The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

Sector coupling and the electrification of our economy will boost green hydrogen’s appeal and cost-effectiveness

Green hydrogen is experiencing unprecedented momentum. The European Union has made hydrogen a big part of its trillion-dollar Green Deal package and presented its hydrogen strategy in 2020. A host of countries such as Portugal, Germany, Chile and Australia have also formulated ambitious plans for developing hydrogen-based on renewables. Also, several big energy and oil companies such as Shell, BP, Total and Norway’s Equinor have all recently announced plans to develop green hydrogen projects. In June 2021, the Danish Government allocated €114 million to the so-called Important Projects of Common European Interest initiative for hydrogen, subscribed to by 23 European countries. Denmark has also recently approved the establishment of two energy islands by 2030—one in the North Sea and one in the Baltic Sea. Besides serving as hubs for electricity generation from surrounding offshore wind farms that will be connected and distribute power between Denmark and neighbouring countries, the energy islands will also hold facilities for energy storage, green hydrogen electrolysis. This makes the two islands among the world’s first large-scale power-to-X production facilities. The two energy islands and the allocation of public funds are important and necessary steps. We need green hydrogen if we are to achieve deep decarbonisation of the energy system. In regards to the hard-to-electrify sectors such as transportation, industry and buildings the potential is great. The transport sector alone is responsible for 24% of global carbon emissions, according to the International Energy Agency (IEA). TRANSPORT SOLUTION The number of cars, container vessels and aircraft will only increase. Global transport activity will more than double by 2050 and emissions will rise by 16% compared to 2015—even if existing commitments to decarbonisation targets are met—according to the ITF Transport Outlook 2021. Part of the answer to that challenge is of course electrification and batteries, especially in relation to lighter vehicles, but for the heavier and long-distance vehicles that have proven hard (or impossible) to electrify directly, green hydrogen represents an attractive solution. The paper “Navigating through hydrogen” published by European think tank Bruegel in April 2021 looks at the potential use of hydrogen. In regards to shipping, aviation and heavy-duty vehicles, steelmaking, chemical industries and oil refining, green hydrogen would be a viable solution, it concludes. Additionally, green hydrogen could become important in regards to energy storage, which some argue could pave the way for increasing shares of variable renewable energy into electricity systems. “Compared to batteries, hydrogen is a more plausible solution for seasonal storage because investment costs are almost independent of storage volume and self-discharge is low,” the Bruegel paper concludes.

SCALE PRODUCTION If we are to tap into the potential of green hydrogen, we need to scale up the efforts to increase production and lower the price. It is still an early-stage technology that remains untested in the scale. The EU hydrogen strategy is targeting 6 gigawatts (GW) of installed renewable hydrogen electrolyser capacity by 2024 and 40 GW by 2030. In comparison, there is currently only around 300 megawatts (MW) of green hydrogen electrolyser capacity installed globally and green hydrogen still only accounts for about 1% of global hydrogen supply. If green hydrogen is to meet this kind of market demand within the next decade, there needs to be technological advancements and coordinated efforts to get the necessary technologies to reach commercial maturity. This applies to further development of electrolysis design and construction, improvements on the efficiency and conversion rate in the production, and the durability and modularity of the production facilities. These advancements need to happen now.

PRICE DIFFERENCE Experts highlight the price of green hydrogen as a significant barrier in terms of accelerating its use. Green hydrogen costs between about $3/kilogram and $6.55/kilogram, according to the European Commission's hydrogen strategy. Fossil-based hydrogen costs about $1.80/kilogram. The good news is that we are heading in that direction. Roughly 65% of the costs of green hydrogen is currently electricity. The continued deployment of renewables—cheaper than fossil fuels on the whole—will therefore likely also help see the price of green hydrogen fall. It could be further accelerated by a regulatory push towards increasing taxes on CO2. It is also important to look further into the reduction potentials in improving the gradual maturity of electrolysis technology and manufacturing.

SECTOR COUPLING Another important step is to accelerate the expansion of the necessary infrastructure and encourage sector coupling. Through electrification, we can maximise the value of renewable energy, the electrolysis process and also distribute the energy efficiently throughout the energy system. To do so we have to view all the individual parts as a whole and establish new partnerships and alliances between various sectors. The two Danish energy islands will be an important demonstration of how we should work together in order to achieve synergy and redesign our energy systems. Green hydrogen holds great benefits in this redesign process. First of all, green hydrogen can store some of the energy from solar and wind and provide grid balancing services so that we can increase the share of green electricity. It is also an energy source where we can rely on existing energy infrastructure and we already have gas pipes that can be used to transport the hydrogen. Lastly, green hydrogen can provide a missing link between growing amounts of renewable electricity and hard-to-abate sectors. But if we are to tap into these potentials and create a large-scale and cost-effective production of green hydrogen, we still have to move faster. We need to establish a common understanding that green hydrogen is a vital part of the future energy mix. But we also need to ensure long-term political commitment by following up on the many political statements with new regulations, further investments and ambitious goals. Finally,we need a clear and mutual plan for where we are heading; from production to supply and markets. If we succeed with this, green hydrogen will become a vital part of the decarbonisation of our global societies. •

Do you have a thoughtful response to the opinion expressed here? Do you have an opinion regarding an aspect of the global energy transition you would like to share with other FORESIGHT readers? If so, please send a short pitch of 200 words and a sentence explaining why you are the right person to deliver this opinion to opinion@foresightdk.com.