The hydrogen revolution is revving up, but has not taken off yet

Germany “must become the number 1 in hydrogen technology in the world”, the German Minister of Economic Affairs and Energy Peter Altmaier said on 9 October when he presented the outcome of “Gas 2030”, a “stakeholder dialogue process”, started in December 2018 by the Ministry, in which over 100 companies, business associations, NGOs, researchers and political representatives discuss the future of gas in Germany. 

In the press release accompanying the report Altmaier said that “The dialogue process 2030 has shown that natural gas will remain an important part of our energy mix for many years. But if we want to reach our ambitious long-term climate targets, then we must increasingly meet remaining gas demand with CO2-free or CO2-neutral gaseous energy carriers. I believe hydrogen will become a key technology which will be indispensable for a successful decarbonisation of our economy and other economies.”

 According to the German minister, “The time for hydrogen is ripe. It also offers enormous industrial potential and could lead to new jobs. That’s why we have to take steps now to ensure that Germany will become number 1 in the world in hydrogen technology.” The German government will publish a national hydrogen strategy before the end of the year. 

Large importer 

All of this sounds pretty self-confident. But what is Altmaier’s conviction based on? And how likely is it that “green hydrogen” (made from renewable electricity through electrolysis, which is the kind that Germany prefers – see box) will become “a key technology” in the energy system? 

The German hydrogen ambitions will not come as a surprise to readers of Gas Transitions. As I reported earlier ((see Germany returns to gas and Germany’s gas faces a bright future), it has become increasingly clear to German policymakers that their Energiewende cannot be based on renewable power. The German government decided earlier this year to phase out coal power production (by 2038), which will come on top of the phaseout of nuclear power. This has led to concerns about future energy shortages (e.g. from McKinsey) and a growing realisation that gas will be the only form of dispatchable power left in the German energy system. 

As the “Gas 2030” report notes, “there are political discussions about an early phaseout of natural gas. However, such a step would not only carry enormous risks for the position of Germany as industrial nation but also for the overall security of energy supply.” The report states that total energy demand in Germany is around 2500 TWh per year (600 TWh electricity, 700 TWh transport, 1200 TWh heating), of which wind and solar now contribute some 180 TWh, i.e. around 7%. “This shows that we cannot achieve the Energiewende with renewable power alone, we also need gaseous CO2-free and CO2-neutral energy carriers.” 

In other words, although, according to the “Gas 2030” report, “unabated” natural gas “will play an important role in the energy mix also beyond 2030,” (emphasis added), it will gradually be replaced by hydrogen (and some biogas). According to the report, “By 2050, with ambitious climate targets, there will be almost no room anymore for fossil gas in its present uses.” 

But what will it take for Germany to build up a hydrogen economy? So far, some 30 green hydrogen projects have been started up in the country. Most recently, Siemens announced in July that is planning to build a hydrogen research laboratory and innovation campus in the east German city of Görlitz. The Bavarian state government announced in the same month that it will set up “hydrogen technology centre” in the city of Nuremberg. Earlier in May a consortium of German companies launched a research platform to store renewable hydrogen in a salt cavern. 

These are all research projects, though. No green hydrogen production is taking place at scale yet. The city of Hamburg announced in September that it wants “to become home to the world’s largest hydrogen electrolysis plant with a capacity of 100 megawatts”. 

But even this “largest plant in the world”, for which an FID has yet to be taken, is peanuts compared to the capacity Germany will need if it is develop a serious hydrogen production potential. According to a recent study from Greenpeace Energy, Germany will need 115 GW of domestic electrolysis capacity by 2040 if it wants to achieve a climate-neutral energy system with a healthy balance of electricity and “gaseous fuels”. The 115 GW of German electrolysers will, however, deliver only a quarter of the hydrogen that Germany will need, finds the Greenpeace report. Three-quarters of demand will need to be imported. 

In other words, even if Germany were to become “the number 1 in hydrogen technology”, it would not be able to become a dominant player in the hydrogen market internationally. 

 “Germany will remain a large energy importer,” concedes Altmaier in the Foreword to the “Gas 2030” report – but it will turn to importing hydrogen instead of natural gas. The “Gas 2030” report notes that “this development will have considerable geopolitical implications” and that Germany will have to “further develop energy partnerships with partnership countries”, but no further specifics are mentioned. 

South Australia 

Where could Germany obtain that much hydrogen? The only country so far where intentions have been expressed to develop hydrogen export capacity is Australia. 

But Australia is facing some of the same problems as Germany. It does have plenty of pilot projects and plans to start producing green hydrogen. For example, the Australian website RenewEconomy reported in September that two “huge renewable hydrogen projects” have been planned in “the heart of Queensland’s major coal and gas regions, with the Australian Renewable Energy Agency agreeing to initiate funding to support feasibility studies to use large-scale renewables for the production of ammonia.” 

One proposal is to build a solar farm of up to 210 MW along with a 160 MW hydrogen electrolyser to produce renewable hydrogen and “green ammonia” at Dyno Nobel’s facilities at Moranbah in central Queensland, which currently rely on gas. The second is to tap into wind and solar and storage facilities to be built by Neoen to use renewable hydrogen to supply one fifth of the ammonia needs from Queensland Nitrates ammonia plant near Moura, which also currently relies only on gas. 

These projects, writes RenewEconomy, “add to a growing list of renewable hydrogen proposals across the country, not just for the purposes of storing wind and solar for electricity, but also to help reduce emissions in key manufacturing industries such as ammonia production, and for the export of renewable fuels.” 

But even if Australia could ramp up green hydrogen production to meet part of its own energy needs, the question is whether there would be anything left to export. And at what cost. Some in Australia are optimistic about the chances of hydrogen exports. The state of South Australia recently outlined a plan for “a 100 per cent renewable hydrogen economy”, reports RenewEconomy, on the grounds that “its enormous wind and solar resources mean there is nowhere else in the world as well positioned to produce, consume and export 100% green hydrogen.” 

The plan, which was unveiled at an international hydrogen conference in Adelaide in September, foresees in South Australia becoming a major hydrogen exporter in the future. The South Australian government sees Japan, China, South Korea and Singapore (not Germany) as the most attractive export markets. 

South Australia gets already well over 50% of its electricity needs from renewables and is on track to reach 100% renewables before 2030. However, to become an exporter of green hydrogen will take much higher levels of renewable energy. After all, a large amount of renewable power would have to be devoted to producing hydrogen that would then leave the country. 

This is why Australia’s chief scientist Alan Finkel, who is currently preparing a national hydrogen strategy, will, according to RenewEconomy, recommend that the country move to 700% renewable energy capacity. 

Darren Miller, CEO of the Australian Renewable Energy Agency (ARENA), supports this idea. In an interview with RenewEconomy, he said, “The key input into renewable hydrogen is low cost electricity. For the first time now with solar and wind prices being so low and still going down, we can see a pathway to very low cost electricity.” 

With huge Asian economies such as Japan and Korea hungry for green electricity, and without the resources to provide it themselves, Australia has a fantastic opportunity to develop an export market in renewable hydrogen that would match the current LNG market, notes Miller. 

According to Miller, if Australia were “to make of hydrogen the same kind of opportunity as we have now for LNG”, the country would have to expand its wind and solar power capacity from 10 GW today to 700GW. And if that capacity is grid-connected, “We will have a giant system, where cheap electricity is just a bi-product of that system,” Miller says. “This idea of not having enough renewable energy will just be a weird concept that we had in the 2010s.” He adds that “200% renewables is too small. It could be 6-7 times what we have in the NEM [National Electricity Market].” 

Transportation costs 

What about the cost of all this beautiful green hydrogen? Most analysts believe that the cost curve of green hydrogen will follow that of solar PV, for similar reasons. For example, according to a report from international consultancy DNV GL, published in March of this year, green hydrogen will become competitive with natural gas based hydrogen by 2035. This is because of three factors, says DNV GL: 

• The cost of electrolysers will go down caused by learning curve experiences and the cost of asset developments which is expected to decrease. Production by electrolysis from ‘surplus’ or low- cost electricity from renewables is an option for producing low-carbon hydrogen with no related carbon emissions.
• Time periods when low or zero cost prices for electricity are available will increase due to the rise of renewables, generating a surplus of energy available to the power grid.
• Penalization of carbon emissions in the coming years industries are expected to see a shift away from carbon-heavy activities e.g. due to introduction of carbon tax and incentives for low-carbon solutions.

What the DNV GL report does not include, however, is a comparison of transportation costs, a key element if hydrogen is to become an export product. According to research from McKinsey in Australia, although the cost of electrolysers is expected to fall by more than 70% over the next decade, this “may still not be enough to provide Australia with a breakthrough in green hydrogen exports”, reports RenewEconomy. The reason is “the heavy cost of transport and shipping”. 

“The (green hydrogen) export story is still a challenging one,” McKinsey analyst Godart van Gendt told RenewEconomy in an interview back in June. “The fact that you have got costs coming down in Australia …  does not mean that the export market opens up.” 

The key point to note is that “every country will be able to access the same electrolyser technology”, and shipping and handling costs are nearly as high as production costs. In other words, a country must have a significant production cost advantage to make exports feasible. According to Van Gendt, “Australia will need a price of around $20/MWh for the electricity it uses to make hydrogen from the electrolysers to make it competitive and overcome the crippling costs of shipping and handling.” 

Blue or green hydrogen?

Germany wants to become the number 1 in the world in hydrogen technology, said Economy Minister Peter Altmaier. But what kind of hydrogen will that be? Will it be just “green hydrogen”, made from renewable electricity by electrolysis? Or will there also be a role for “blue hydrogen”, made from natural gas combined with CCS? For the natural gas industry, this is an important difference. 

Environmentalist groups like Greenpeace in Germany insist that only “green hydrogen” should be allowed. They acknowledge that Germany will not be able to produce enough green hydrogen domestically, but believe this can be compensated by massive imports of green hydrogen in future. 

But the German government sees a clear role for blue hydrogen, though it’s not clear for how long. According to the “Gas 2030” report (see main article), “CO2-neutral blue hydrogen can play an important role in the short term, in particular for cost reasons.” It adds that this will require “public acceptance of the sequestration and storage of CO2 (CCS)”, a sensitive issue in Germany. Altmaier stated in the press release accompanying the report that “CO2-neutral and CO2-free energy carriers include both green and blue hydrogen.” 

That the German government supports blue hydrogen was confirmed by the definitive version of the country’s first climate law, which was published on the same day as the “Gas 2030” report, 9 October. (A draft version had already been published on 20 September.) The new climate law was accompanied by a programme of measures that should see Germany meet its 2030 climate targets. Although these measures do not make any mention of “blue” hydrogen, they do include a proposal for a CCS and CCU (carbon capture and utilization) R&D programme in the energy-intensive industry. The programme also notes that “a large majority of studies and scenarios conclude that CCS-technology is indispensable to achieve climate-neutrality in 2050.” This constitutes at least implied support for the development of blue hydrogen. 

Nevertheless, it is clear that the main thrust of Germany’s energy policy is aimed at building up a green hydrogen sector. The programme of measures accompanying the climate law makes mention of  “a central role for green hydrogen in the conversion (Umbau) of the German economy”. How the government wants to do this, and in what time frame, is not clear. Neither the “Gas 2030” report nor the climate law contain any concrete plans showing how Germany thinks it can make its green hydrogen dreams come true.

Floating wind turbines 

Even if Australia does not become a big exporter of green hydrogen, it is in a good position to become perhaps the largest producer. Alberto Litta, Head of Technology and Design at Engie’s business unit Hydrogen, said in an interview ahead of the Australian Hydrogen Forum in September, that “Australia is set to lead the world on hydrogen production, usage and exports.” 

“Australia’s huge renewable energy resources, growing economy and supportive government provides a natural advantage for renewable hydrogen production,” said Litta. “For Australia, we see the potential for renewable hydrogen as a replacement for domestic natural gas and possibly for export to Asia.” (Emphasis added) 

Another country, a bit closer to Germany, that is banking heavily on hydrogen is the Netherlands. But here too the hydrogen race has barely reached the qualifying stage. 

A number of hydrogen projects have been started or planned in the Netherlands (see here and here for more details), but there is no production at scale yet. One of the latest and (potentially) largest Dutch hydrogen initiatives is a “feasibility study” for a 100 MW power-to-hydrogen plant in Eemshaven in the north of the country, which German energy groups RWE and Innogy announced in June. 

Other recent developments: in September, Dutch distribution system operator Stedin announced that it is able to convert an entire village of 600 houses from natural gas to green hydrogen. The conversion could be ready in 2025. No final decision on the project has been taken as yet. Also in September, the Dutch Minister of Economic Affairs Eric Wiebes promised that the government will support green hydrogen with “many millions of euros” – up to €60 million a year, although that includes funding for CCS. 

Under the national Climate Accord that was agreed upon last year, the Netherlands is planning on “a substantial hydrogen programme”, which should see electrolysis capacity expanded from just a few megawatts today to 3-4 GW by 2030. This may happen, but even then these numbers are a far cry from the 115 GW of electrolysis capacity that Greenpeace wants to see built in Germany by 2040. 

Perhaps the most ambitious hydrogen project in the world was announced in September in the UK. As reported by Recharge News, “Floating offshore wind turbines far out in the North Sea will convert seawater to ‘green’ hydrogen that will be pumped ashore and used to heat millions of homes, under an ambitious plan just awarded UK government funding.” 

According to Kevin Kinsella, director of this so-called Dolphyn project, a joint-venture of consultancy ERM, Engie and offshore specialist ODE, “deployment of a 4GW floating wind farm in the early 2030s at an estimated cost of £12bn ($14.8bn) could be the first step in the eventual replacement of natural gas by hydrogen in the UK energy system.” 

ERM plans to integrate hydrogen production technology into a 10MW floating wind turbine platform, enabling each unit to import seawater, convert it to hydrogen and export the gas via a pipeline, notes Recharge. “Deployment of hundreds of the floating platforms would be able to tap into the excellent wind resources far out in the North Sea, way beyond the depths accessible to fixed-bottom foundations, Kinsella told Recharge, estimating that a 4GW floating wind farm could produce enough hydrogen to heat 1.5 million homes.”

“If you had 30 of those in the North Sea you could totally replace the natural gas requirement for the whole country, and be totally self-sufficient with hydrogen,” said Kinsella.

Across the world green hydrogen plans are being floated. But they are mostly just plans.