This year, Germany, Portugal, Spain and the Netherlands published their national hydrogen strategies, in which hydrogen from Renewable Energy Sources is a priority. Moreover, Russians have started to consider promoting hydrogen as advantageous for them – the natural gas sent from Russia to Europe could be reformed into blue hydrogen locally, e.g. in Germany or Poland. On the other hand, the German concept for hydrogen is to construct large wind and solar farms at locations abroad with a high level of sunshine and stable wind, and use their energy to produce hydrogen and export it to international markets, using gas tankers amongst other methods. Is this economically feasible? Today – not yet. Michał Wojtyło discusses the subject with Energy and Climate advisor, Gniewomir Flis.
Even 470 billion euro. Such astonishing funds are to be dedicated to investments associated with hydrogen production in the EU by 2050, according to the recently published document by the European Commission, A hydrogen strategy for a climate-neutral Europe. What is your opinion about forecasts included in that strategy? Is it not too optimistic?
I think that this strategy represents a good first step. The European Union has signalled that it is treating hydrogen seriously. Although I do not think that we will have an economy based in 50% on green hydrogen, in a real scenario it can be as much as 10%, and this is actually quite a large amount of energy and investments worth an eye-watering sum of money. I think that the initial assumptions of the strategy, of 40 GW by 2030 in the EU, are ambitious, bordering on the limit of feasibility. In this context, at the moment, all existing electrolyser factories across the globe are not able to fulfil this task. However, a new generation of European factories is already under construction. Norwegian Nel, French McPhy or German Thyssenkrupp and Enapter, among others, have already invested in gigawatt-scale electrolysis plants (required to generate hydrogen using RES). This area is already becoming quite crowded.
Recently, the decarbonisation of European economies and the use of hydrogen for that purpose has been a hot topic mainly due to communications from European governments and the mentioned EC’s hydrogen strategy. Why did the issue of using hydrogen enter the mainstream discussion at this particular moment, although, in fact, it has been present in the economy for years?
Firstly, we are currently on the decarbonisation wave which aims at climate neutrality in the EU by 2050. European governments are negotiating new goals for emissions reduction, and therefore we have also started discussing applications that were previously ignored – including heavy industrial and chemical sectors or transport subsectors such as aviation or marine transport. At first glance, hydrogen may appear an ideal solution for them, as it works in the same way as natural gas. Through an explosive reaction of oxidation, it may provide electricity and heat, and be used to power a truck, a ship or an airplane.
Hydrogen’s advantage over fossil fuels is that hydrogen oxidation does not emit carbon dioxide when releasing energy. However, it comes at a price – in the best-case scenario, hydrogen contains a half of fossil fuel energy in the same volume. Furthermore, it is more energy-intensive during compression. Therefore, it is a much less appropriate substitute for gasoline than it seems at first glance.
A discussion about hydrogen has evolved over the years. For over forty years, it has been treated as a solution to the issue of diesel engines. Five years ago, this problem was solved, to a large extent, by batteries. However, they are not the best solution for other sectors, including industry, aviation, marine transport.
Hydrogen appears to be most advantageous for the production of steel. In metallurgy, there is a process of Direct Iron Reduction, which is an alternative to today’s coking. Although in this process the use of natural gas instead of coking coal reduces carbon dioxide emissions by as much as 60%, the use of green hydrogen allows to reduce these emissions by as much as 95%.
When the metallurgical sector starts to plan new investments (and they are necessary because the infrastructure is becoming old), these investments must take hydrogen into account. Although green hydrogen may increase operator’s costs by 50%, yet in final products, e.g., in a “green car” made of “green steel” this results in a final price that is only 100–300 euro higher. For this reason, this sector is classed as an easy-win.
Secondly, we have managed to solve the issue of low-emission hydrogen only recently. Have I just not said that we do not have a problem with carbon dioxide emissions in relation to hydrogen? When using it, this is true, but hydrogen must first be produced. Attempts to produce it from natural gas using emission-capture technologies (so-called blue hydrogen) have not yet been successful on a mass scale, which would ensure its profitability. So far, the production of so-called green hydrogen, manufactured by electrolysis, using power from renewable sources, was completely uneconomic and remains so to some extent. However, in 2020, when solar energy is frequently the cheapest source of energy, the chance of success in obtaining hydrogen through hydrolysis is starting to come to fruition.
This sounds great; however, we are talking about technology that is only in its initial stages of development. What is the real timeframe for the use of hydrogen in the most important sectors, such as industry? And what, if any, is the timeframe for heavy goods vehicles or for energy storage in the power supply sector?
If you were to ask different pro-hydrogen groups from different countries, or heads of energy corporations, or Polish companies, you would hear that their best guess on the use of hydrogen in road transport is the middle of the decade, especially for cars and heavy goods vehicles.
This results from wishful thinking that hydrogen-powered vehicles will replace lucrative oil and gas markets, while business in the well-known Polish companies will carry on as usual. „But Poles love freedom associated with cars easy to refuel”, I once heard at a meeting with a management board. I have not seen any studies confirming this statement. But even if it is truly so, I do not think that my compatriots are ready to pay two-three times more for each driven kilometre than for the battery-driven electric car. Batteries store energy two to three times more effectively than hydrogen.
I have more faith in hydrogen clusters, i.e. in industrial regions where hydrogen is produced at a lower cost, because it is done locally and on a mass scale to cover industrial demand in its close proximity. Such industrial areas also include various types of ports – so marine transport and aviation will be able to use clean fuel.
When? It may be surprising to many people, but it has already begun. However, these are only the first steps, and it will take at least five, if not ten years, before hydrogen can compete with today’s fossil fuels. For example, the port in Rotterdam (the Netherlands) has already started to prepare for a hydrogen transformation.
And what is the situation in the case of hydrogen used for energy storage, for example, the problematic surpluses from RES? Is this feasible at all?
It is true – Renewable Energy Sources have their faults. For example, in winter, when the level of sunshine is lower than in the summer, and there is no strong wind for two weeks, how can energy be produced? In this context, nuclear energy is frequently mentioned. However, one question must be asked from the strategic perspective – do we truly need technology that must operate at 95% of its maximum capacity throughout the year? In my opinion, it does not make any sense, and in the future hydrogen can be used in Poland as part of strategic energy reserves in such situations.
Hydrogen can certainly be used in the power market to balance weeks when the sun does not shine or when there is no wind. Standard batteries are better for the storage of energy during the day because of higher efficiency as I mentioned in the case of cars. Therefore, that strategic reserve will not be as large as many people think.
You said earlier that the experiment to produce clean hydrogen from gas was unsuccessful. Many would not agree with this opinion. They would say that currently we should not work on an unproven and slightly futuristic solution of green hydrogen, but we should focus instead on its blue equivalent and use our infrastructural potential for gas import. What do you think?
Green hydrogen is not futuristic in any way. We have over one hundred years of experience with electrolisys. The reason why hydrogen from gas and coal currently predominates is that we were not interested in emissions and that the electricity for electrolisys nearly always was cheaper than the natural gas for reforming. The rise of RES changes the whole ballgame.
Nearly all investments associated with carbon dioxide capture and its storage (CCS) over the last 10–15 years were unprofitable. Despite many years of research and development, the carbon capture sector is still in its toddlerhood.
One of the problems that hinder the development of blue hydrogen is a risk associated with the large scale of these projects. When we talk about hydrogen from gas, we have to bear in mind the large plants whose power is expressed in gigawatts. Here green hydrogen has an advantage – it is modular, so one can start with the purchase of one electrolyser, and when the project is successful, it can then be developed further, adding successive megawatts, and then even 100 MW, if necessary. This allows, at least from a financial point of view, to reduce the risk of hydrogen from renewable energy sources.
Forcing a gas solution with CCS is a slightly outdated approach, which states that we need large and complex units. In my opinion, it is the same as a concept of constructing another Bełchatów plant. The energy transformation – photovoltaic, wind power, and now also green hydrogen – represents a history of decentralisation, or even democratisation of access to energy. Despite my slight pessimism, when it comes to blue hydrogen, in some specific cases it may be a commercial success (e.g. in cement production).
Today, the production of hydrogen using RES, of which you talk so optimistically, is much more expensive than of its equivalent using fossil fuels, so-called grey hydrogen. Where will you find the money for it? Can banks be encouraged to support these projects?
It is true, green hydrogen is still even two to three times more expensive than traditional grey hydrogen from fossil fuels, so finding the financing for projects associated with it was difficult. However, this situation has started to change. This technology is becoming increasingly cheaper. In my opinion, thanks to the EC’s hydrogen strategy, the prices of electrolysers and cells will drop to EUR 100 per 1 kW by 2030. The European Green Deal provides for hundreds of billions for green investments. Individual European countries, such as Germany, Portugal, Spain and the Netherlands, published their national hydrogen strategies, in which hydrogen from RES is a priority. This way, a signal was sent to banks that investments in green hydrogen will be executed and that they are worthy of investing in.
Today, one of the largest obstacles which prevent banks from supporting green hydrogen projects is the difference in tax rates for electricity and gas. The latter one is strongly favoured in tax law. Also, there is still a lack of tools to support green hydrogen, although the EC will try to change that next year. Therefore, it is difficult now for green hydrogen to compete with grey hydrogen and obtain financing. However, recently I have been told by a director in a big Dutch bank that he fully trusts alkaline electrolysis and that he is granting loans for such projects, but that is not yet a rule.
Problems with the transport of hydrogen are widely known. Recently, information about relevant agreements signed by Germany with Australia or Morocco has emerged. So, when it is so expensive, what is the German concept for cooperation concerning hydrogen with such distant countries?
At the moment, agreements or declarations for the performance of certain projects are being signed. According to these agreements, at locations with a high intensity of sunshine or with strong and stable winds, or with both these conditions, e.g. in Australia, large wind and solar farms are to be constructed. The energy generated by them is to be used for the production of hydrogen, which later will be exported to international markets using gas tankers or pipelines.
At the moment, it is just a concept. Is it feasible? This is a controversial question. My analyses show that as of today and for many years in the future such tankers do not make sense and it is cheaper to manufacture hydrogen locally than to import it. Furthermore, the construction of completely new infrastructure would be necessary – completely new import and export terminals, and the production of a completely new fleet of gas tankers.
Local production does not create such problems. The transport through pipelines is cheaper, but costs increase with distance. In some places, where gas pipelines are already installed, this may be feasible.
Nevertheless, a positive aspect of such agreements should be noted, and the fact that they represent a step pushing the whole world towards the formation of an international hydrogen market.
For my last question, I would like to ask you for your opinion about the pandemic’s influence on the European and Polish green transformation. Does our discussion about hydrogen, i.e. one of its tools, still make sense?
I think that due to the pandemic the European Green Deal has become even more necessary, even more important. Both COVID-19 and climate change are symptoms that humans have crossed the ultimate borders in their cooperation with nature. If we want to prevent further crises in those areas, we must make sure that our development truly considers the natural environment. Hydrogen production from RES belongs to that category, and I am certain that it will play an important role in Polish and European energy transformation.
More about hydrogen economy can be found here.
Polish version is available here.
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