Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
With the hydrogen economy set to boom in the next few years
across the globe, Europe is emerging as the clear leader in planned
installations and government policy supporting the sector.
"An unprecedented wave of hydrogen strategies has been released
in 2020, despite COVID-19," said IHS Markit in its
Power-to-X quarterly report, released 9 December. (see link here). "In 2020, six
European countries and the European Commission released hydrogen
strategies amid the COVID-19 crisis, in most cases as part of a
green recovery plan."
Annual global investments in green hydrogen are now expected to
exceed $1 billion by 2023, according to IHS Markit, and spending
will accelerate rapidly thereafter. IHS Markit projects that from
2020 through 2030, $44 billion will be invested in green and blue
hydrogen projects in five key European countries: France, Germany,
Italy, Portugal, and Spain.
"The interest in hydrogen is being driven by the very clear
net-zero carbon commitment by 2050 in Europe, as well as the more
recent announcement of a 55% decarbonization by 2030," said
Catherine Robinson, IHS Markit executive director of hydrogen and
renewable gas, and co-author of the Power-to-X report.
"Hydrogen development is tied directly to decarbonization. What
Europe has done in the last six months is to begin to put in place
the financing framework for hydrogen. If hydrogen going to take
off, it needs to have [incentive] schemes, like renewable power,"
Robinson continued.
At present, Europe represents about half of the globa; the
planned capacity for electrolysis hydrogen production (see
graphs).
"Green" hydrogen is defined as hydrogen produced through
electrolysis using renewable energy so that it's carbon free; and
"blue" hydrogen is defined as hydrogen produced from processing
natural gas and then using carbon capture and storage to reduce or
avoid emissions.
The EC's hydrogen strategy calls for regulatory and financial
support to reach at least 6 GW of installed renewable hydrogen
electrolysis capacity in the EU by 2024 and 40 GW by 2030.
According to IHS Markit, the current pipeline for 2030 of existing
and planned projects is about 7.3 GW, indicating the chasm between
current activity and its stated ambition.
Depending on a particular nation's needs, it might import
hydrogen from Russia or the Middle East, such as France and Germany
would possibly do. Other countries such as Portugal could be
hydrogen exporters.
Falling costs
Two factors are driving the acceleration: falling costs and
government support.
"Green hydrogen production costs are down 40% since 2015 and are
expected to fall by a further 40% through 2025," IHS Markit said in
its Power-to-X report. "Reductions in the costs of
renewable power account for two-thirds of the reduction in the cost
of green hydrogen seen since 2015; with one-third due to reductions
in the cost of the electrolysis equipment…. By 2030, IHS Markit
expects that green hydrogen costs could drop below $2/kg, enabling
it to compete with [blue] hydrogen."
At current costs, blue hydrogen can compete with fossil fuels if
a carbon tax is about €60/metric ton (about US$73/mt), and green
hydrogen can compete at about twice that tax rate, according to
Robinson. But the cost of green hydrogen in particular is coming
down rapidly, and she said, "it could compete by 2030 or even
sooner."
The EC's Roadmap comes up with similar figures:
Current estimated cost for fossil fuel-based hydrogen is around
€1.5/kg (US$1.82/kg) for the EU, although this is highly dependent
on natural gas prices
Current estimated costs today for fossil fuel-based hydrogen
with carbon capture and storage are around €2/kg, and renewable
hydrogen €2.5-5.5/kg.
COVID-19 has slowed investment in hydrogen projects, but also
laid open the potential to leverage recovery spending on green
hydrogen. The EC's hydrogen roadmap estimated that cumulative
investments in renewable hydrogen in Europe could be up to €180-470
billion (approximately US$220-570 billion) by 2050, and in the
range of €3-18 billion for low-carbon fossil fuel-based
hydrogen.
But, according to Hydrogen Europe, a coalition of nearly 200
private companies, 40 research institutions and more than 30
national agencies, investment in the sector is at risk as companies
focus their spending on their most immediate needs. "While the
current clean hydrogen technology market is not worth more than €2
billion at the moment, our analysis shows that €15 billion of
investments that have been planned by the sector in the near term
may be in jeopardy. Over the longer term, we estimate that there
are currently almost 70 projects at varied stages of development
that would be at risk if no action is taken," the group said in a
report released in November.
Hydrogen Europe pegged the short-term R&D needs of the
estimated 280 companies with whole or parts of their business in
hydrogen at €450 million. This should be supplemented with
additional research and development funds; time extensions for all
projects that have been funded by the EC or national governments;
and expanded market incentives, such as quotas for green aviation
fuels or increased shares of renewables under the EU's Renewable
Energy Directive quotas.
Users of hydrogen are critical to the equation as well. In
Europe, a breakthrough occurred in January 2019, when EUTurbines,
which represents turbine manufacturers in Europe, and EUGINE, which
represents engine manufacturers in Europe, announced an agreement
under which major gas turbine suppliers committed to providing
turbines able to operate on 20% hydrogen by volume in combination
with natural gas by 2020. This agreement also set as a goal that
customers would be able to acquire gas turbines for operation on
100% hydrogen by 2030.
Accommodating both green and blue hydrogen will be crucial, in
order to provide enough volume. "While power generation may not be
among the first customers of hydrogen in the short-term,
hydrogen-powered gas plants will be pivotal for balancing and
ensuring the stability of the grid in a climate-neutral future - as
also recognized in the Hydrogen Strategy," concluded Ralf Wezel,
secretary general of EUTurbines.
In another example of Europe's head start, aircraft manufacturer
Airbus announced three concept designs it is pursuing to develop
the world's first hydrogen-fueled commercial aircraft by 2035. They
would be powered by a modified gas turbine engine that could run on
hydrogen, rather than jet fuel.
Having dual-power turbines is one thing, but having the hydrogen
for their use is another, wrote Michael Welch, a marketing manager
for Siemens Industrial Turbomachinery, in a commentary on the
industry's outlook. "Initially, most turbines are likely to operate
more on blends with much less than 100% hydrogen because there
simply isn't enough hydrogen available, as acquiring sufficient
hydrogen at an affordable cost for operating solely on hydrogen is
going to be a significant challenge," he wrote.
Regardless of the financial challenges, many new projects to
produce hydrogen are emerging. Among recent announcements are the
following:
H2Future Project. November 2020 marked the official startup of
this green hydrogen project in Linz, Germany. This is the debut of
a new polymer electrolyte membrane for the electrolysis process to
produce hydrogen that is powering steel production.
North H2 Project. This Dutch joint venture between Gasunie,
Groningen Seaports and oil major Shell aims to build a 1 GW
electrolysis facility by 2027 (expandable to 4 GW in 2030 and 10 GW
in 2040), using offshore wind to make green hydrogen. On 1
December, German utility giant RWE and Norwegian oil and gas firm
Equinor joined the project as well.
Gas technology company Linde announced on 11 December a
memorandum of understanding with Snam, the largest gas pipeline
operator in Europe, to collaborate on infrastructure projects for
hydrogen.
Russian gas producer Novatek announced a joint venture with
Siemens Technology on 10 December to replace natural gas burned by
Novatek at its gas and LNG production sites in West Siberia with
hydrogen.
In Italy, Eni and Enel said in November they will work together
to produce green hydrogen for two Eni's refineries in Italy. A 10
MW hydrogen facility is targeted for 2022-2023, they said.
On 1 December, the governments of Denmark and Germany announced
plans for green hydrogen projects. In Germany, five states have
established a "green hydrogen cluster" and will invest in a total
of 500 MW of electrolyzer capacity for 2025 from wind power. And
the Green Hydrogen Hub Denmark project aims for 350 MW of
wind-supported capacity in Northern Jutland by 2025.
One aspect of hydrogen that's underappreciated outside of the
industry, but which is very positive for its expansion of use, is
that the technology is well established. This is sometimes masked
by the interest in using hydrogen in new ways to generate power and
power transportation. "Hydrogen…has been an industrial gas for a
long time," said Robinson, and the logistics of producing it,
transporting it and storing it are well established. "The barriers
are demand and infrastructure. Will [new] industries use hydrogen?
Will cars use it, will buildings be heated by it?"
And getting to the point that hydrogen can be used widely,
infrastructure will have to be modified. "This is why the support
schemes are very important, and it's why Europe is talking about
allowing low-carbon hydrogen as a transition," Robinson said.
Policy developments
On the policy front, new regulatory frameworks are providing
certainty for investors in hydrogen production, distribution and
use. On 8 July 2020, the EC published the Energy System Integration
Strategy and a hydrogen-specific roadmap, "A hydrogen strategy
for a climate-neutral Europe," making it clear that green
hydrogen and low-carbon hydrogen are integral to the European Green
Deal. (See link here.)
Moreover, the EC said that clean hydrogen investments will help
the EU recover economically from the coronavirus pandemic-induced
recession, as well as delivering long-term financial benefits.
"Europe is highly competitive in clean hydrogen technologies
manufacturing and is well positioned to benefit from a global
development of clean hydrogen as an energy carrier…. Combined with
the EU's leadership in renewables technologies, the emergence of a
hydrogen value chain serving a multitude of industrial sectors and
other end uses could employ up to 1 million people, directly or
indirectly," it said.
The EC committed to "an enabling regulatory framework" that will
help the industry reach the "tipping point [for] critical mass in
investment…and for bringing new solutions to the market…"
"In the integrated energy system of the future, hydrogen will
play a role, alongside renewable electrification and a more
efficient and circular use of resources. Large-scale deployment of
clean hydrogen at a fast pace is key for the EU to achieve a higher
climate ambition, reducing greenhouse gas emissions by [a minimum
of] 50% and towards 55% by 2030, in a cost-effective way," the EC
said.
The EC's plan includes investments to repurpose the current
natural gas distribution and storage network to handle hydrogen
blends and to develop new storage and transportation options, such
as liquid carriers and the use of metal hydrides to expand storage
capacity.
But this plan has received some criticism as well. "While the
Hydrogen Strategy has a more inclusive approach, the Energy System
Integration Strategy missed out concentrating on electrification
instead of enabling all sectors to find their specific best
approach to decarbonize through optimized interactions of the
electricity, gas and heat networks," said Ralf Wezel, Secretary
General of EUTurbine and EUGINE, in a statement in November.
"The Energy System Integration Strategy falls a bit short in
promoting a truly connected energy system. The role of the gas
infrastructure and of renewable and low-carbon gases seems to be
limited to certain end-users only - forgetting the important role
that renewable gas power generation will have in the future," he
wrote. "With energy efficiency being a key EU priority, we would
have expected to see a more prominent role for the combined
generation of heat and power in the strategy: our technologies are
at the center of system integration, efficiently connecting
together the gas, electricity and heat sectors."
The bottom line
The bottom line is that the hydrogen revolution appears to be
arriving. "Investment in electrolysis is booming around the world,"
said IHS Markit's Robinson. "The pipeline through 2030 is for over
23 GW of capacity to be developed—more than 280 times current
capacity."
A study of 35 potential applications of hydrogen in
transportation, heating and power for buildings, industrial heating
and power and industrial feedstocks, released by the Europe-based
Hydrogen Council in November, found that in many applications,
low-carbon hydrogen will be cost-competitive by 2030. The
applications represent about 60% of the world's current energy- and
process-related carbon emissions. (The study, "Path to hydrogen
competitiveness," assumes that Europe's carbon taxes are
maintained and that carbon capture and storage is a viable
technology.)
"Commercial vehicles, trains, and long-range
transport applications will compete with low-carbon alternatives by
2030 due to lower equipment and refueling costs," the Hydrogen
Council said. "Hydrogen boilers will be a competitive low-carbon
building heating alternative, especially for existing buildings
currently served by natural gas networks. In industrial heating,
hydrogen will be the only viable option to decarbonize in some
cases."
Posted 15 December 2020 by Kevin Adler, Editor, Energy and Natural Resources Group, IHS Markit