Europe bids to lead renewable hydrogen revolution

The European Union intends to do with hydrogen what it failed to do with solar and batteries: lead the world.

Clean hydrogen – which ultimately means green or renewable hydrogen made from solar- or wind-powered electrolysis – is one of the European Commission’s top priorities, Commission Vice President Frans Timmermans said recently at the launch of the EU’s post-coronavirus recovery package. The Commission is due to unveil a European hydrogen strategy and a sector integration strategy focused on decarbonising industry on June 24. Ahead of this, the newsflow around hydrogen has exploded. Climate campaigners say hydrogen is indispensable to Europe’s ambition for net zero greenhouse gas emissions by 2050. At the same time, they are worried. “The risk is that the [hydrogen] hype triggers a reversal of priorities,” said Dries Acke, head of the energy program at the European Climate Foundation (ECF), a Brussels-based think tank. “Energy efficiency, renewables and direct electrification are the bulk solutions. Hydrogen is essential to get to net zero in certain sectors like industry but we are talking about the last 20% of emission reductions,” he said. National hydrogen strategies, the most recent of which has just been unveiled in Germany, target heavy industry and long-distance transport. But for many advocates hydrogen has a vital role to play across the energy system. “Even if all production and consumption was electric, more than half of that power would have to be converted to hydrogen for [cost-effective] transport and storage,” said Ad van Wijk, professor for future energy systems at Delft University of Technology in the Netherlands and a founding father of the hydrogen economy concept. “In a sustainable energy system, you calculate in terms of system costs, not efficiency,” he said. As such, it made more sense to generate renewable power in the Sahara and import it to the Netherlands in the form of hydrogen, even with the energy losses that conversion entailed, than to install solar and electrolysers in the Netherlands. There is a general consensus that most of Europe’s future hydrogen demand would be met by imports. This is recognized in the German strategy, which puts aside Eur2 billion in hydrogen subsidies to develop production partnerships with third countries. A study by German think tank Agora Energiewende in March highlighted the importance of cooperation within Europe. It warned the number of offshore wind turbines expected to be squeezed into the German section of the North Sea risked reducing full-load hours from 4,000-5,000 per year to 3,000/yr.

Hydrogen hedge

The business case for green hydrogen is tied up with that for renewables. It can improve the business case for offshore wind in particular by avoiding additional pressure on an already overloaded grid. Hydrogen can also provide renewables with a business case when the electricity system cannot. “Conversion to hydrogen is a kind of hedging for a renewables investor,” said Emmanouil Kakaras, head of new business at Mitsubishi Power Europe. For hydrogen advocates like Van Wijk and Kakaras, the biggest challenge to a clean hydrogen economy is getting the right regulations in place. “EU policy is trying to repeat the success story of renewables,” said Kakaras. “But there is a big difference: unlike solar and wind, green hydrogen production is driven by operational not capital expenditure. 80% of the cost depends on the electricity price.”

German tax boost

This is why the German government’s pledge to “look into” removing taxes and levies on power used for hydrogen production is as important as its ambition for 5 GW of domestic electrolysis capacity by 2030. “You need an electricity price which is expensive enough to make renewable power viable and low enough to make the hydrogen produced from it competitive with gas,” Kakaras said.

In practice, stakeholders are pushing for Contracts for Difference for green hydrogen. The German government has said it would pilot these for steel and chemicals. And this is where stakeholders diverge: hydrogen enthusiasts want policymakers to promote green hydrogen – and, to get things started, blue hydrogen made from natural gas with carbon capture and storage (CCS) – across the economy. Climate campaigners say hydrogen should be steered to where it has the greatest value, namely industry, long-distance transport and seasonal storage of electricity. They also want a clear definition of what “clean” hydrogen is before it is promoted.

“There is a risk of policy before definitions,” said Acke. “Hydrogen is not a technology, it is an energy carrier that can be produced clean or dirty.”

Blending debate

There is a split over blending hydrogen with natural gas. “Blending is essential to help ramp up clean hydrogen production and its transport and distribution, and begin the process of the gas switch,” said Eva Hennig, head of EU energy policy for Thuega, a network of local German utilities. If Europe adopted a 55% emission reduction target for 2030, Germany would need to decarbonise gas for heating, she said. Climate campaigners argue that heat pumps and district heating are more cost-effective for space heating. Others say that hydrogen is too valuable to mix with natural gas, both in climate and economic terms.

Eurogas study

On June 9 energy consultants DNV GL presented preliminary results from a year-long study commissioned by Eurogas into how to decarbonise the European gas sector. They modelled a scenario that hits the EU’s decarbonisation targets for 2030 and 2050, but with more gas and at lower total cost – mainly due to less grid build-out – than one of the European Commission’s main net-zero scenarios.

The Eurogas version has nearly equal shares of electricity (36%) and renewable or decarbonised gas (32%) in final energy demand in 2050, versus the Commission’s 51% versus 20%. Variable renewables make up half the electricity mix in 2038 rather than 2032. But the carbon price also reaches just €100 a tonne in 2050, rather than €350 a tonne.

CCS assumptions

A big difference between the two scenarios is in the power sector. The Eurogas scenario has a lot more negative emissions from power plants – essentially from CCS applied to biomethane or biomass – to offset emissions in other sectors, notably transport and buildings. The consultants have assumed that CCS becomes viable at Eur100-Eur110/metric tonne. Both scenarios rely heavily on the technology, above all in power plants which is where it has thus far failed to get off the ground.

Nor is everyone convinced it ever will. CEO of Enel Francesco Starace told a May 28 webinar that Enel would not re-invest in CCS: “For us, CCS is a dead-end.” He added: “The future of natural gas will be decided more by what renewables can do than what gas can do.”

In the long run, CCS becomes less important for hydrogen production than electrolysis. By 2050, one MWh of green hydrogen will cost a quarter that of hydrogen made from natural gas with CCS, estimates DNV GL. Cheap wind and solar power are “the game-changer”, says Van Wijk. The Eurogas study does not model powerfuels, or hydrogen-derived liquid fuels, because they were “too cost-prohibitive” when the work started, a DNV consultant said. The full study is due June 30.

Author: Sonja Van Renssen

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