Wednesday, 10 November 2021
Author: Kevin Lim
Last week at the EU COP26 side events on Friday (5 November 2021), the role of hydrogen in the renewable energy transaction was focussed upon. We highlight two of the sessions below, one discussing the market for hydrogen and the other regarding the development of a global tracking system for green hydrogen.
While green hydrogen is still in its infancy, the industry is bullish on the renewable gas carrier, with 50 GW of electrolyser projects announced by 2030 exceeding the EC target of 40 GW by 2030. The countries heading this push include Spain, Germany and the Netherlands who already have projects in the pipeline which would see them exceeding their respective 2030 national targets. National hydrogen strategies currently account for 38 GW of electrolyser capacity by 2030, with many countries still developing their strategies.
Rapid upscaling of hydrogen production will of course require a similar expansion of electrolyser manufacturing capability; supply chain companies, including Siemens, Haldor Topsoe and Thyssenkrupp, have plans for gigafactories which should see electrolyser manufacturing capacity reach 20 GW per year by 2025, and 30 GW by 2030.
Other projections include a 45% CAPEX reduction by 2025, with the savings coming from improvements in Balance of Plant and Engineering, procurement and construction (EPC) procedural efficiency. The production costs are expected to decrease to 2.5 EUR/kg hydrogen (currently 3.84 EUR/kg).
On the demand side, steelmaking and e-fuels are expected to account for approximately 170 TWh by 2030. Notably, the future steelmaking demand alone (80 TWh) exceeds the current RES-E capacity to produce it. On the fuel -side, while there is promise in utilising hydrogen directly in mobility, a large portion of green hydrogen will likely be used to produce drop-in e-fuels. In particular, Danish shipping giant Maersk has committed to establishing e-methanol facilities to help power green fleets.
Two electrolyser projects were also highlighted:
In the session titled "Global Guarantees of Origin for Clean Hydrogen", the need for appropriate tracking systems for hydrogen was discussed. Given that production is likely to be delocalised and over several continents, robust systems will be required to ensure green supply chains. A book and claim system via Guarantees of Origin appears to be the prime candidate to play this role.
The establishing of a hydrogen GO system will rely upon the EU experience with RES-E GOs via the AIB which has been operating successfully for several years. The Green Gas Guarantees of Origin systems within Europe were also discussed, but noting there was no current unified system with tracing systems tending to regional in practice.
Ammonia is one of the key demand drivers for hydrogen, which in turn can be used to produce fertiliser. David Herrero, Chief Operating Officer at Fertiberia SA discussed the versatility of ammonia and some of the advantages it has in comparison to hydrogen particularly in transporting, also making a case for establishing a similar certification scheme for ammonia.
The current pilot European hydrogen GO register, CertifHy, was presented. The CertifHy register is set up to handle GO issuances and transactions for both renewable and low carbon hydrogen.
Wouter Vanhoudt of Hinicio, also representing CertifHy noted that an established GO scheme could be used to certify quality products to consumers willing to pay a premium, thus supporting the increased production costs associated with green hydrogen in comparison to grey hydrogen.
Such a premium market will take some time to develop. In the meantime, a GO system could allow governments to verify that early producers receiving state support via schemes such as Feed-in-Tariffs/Premiums and Contract for Difference are manufacturing hydrogen sustainably.
The level of documentation and record-keeping required for a credible global system will likely exceed the requirement of a standard GO system. Rather an "enhanced" GO system will be required to ensure sustainability.
The success of an enhanced global Guarantees of Origin system is perhaps best summed up by the 5 T's:
There is a sense of urgency in setting up such a global system. Daria Nochevnik, Director for Policy and Partnerships at the Hydrogen Council noted that hydrogen projects are due to go live at the end of the year and early next year and that the importance of "qualifying hydrogen is renewable will play a key role". Novchevnik ended with:
"The development of those enhanced Guarantees of Origin that would evidence not only the origin but also the carbon footprint and other sustainability attributes of hydrogen is key to enable consumer trust, stimulate demand and allow for market-based sourcing of hydrogen and cross-border trade at a global level".
The replays for the COP side event presentations are available upon registration.