Posted on 09 May 2024
European green hydrogen producers need to diversify their business to ensure profitability and independence from state aid, while insufficient renewable energy capacity may necessitate hydrogen imports from outside the continent. This was the conclusion of the hydrogen panel at the European Economic Congress in Katowice attended by Kallanish on Wednesday.
Standalone green hydrogen producers will find it difficult to turn a profit or secure bank lending and therefore need to also serve other markets such as renewables-based heating and electricity, said Tomoho Umeda, chief executive of green hydrogen infrastructure firm Hynfra. It is not possible to build a standalone green hydrogen plant today without some form of public grant, he added.
“There is no subsidy, there is no public money in not just in the EU but in the world that can finance this [decarbonisation] universally … so we need to, starting already today, adopt the outlook that renewable energy has today – this sector was initially supported with the help of grants, then auction mechanisms,” Umeda noted. Now, it stands on its own feet.
A larger system that caters to renewable energy, hydrogen, heating and transport can already secure project finance today, where the lending is not based on the company’s balance sheet, but on the project’s offtake agreements, Umeda argued.
Sourcing private financing will not be a problem, as private equity funds are prioritising green projects. The money available is vast, but these funds cannot find enough suitable projects, he continued.
Poland does not have sufficient surface area to build hydrogen electrolyser projects exceeding 100MW capacity in one location. European hydrogen/ammonia producers are looking at projects in countries such as Oman, Mauritania or Colombia, where conditions are more favourable. Poland may be the EU’s third-largest non-green hydrogen producer, but it will lose out on green hydrogen if it does not act fast on securing global renewables supply.
Grzegorz Jozwiak, hydrogen technology and synthetic fuel director at Polish oil refiner Orlen, countered by saying: “When it comes to industry … only large-scale production of hydrogen matters, measured in tonnes per hour, not kilograms per hour, to ensure industry survives in Poland and meets the targets industry is burdened with.” He however conceded: “But we have to realise there will not be enough renewable energy here [in Poland].”
Alongside rolling out new renewables capacities, therefore, alternatives need to be employed to ensure sufficient electrolyser capacity and low-emission hydrogen production, such as nuclear power. Carbon capture storage and utilisation should also be considered, with the CO2 used to produce synthetic fuels, Jozwiak added.
Industry will be unable to meet the EU’s requirement for renewable fuels of non-biological origin (RFNBO) by 2030. This states that 42% of hydrogen used by industry must be renewable hydrogen. It makes more sense, therefore, to source the hydrogen from a competitive global market, to keep down costs, and process it on site in Europe, according to Umeda.
Emilia Makarewicz, board member on Polenergia’s H2Silesia hydrogen project, agreed that local hydrogen production will be insufficient to cover demand. “On the other hand, we can’t repeat what we’ve already done many times with other technologies or fuel sources … that we will only rely on [imports] and ultimately worry about who will apply the pricing pressure on us,” she warned.
Alex Carr, Europe policy manager, zero-carbon fuels at Clean Air Task Force, emphasised the cost challenge to replacing grey hydrogen with green. Hydrogen will be produced in certain locations, such as the Iberian Peninsula, and consumed in others such as Poland, meaning vast distribution infrastructure will be required. Due to limited resources, the EU needs to prioritise hydrogen in the sectors that need it most. The full rollout across the economy will take time.
Participants agreed the EU must not overregulate the market as this will stifle hydrogen capacity rollout. Umeda concluded that rather than government grants, the focus should be on government-backed bank loans, which enable investments at the scale required.
Source:Kallanish
