Denmark’s Power-to-X industry is gaining momentum with numerous projects underway but regulatory advances elsewhere may mean this impetus is short-lived
FLEXIBLE TARIFFS
Different ones can be established to support PtX plants that help balance the grid
PLAYING CATCH UP
The United States’ recent legislation risks Europe’s first mover advantage
KEY QUOTE
If Denmark is to realise building all of its planned offshore wind capacity then it will need PtX plants, since no offshore wind farm owner will want to rely 100% on merchant contracts. Signing PPAs with PtX plants will be a way to ensure a long-term demand for their electricity
In March 2022, Denmark’s political parties produced an agreement on Power-to-X (PtX), to accelerate the development of green fuels, targeting 4-6 gigawatts (GW) of installed electrolyser capacity by 2030, and supporting the first round of projects with a DKK 1.25 billion tender. Denmark, blessed with vast offshore wind resources, already meets almost two-thirds of its annual electricity demand with renewable energy. Wind power potential in Danish waters is 40 GW, while a fully electrified country would require 13 GW, according to the transmission system operator (TSO) Energinet. As more clean energy is connected to the grid, peaks in supply and demand are becoming more acute, says Energinet’s Michael Linnemann Pedersen. Denmark has revised upwards its offshore wind target to 12.9 GW installed capacity by 2030, pledging, as part of the May 2022 Esbjerg Declaration with Germany, the Netherlands and Belgium to collectively reach 65 GW of offshore wind by 2030 and 150 GW by 2050. Connecting electrolyser facilities to the grid provides an alternative route to market for electricity produced by offshore wind farms to produce green hydrogen, which can be used as a fuel or exported, while also helping to balance the grid. Within integrated facilities—PtX plants—green hydrogen can be further processed into ammonia, a chemical commodity, or a synthetic fuel (e-fuel). “If Denmark is to realise building all of its planned offshore wind capacity then it will need PtX plants since no offshore wind farm owner will want to rely 100% on merchant contracts. Signing PPAs with PtX plants will be a way to ensure a long-term demand for their electricity,” says David Dupont-Mouritzen of HØST PtX Esbjerg, a Danish ammonia project backed by investment firm Copenhagen Infrastructure Partners.
FLEXIBILITY SERVICES
The venture is developing a 1 GW PtX plant on the outskirts of the port city of Esbjerg on Denmark’s west coast, which will make ammonia from green hydrogen from 2027 onwards. In January 2023, the project development company signed a grid connection agreement with Energinet. The PtX plant has been oversized both in terms of generation and storage capacity, to avoid baseload ammonia production. By running on average at 75-80% of nameplate capacity, but with the potential to be as low as 20% of nameplate capacity, production can be optimised at times when there is a lot of renewable electricity on the grid and reduced during peak demand periods. To produce green hydrogen and ammonia, PtX plants must be able to ramp production up and down to match times when clean power is available and affordable. The plant and its power sourcing have to be configured, meaning excess electrolyser capacity, and sufficient hydrogen and ammonia storage facilities to convert an intermittent input into a more stable output to accommodate the offtake market requirements. Electricity from offshore wind projects off the west coast of Denmark has historically been produced for as low as €36-37 per megawatt-hour (/MWh). HØST’s project will also benefit from coupling with Esbjerg’s district heating needs, using waste heat from the process to warm Denmark’s largest city on its west coast.
PIPELINES AND STORAGE
Following the government’s PtX agreement, Energinet launched a dialogue with project developers and users of hydrogen infrastructure. A survey included responses from 28 companies that are developing 70 green hydrogen and PtX projects between them, amounting to 14 GW of electrolyser capacity by 2030. “Around 90% of the entities developing the 14 GW want hydrogen infrastructure. This is because the size of PtX projects in many cases would produce so much green hydrogen that you would need several thousand trucks every hour to move it around,” says Energinet’s Pedersen. In the first quarter of 2023, Energinet is due to publish a visibility strategy on a hydrogen backbone in western Denmark, since the PtX industry expects that around 70% of the domestic hydrogen production by 2030 will take place in Funen and Jutland. Work is also underway with the aim of repurposing an existing natural gas pipeline in Jutland. “This repurposing of a pipeline to Germany for export is possible because there are [already] two natural gas pipelines between the countries,” says Pedersen. More than half of the largest projects (of over 1 GW) in the 14 GW pipeline have a business case that rests on exporting hydrogen to Germany. In late 2022, Energinet signed a Memorandum of Understanding with Gasunie Deutschland, with the partners committing to cooperating in various areas concerning exporting hydrogen to Germany. Hydrogen infrastructure would also allow for hydrogen to be produced in areas of Denmark at lowest cost, which can then be transported in large volumes to other areas of the country for refining into e-fuels.
DIRECT LINK
Denmark’s “open door” regime will allow offshore wind projects to have a direct line to a PtX plant
PTX EXPORT OPPORTUNITIES
HØST PtX Esbjerg will make ammonia for chemicals and fertiliser production because, for these industrial sectors, it makes no difference whether the molecules are grey or green, says HØST’s Dupont-Mouritzen, whereas ammonia for shipping fuel would require new types of vessels to be built as well as change in how fuel is procured to long-term contracts rather than on spot markets. There is are significant opportunities to decarbonise represented by ammonia used in the production of chemicals and fertilisers as it is responsible for 2-3% of global carbon dioxide emissions. “Half the capacity of the 1 GW plant at HØST will provide all of Denmark’s nitrogen fertiliser demand so the plant will be exporting to markets outside of Denmark, most probably nearby, such as northern Germany, Sweden and other parts of Scandinavia,” Dupont-Mouritzen adds. The combination of competitive clean energy, abundant wind and solar resources, cheaper capital plus factors like stable, transparent regulations, contributed to the decision by renewables developer European Energy to build its first e-methanol PtX plant in Denmark. “Denmark should and can do both green hydrogen and PtX export,” says European Energy’s Emil Vikjær-Andresen. “We have been successful at exporting renewable energy hardware—like wind turbines—as well as development capabilities, so by doing initial projects in Denmark, we are building upon this ecosystem, which can then be exported globally to develop, supply, construct and operate PtX projects. But we can’t ignore the fact that other countries, like the US, are aggressively pursuing establishing PtX,” Vikjær-Andresen adds.
GRID CONNECTION TARIFFS
To have the best opportunity to establish a domestic PtX industry—one that can also meet export demand—requires addressing fundamental issues. As well as the need to boost infrastructure, grid connection tariffs need to reflect the actual usage of electricity from the grid, according to Vikjær-Andresen. PtX plants can help to balance the grid and tariffs should reflect this, says Dupont-Mouritzen. “A good approach to take on tariffs would be to look to Norway, where commercial and industrial electricity consumers are incentivised to use electricity at times outside of peak demand periods,” he says. Denmark’s PtX agreement has led to work to design a more flexible grid tariff regime, says Pedersen away from the present regime that applies charges based on volumes of electricity (MWh) consumed to one based more upon capacity. Topsoe, a Danish provider of chemical solutions for the ammonia and methanol sectors, is partnering with companies and customers to scale the PtX market, ready for its solid oxide electrolyser (SOEC) technology, which will be produced in 2-3 years’ time. These partnerships include a green ammonia project in Lemvig, with developer Skovgaard Energy and equipment manufacturer Vestas. 
CLEAR PATHWAYS
Topsoe’s Sundus Cordelia Ramli says Denmark’s PtX agreement recognises there is much more to gain than, “Simply jumping on the green hydrogen train”. But she agrees with Vikjær-Andresen that, while support and subsidies are welcome, transparent frameworks to provide certainty for developers are critical. “Setting targets for the use of green hydrogen across specific sectors and providing financial incentives supporting the development of the green hydrogen infrastructure builds trust and commitment,” says Ramli. While there are many advantages to establishing Denmark as a PtX hub, Ramli points to a lag between Denmark and other EU member states. “Germany, Netherlands, Spain and Italy are just a few examples of EU member states with extensive funding programmes and initiatives underway to enable their green hydrogen transitions,” she adds. HØST’s Dupont-Mouritzen thinks Denmark and Europe can seize global PtX export opportunities through coordination with offshore wind capacity build-out, as set out in the Esbjerg Declaration. Denmark’s “open door” regime provides developers with the opportunity to apply to build offshore wind projects with a direct line between the turbines and a PtX plant. “This mechanism will accelerate the build-out of renewable energy significantly,” says Dupont-Mouritzen. To help facilitate the growth of the PtX industry, revisions to rules around direct line connections and hybrid facilities are being reviewed with the aim of providing more flexibility in terms of co-location. 
US THREAT
In a global context, the EU is at risk of playing catch-up after the US introduced the Inflation Reduction Act (IRA) last year. “Our customers, who were considering investments in Europe, are now relocating their PtX projects to the US,” says Ramli. The IRA includes tax credits that incentivise the production of green hydrogen at $3 per kilogram and throws the EU’s prolonged deliberation over green hydrogen certification into sharp relief. “In the US businesses and industries are incentivised for doing the right thing, whereas the approach by the EU seems to be more concerned with penalising businesses and industries for not doing the right thing,” says Dupont-Mouritzen. This could be to the detriment of early gains in PtX made by Denmark, and the wider Union, in what is rapidly emerging as a competitive, global market. “PtX can potentially address Europe’s energy security woes, but if it doesn’t accelerate its progress, the US could move ahead,” says Pedersen.
TEXT Sara Verbruggen IMAGES
Mads Eneqvist, Unsplash & Nicholas Doherty, Unsplash