grid emission intensity of 26.9g CO2e/kWh in 2018 [4] whisky distillation remains a significant source of emissions. This is primarily due to the industry’s continued reliance on fossil oil and natural gas, even as efforts to transition to non-fossil-fuel energy sources are underway [3]. Previous decarbonization research by Sibille [5] used the greenhouse gas accounting methodology to estimate that the Scottish whisky industry is producing 528,792 tonnes CO2e per year [3].

While anaerobic digestion (AD) shows promise for decarbonizing a portion of whisky production (18.24 %), hydrogen presents a viable solution for the remaining decarbonization, especially in areas lacking low-carbon options. The multifaceted strategy, though not linear, is essential to achieve sustainability goals. However, challenges such as affordability, viability, safety, and the varying capital and operational expenditures associated with hydrogen production and storage must be addressed. The Scottish whisky industry generates approximately 4,371,000 tons of waste each year [6]. For every liter of alcohol produced, the industry produces 2.5 kg of draff (spent grains), 8 L of pot-ale (liquid residue from mashing and distillation), and 10 L of spent lees [7]. Managing the disposal of such waste poses a challenge, prompting early research efforts to explore methods for waste reduction, including AD and the generation of biogas [8].

Traditionally, whisky distillation by-products have been repurposed as animal feed. However, this process is costly, energy-intensive [8], requires extensive storage facilities, and is unsuitable for sheep due to its high copper content [6,9]. The continuous generation of waste often leads some distilleries to discharge it into oceans or rivers, exacerbating eutrophication issues [10]. On Islay, 30 % of the pot-ale produced is released into the Sound of Islay [11]. Implementing AD could mitigate these waste discharge problems by reducing distillery energy costs and providing a waste-to-energy solution. This approach aligns with the objectives of the proposed Scottish Circular Economy Bill, which promotes responsible production and maximizing the value derived from waste [12].

Whisky by-products, when converted into biogas, have the potential to fulfil 25 % of a distillery’s thermal energy needs [9]. Large and efficient distilleries, as noted by O’Shea et al. [13], could replace up to 64 % of their natural gas supply through anaerobic digestion (AD), assuming an 80 % digestion efficiency for all whisky by-products. However, these findings are theoretical and overlook the economic challenges of capital expenditure (CAPEX) and operational expenditure (OPEX), despite suggesting the need for a large tank with a volume of 541,884 m³ and a diameter of 200 m. Economic considerations are crucial for a smooth and cost-effective transition to low-carbon alternatives, particularly as AD is often deemed too expensive for small distilleries [8]. The limited lifespan of AD systems, ranging from 15 to 30 years [14], further raises questions about the feasibility and desirability of their installation.

While biogas remains a promising avenue to reduce distillery CO₂e emissions [5,9,14,15]. Matthew and Spataru [16] highlight the potential reluctance of isolated Scottish distilleries to capitalize on biowaste opportunities, despite a potential utilization rate of 87 %. Considering that industry-wide AD would only achieve a 14 % reduction in emissions, it is crucial to explore alternative decarbonization strategies. For example, hydrogen could potentially contribute an additional 32 % reduction in whisky emissions [5]. However, the economic and environmental implications of green hydrogen in the distillery sector requires further research.

Green hydrogen (GH₂), derived from renewable resources, is hailed as a future fuel [17,18]. However, with only 4 % of global hydrogen currently produced from renewables [19], it is imperative to establish sustainable and cost-effective GH₂ production methods. The annual projected global hydrogen demand of 2.3 gigatons raises concerns about the technology’s sustainability, particularly regarding water consumption, which could reach annual volumes of 21 billion m³ [20,21].

While hydrogen plays a pivotal role (19 % of the future pathway) in the Scotch Whisky Association’s (SWA) net-zero strategy [5], transitional fuels, including natural gas, are acknowledged as fundamental in optimizing the use of prototype biofuel/hydrogen boilers in Phase 1 solutions, such as that proposed by Maxfield et al. [22]. This recognition persists until hydrogen becomes universally available from the gas grid or synthesized locally, presenting an economic challenge as costs vary significantly depending on electrolyser size, system type, location and electricity cost [23,24].

Hydrogen gas necessitates around 3000 times more volume than gasoline to yield an equivalent amount of energy [25]. When energy is needed for processes like distillation, the hydrogen through combustion delivers thermal energy. It’s essential to note that hydrogen combustion is considered genuinely "green" only when it takes place in the presence of pure oxygen; otherwise, nitrogen oxides are formed [25].

Hydrogen’s key advantage is its high energy density, measured at 33 kWh/kg [26], making it ideal for industrial processes and long-term energy storage. For short-term energy balancing, batteries are a more suitable solution [27]. A tone of hydrogen stored at 200 bar can provide 100 % operational energy for 4 h in large distilleries [28]. Effective hydrogen storage is essential for mitigating curtailment and ensuring consistent energy supply [29]. Due to hydrogen’s low volumetric density, the most practical storage methods are compressed gas storage and cryogenic liquefaction. This is especially relevant to Islay, where geological storage options are unavailable [30]. Liquefaction does, however, have a high associated electrical energy consumption due to boil off losses and the high electrical energy required to keep and maintain hydrogen in a liquid state [31,32].

This study evaluates the economic viability of hydrogen technology for decarbonizing whisky production on Islay. Islay, a major Scottish whisky-producing island, faces significant challenges in reducing the carbon footprint of its energy-intensive distillation processes. Building on previous research, including AD studies by O’Shea et al. [13] and Matthew and Spataru [16], this study addresses the energy demands that remain after implementing AD processes. Given that AD can be economically burdensome for some distilleries [8], it is essential to quantify the economic implications of alternative decarbonization options of hydrogen production and storage. Hydrogen generation from alternative energy sources such as wind has been estimated to have higher production costs [33]. By quantifying these costs through the Levelized Cost of Hydrogen (LCOH) metric, this study aims to support policy development and incentivize a shift towards a low-carbon economy. The findings will offer valuable insights into the feasibility and practicality of hydrogen solutions for sustainable whisky production on Islay, with potential applications for other islands and industries.

Scenarios were developed by first splitting the year into summer and winter seasons. Electrolyzer efficiencies were then varied, with AEL systems operating at 62 %, 72 % and 82 %, and PEMEL systems at 67 %, 74.5 %, and 82 %, representing the lower, average, and upper efficiency bounds as outlined by Smolinka et al [37].

AEL and PEMEL system were both modelled due to PEMEL’s, predominant use in small to medium sized projects, capacity to work well with decentralized renewables and AEL’s technological maturity [38,39]. Solid Oxide Electrolysis (SOEL) was omitted as it is in the early stages of development, with low technology readiness levels and limited technical data available [40]. Different storage methods were also evaluated, with higher pressure storage (350 bar, 500 bar, 700 bar and cryogenic liquefaction) chosen to reduce potential spatial constraints present on island nations. The model calculates the energy required for hydrogen compression by considering factors such as system efficiency (Table-A1), temperature and the initial and final pressures. The energy required for compression increases with higher pressure and temperature and the relationship between pressure and energy is logarithmic. Additionally, higher system efficiency reduces the energy required for compression, meaning more efficient systems need less input energy.

Large energy systems can negatively impact arable land due to space constraints [39]. As a result, larger sized, low pressure cylinders were omitted, despite their ability to absorb production peaks and limit losses more easily [41]. Cycle times of 18, 36 and 72 h were used to explore the implications for storage options, as shown in Table-A1. This approach resulted in a total of 288 possible scenarios.

Water consumption was calculated using Equation-5, which is based on stoichiometric relationships and the molar masses of hydrogen and water under standard temperature and pressure conditions. According to Equation-5, theoretical estimates indicate that 9 L of water are required to produce each kilogram (Kg) of hydrogen [20]. Considering the electrolyzer efficiencies, water consumption values were calculated by determining the required volume of water per kilogram of hydrogen produced at each electrolyzer efficiency (Table-A5). This calculation involved multiplying the electrolyzer’s efficiency by the theoretical water usage derived from the stoichiometric equation. This informed the seasonal water needs based on seasonal hydrogen production.(5a)(5b)(5c)(5d)(5e)Where:

Due to variability and difficulty in measuring precise gas compression values [42], assumption A-1 was applied as shown in Table A6. The required energy to compress 1 kg of hydrogen to the designated pressures was calculated using an isentropic compression equation (Equation-7). This energy requirement was then adjusted by the storage percentage for each run and further multiplied by the electricity costs listed in Table-A4 to derive the total electricity cost for hydrogen compression.(7a)(7b)Where:

To calculate the LCOH, annual hydrogen demand was projected through 2050, along with the associated costs of producing hydrogen using the selected electrolyzer system. All values were initialized for the baseline year of 2023. A degradation rate of 1.375 % [43] was applied on an annual basis to the energy demand from the hydrogen production until stack replacement, at which point it reset. This ensures that hydrogen production remains static, whilst electricity demand increases. The system was expected to have only one stack replacement in its 20-year operational lifetime. Stack replacement occurred at year 9 for PEMEL and 10 for AEL [44] with an associated cost of 315 €/kW for AEL and 727.5 €/kW for PEMEL [45].

The electrolyzer capacity was determined based on annual hydrogen demand, with the operating percentage applied to 8760 h to calculate the effective operating hours. This value was then multiplied by cost factors (Table-A3) to determine the total CAPEX for the required electrolyzer’s. Additional expenses related to wiring were estimated using manufacturing interviews from Glenk and Reichelstein [46], which suggested a cost of $50 per kilowatt for piping and wiring CAPEX. Each system was also expected to have one stack replacement its 20-year operational lifetime.

To replace current gas-fired systems and achieve a system that allows 100 % hydrogen firing, an integrated and flexible hydrogen and biogas burner is required. Burner costs were therefore integrated into the overall LCOH, to achieve a net-zero system. Burner count and costs were determined using equations in assumption A-4, Table A-6. The total distillation time was set to 12-h [47] to account for both distillations, with the first lasting 4 h and the second eight. This timing influenced the selection of a 4-h production period in Table-A7, ensuring that at least the first distillation can proceed. Additionally, a shorter production window allows for better adaptation to variable renewable energy conditions, maximizing the efficient use of available resources. To establish the number of burners needed, the total energy required in a 12-h period was divided by the energy produced by one burner in a 12-h period and multiplied by the CAPEX cost detailed in Table-A2. Based on Table A-6, row A-3 and hydrogen cost data [48], energy costs for pressurized systems were calculated using previous energy requirements (energy for compression and production).

Water costs were derived from the annual water demand (Table A-6, row A-5), utilizing rates per kilogram of hydrogen produced in Table-A4. The total annual water cost was based on Table-A6, row A-9 and cost factors in Table-A3. These costs were solely associated with hydrogen production, excluding water costs of whisky production.

Operating costs were determined based on the percentage of CAPEX (Table-A4), this was 4/ % of CAPEX for PEMEL systems and 2.5 % of CAPEX for AEL. These are annually recurring figures calculated as a percentage of the initial investment cost of an electrolyzer.

The LCOH was computed for the entire island using Equation-9, this assumed a singular electrolyzer providing hydrogen to the entire island. Therefore, unless otherwise stated, the LCOH reflects the total cost of the island. The LCOH was allocated proportionally to each distillery based on production output percentages, using annual alcohol production [16].

(9a)(9b)(9c)(9d)

The volume of oxygen generated from water electrolysis was calculated by first determining the number of oxygen moles, using Equation-10, which involved halving the number of hydrogen moles produced. The ideal gas law then applied to convert the moles of oxygen into volume expressed in cubic meters (m³). To estimate weekly volumes, the annual value was divided by 52. CAPEX costs for oxygen storage were omitted, considering the possibility of using the oxygen in ‘green’ hydrogen combustion, as suggested by Armaroli and Balzani [25].

(10)

Precipitation data were gathered from the three geographical areas. The annual average rainfall was calculated, and the percentage of annual rainfall for each month was determined. Monthly water production was computed by multiplying this percentage by the annual production volume [16], Table A-6, row A-5. Seasonal water stress was assessed per Table A-6, row A-6 by dividing the water used for each hydrogen production method by the total water available in that season, obtained through the calculations of rainfall volume.

The energy demand per fuel for the baseline year (2023) was multiplied by greenhouse gas conversion factors [49] to determine the current quantity of emissions produced. Subsequently, the electrical energy demand was multiplied by a factor of 50g/kWh [50] to establish the associated emissions from electricity. The total energy demand did not include the potential provision of energy from biogas. These values were then aggregated across all distilleries.

Data were aggregated, organized, analyzed, and modelled using the Python Programming language [51]. The model made use of well-known open-source packages, including NumPy [52], Pandas [53], Matplotlib [54], and Seaborn [55]. Additional graphics were created using ArcMap [56].

This study evaluated the LCOH across various electrolysis technologies, storage types, and efficiency levels, while assessing the suitability of local energy infrastructure under these constraints. The findings highlight that Islay’s current onshore wind energy infrastructure is insufficient to meet the hydrogen production and decarbonization needs of its whisky industry. Expanding onshore wind capacity to the required levels is not a feasible option, as it would require approximately 50 times more local wind generation capacity, which conflicts with conservation efforts and the island’s visual landscape. Additionally, local grid constraints are also already a limiting factor in developing further island generation capacity [59], therefore significantly greater electricity demand from the existing grid to produce hydrogen would not be feasible either.

Without upgrading local electricity networks, one potential solution for enabling local hydrogen production is connecting Islay to the proposed 2 GW MWF. This approach could supply sufficient electricity for whisky decarbonization while minimizing impacts on conservation zones through offshore generation. Additionally, it could contribute to help job creation and public infrastructure enhancement [60]. However, further research is required to assess its economic and technical feasibility against local electricity network upgrades. If the project was to enter the UK Hydrogen Production business model, the additionality principle would be achieved, a key desire from the UK government. This occurs if MWF’s commissioning date was after or in line with that of the hydrogen project, a logical potential given MWF has not achieved its Financial Investment Decision yet [61]. A connection to Islay would aid wider electricity system benefits, as the projects electricity source is met by new low carbon electricity, does not add to an already constrained island grid and is not diverting low carbon electricity from other users. The findings emphasize the necessity for a comprehensive top-down spatial energy plan to optimize economic benefits and synergies between energy sectors.

AEL had a lower LCOH for all electrolyzer/storage configurations excluding cryogenic storage, which was prohibitively expensive with a minimum cost of £148.24/kg H₂. Given the storage and cycling requirements of the distillery industry, cryogenic storage will be impractical. Between AEL and PEMEL, differences in cost were less significant for the cheapest scenario in all three pressurized storage cases, but this was greater for the other scenarios. The greater production time appears to reduce the difference between technologies as well as the overall cost, which would appear to indicate that having the greatest load factor is a key factor in minimizing the cost of hydrogen. This is supported by Javanshir et al. [62] who indicates electrolyzers around 24 MW are the most profitable under high electricity prices.

For smaller distilleries, the marginal LCOH increase for 700 bar systems provides up to 50 % space savings, compared with 350 bar systems, addressing potential space constraints. Analysis highlights the challenges associated with cryogenic storage, highlighting the economic advantages of pressurized systems and alkaline electrolyzer’s. There may be other use cases where cryogenic storage could be economical, but it seems unlikely for distilleries given the constraints of this model. The inclusion of expensive high-pressure storage might make Islay’s projects less attractive when in competition for the UK’s Hydrogen Production Business Model [63]. This could have negative consequences for projects as they are not able to access the lucrative Hydrogen Allocation Rounds (subsidy scheme), exacerbating the disparity in achieving a ‘just’ transition on Islay.

In additional to the technical challenges, local production of green hydrogen for the island would have financial implications as well. This study only considers the costs and technical considerations of local production of green hydrogen. It does not consider how affordable or achievable it would be. If fossil fuel use is to be eliminated, the main factor deciding alternative options will be cost. The lowest price of hydrogen modelled here of £13.52/kg and is consistent with estimates from the National Grids Future Energy Scenarios [64]). The high cost of electricity means that industrial heat pumps may be more economical. This will however depend on the type of energy required, specifically for distilling the temperature of heat, which could make heat pumps uneconomical. The significant space requirements of industrial heat pumps could present challenges on a small island like Islay. Moreover, given the current limitations of Islay’s electricity network, any additional electricity demand would be impractical unless a connection to the MWF is established or significant grid infrastructure enhancements are undertaken. If hydrogen were required, various strategies could enhance the viability of GH₂ production on Islay. These include implementing carbon taxes on natural gas to incentivize the adoption of renewable energy sources, subsidizing electricity for industries engaged in decarbonization efforts, securing UK Hydrogen Production Business Model funding or brokering directly connected power purchase agreements for discounted electricity between MWF and Islay’s distilleries (avoiding expensive non-energy costs).

Financial constraints faced by smaller distilleries are also recognized as significant barriers to transitioning to GH₂ production. To address this issue, this study suggests that government subsidies should be specifically targeted towards these entities. Government initiatives, like the Green Distilleries Competition, have significantly supported financial efforts, allocating £12.33 million for research into Whisky Decarbonization. This has led to sixteen successful projects in Phase 1 and four in Phase 2 [65]. Other UK government funded initiatives include the Hydrogen Production Business Model [63] and subsequent Hydrogen Allocation Rounds (HAR). This UK subsidy program unlocks funding for electrolytic hydrogen production by matching the cost of the hydrogen produced to that of the market price of natural gas for the consumer. Electrolytic hydrogen prices are therefore subsidized per kilogram produced and negotiated with the government through a ‘strike price’ which covers electrical energy, OPEX and CAPEX costs. This method creates available and economical ‘green’ hydrogen for a consumer, whilst remaining profitable for the producer. Through this subsidy method, the UK government is hoping to capitalize on the economic benefits and wider hydrogen supply chain developments in an attempt to achieve 10 GW of electrolytic hydrogen production capacity in construction or operation by 2030 [66]. Islay’s distilleries could potentially benefit from this subsidy scheme; however, access to renewable electricity remains a significant challenge. The combustion of hydrogen is not electrically efficient and could raise concerns among taxpayers due to the substantial capital required to subsidies hydrogen to match the price of natural gas. Therefore, further research is needed to explore the feasibility of alternative decarbonization techniques to guide policymakers effectively. Furthermore, without distillery revenue data, it is impossible to determine the overall affordability of transition. Smaller distilleries can potentially achieve greater decarbonization (86 %) by using hydrogen technology versus AD (14 %) for a lower cost, indicating hydrogen could be a more favorable initial approach to decarbonization for some smaller distilleries.

Peat fires are used to dry out the malted barley, giving the whisky a distinct flavor profile. Preserving Islay’s distinct peaty flavors and associated heritage is deemed crucial but despite conservation efforts by large producers [67], use of peat in whisky is increasingly being questioned due to its crucial role in wildlife ecosystems, water quality maintenance, and natural flood defenses [68]. Maintaining the island’s identity and the quality of its whisky production will be crucial whilst also addressing decarbonization demands. If the use of peat is continued, alongside hydrogen or electrification of heat or otherwise, ensuring zero net emissions would require carbon capture and storage (CCS) technologies. Integrating CCS could enable access to UK government subsidies such as the Renewable Transport Fuel Obligation (RTFO), which could facilitate the use of e-fuels [69]. This is turn, could extend synthetic methanol production could then be extended to the maritime sector, facilitating the decarbonization of Scotland and Islay’s ferry system. The prospect of utilizing e-fuels holds significant promise for hydrogen production facilities, potentially driving down production costs. However, the scale of production falls beyond the scope of this study and might necessitate substantial expansion of electrolyzer capacity and the implementation of costly CCS systems. Such CCS systems require significant subsidies for installation and are only legible for subsidies if present in one of the five hydrogen clusters, which Islay is currently excluded from [70]. Nevertheless, the modular construction of electrolyzer’s offers flexibility, hinting at the possibility of developing a market in the future. Additionally, the study emphasizes the importance of further research into alternative flavoring techniques that could minimize the reliance on peat while maintaining the desired flavor profiles. However, the economic challenges associated with implementing CCS technologies and developing alternative flavoring methods are acknowledged, highlighting the need for continued research and innovation in this area.

Water stress arising from hydrogen production in both PEMEL and AEL systems is identified as a significant concern, particularly during the summer months. To mitigate this issue, the study recommends exploring wastewater management solutions aligned with SDG 12, responsible production and consumption. Potential strategies include rainwater harvesting and the reuse of distillery wastewater, which could alleviate pressure on freshwater resources while promoting sustainability. Changing rainfall patterns led to droughts in 2018, halting production of half of Islay’s distilleries [60,71]. A hydrogen transition would exacerbate the increasing threat of drought, underscoring Islay’s inadequate water infrastructure for a hydrogen-based economy. Embracing this hydrogen strategy therefore necessitates wastewater management solutions aligned with SDG 12 (responsible production) [72]. Ethanol production yields 10–15L of wastewater per liter of ethanol [73]. Given water consumption figures in Table-A5, such water consumption volumes suggest that hydrogen production via wastewater from ethanol production is theoretically viable. If distilleries can refine wastewater to the necessary purity for electrolysis, a closed-loop production system could be utilized, optimizing water resource utilization and decreasing water stress.