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Interest in hydrogen has soared in every region of the world and
in all sectors of the economy. This widespread momentum is proving
to be both a blessing, and a curse. A blessing, as every end-use
case is being tested somewhere. A curse, as the absence of one
dominant use-case and the presence of many ways of producing and
transporting hydrogen make it hard to determine what will trigger
mainstream use of hydrogen as an energy carrier. It is also
challenging to identify where there is real progress and where
there is just hype.
Europe—a proving ground for economy wide development of
low-carbon gas
While hydrogen can be used as an energy carrier for all sectors
of the economy, in the US and in Asia, the primary focus is simply
transport. In mainland China, Japan and South Korea, a combination
of local and central government works with industry to drive
development of fuel cell vehicles and the associated
infrastructure. On the other side of the world, California's
"low-carbon fuel standard" provides a clear mechanism to lower the
cost of retail hydrogen and to develop a refueling infrastructure
open to all.
In Europe, there is interest in transport, but there are many
other projects underway to look at the use of hydrogen, and other
low-carbon gases, in buildings, industry and power. In Europe there
is a patchwork approach, with individual countries focusing on
different aspects.
For each country a different focus
Germany is the world leader in
power-to-gas. Of the 113 operating projects in IHS
Markit's power-to-gas database 34 are in Germany. Germany accounts
for approximately 45% of the installed electrolyser capacity
worldwide, 28% are in the rest of Europe, with the remaining 27% in
the rest of the world. The number of projects in Germany reflects
the ability to use electrolysers as a means to balance a
power grid with high levels of intermittent renewables and
increasing geographic constraints. Although Germany's dominance in
power-to-gas will decline (see figure 1), it will remain the key
proving ground for the commercialization of power-to-gas as a means
of integrating variable renewables.
Figure 1: Global power-to-gas projects
France, which has the greatest biomass
potential in the European Union, is taking a lead on grid
injection of renewable and synthetic methane. We estimate
that 11% of Europe's total biomass potential of 250 million metric
tons is in France. Currently, less than 2% of European biomass is
converted into grid-injectable methane. This is due to an incentive
structure which has in the past favored the use of biomass in power
generation or as an additive to liquid fuels. The incentive
structure for grid injection is now changing, and experience gained
in France will provide clear insights in the path to lower
production costs—for renewable methane from biomass and for
synthetic methane from electricity. It may also demonstrate what is
needed to develop the latent potential of intermediate crops and of
other less established biomass production methods.
The Netherlands and UK, which border the gas
reserves of the North Sea, have long been "gas countries". Natural
gas provides more than 90% of space and water heating and dominates
industrial process heat and power generation. Both countries have
signed up to mid-century net-zero carbon goals and are looking at
options to replace natural gas in buildings and
industry. Projects include the H21 North of
England, which seeks to convert 3.7 million British homes to
hydrogen-based heating and H-vision, which seeks
to replace natural gas and coal used in the Rotterdam industrial
cluster with hydrogen. Importantly for the global development of
hydrogen, methane reforming with very high levels of carbon
capture and storage is at the heart of the plans. However,
neither country is focusing exclusively on hydrogen from natural
gas—the largest pipeline of electroyiser projects today is in
the Netherlands where there are plans to add over 700MW by 2024.
The pipeline in the UK exceeds 100MW.
A unique set of circumstances?
The characteristics of the European market—different
national markets with varied energy mixes, strong environmental
policies including net-zero carbon goals in 14 EU member states, a
dense electricity and gas infrastructure and offshore depleted
fields available for carbon sequestration—may not be directly
replicated everywhere else in the world. But experience gained from
the projects that are underway in Europe today can be applied
globally. Among the large number of global hydrogen-related
announcements, a close and special watch should be kept on
developments in North-west Europe.
For more information on the Hydrogen and Renewable Gas forum,
watch this complimentary
webinar.
Catherine Robinson is an executive director on the Gas,
Power, and Energy Futures team at IHS Markit.
