Conor here: The worst news is for Europe – especially Germany – which is playing a major role in this boondoggle to provide power in sectors where electrification is not an option, such as parts of industrial production. The following piece briefly touches on that risky bet, but here’s another from Energy Connects:
Germany plans to build more than 20 power plants even bigger than the one in Leipzig, touting it as the continent’s first “hydrogen-friendly” plant. They will be served by modern liquefied natural gas terminals equipped to handle clean fuels such as ammonia, and a network of specialized pipelines that stretch nearly 6,000 kilometers (9,600 miles).
But there were always many buts:
But there is no official explanation of what makes a plant suitable for hydrogen, to open the door to washing. For power plants, burning hydrogen has not even been tested to a standard.
…Then there is the problem of moving the hydrogen. The Leipzig plant is not yet connected to the grid (and has not yet set up the electrolyzers), which means the highly flammable fuel will have to be trucked in until the second part of the government’s massive project is completed. It is building a 1 billion euro natural gas storage facility in Brunsbuettel, a city along the North Sea, which will initially import LNG. [could] designed to handle the clean fuels of the future.
Hydrogen can only be melted at -253C (-423F), beyond the capacity of today’s LNG ships. So Germany plans to import hydrogen in the form of liquid ammonia, a combination of hydrogen and nitrogen that can easily be turned into a liquid. But ammonia is toxic and handling requires better ventilation systems. Many components in the terminal, including control valves and fire and gas sensors and on-line equipment – most of which have not been tested for ammonia – will also need to be upgraded, according to Fraunhofer ISI, an energy think tank.
Germany does not have an ammonia pipeline network and there are restrictions on trucking it on an industrial scale because it is dangerous. That means ammonia would have to be converted back to hydrogen, however no economically viable technology currently exists to do that. The worker at the terminal said that we will discuss other strategies if it does not appear next year.
…The difference is that wind and solar produce clean electricity – a commodity that the world uses. Green hydrogen, on the other hand, will require building more solar and wind farms where, in many cases, it would be easier to use that clean energy directly. By the time the hydrogen is made, stored and burned to make electricity again, there is 70% less energy than before – and the cost has tripled.
Green hydrogen is likely to be useful at the end of the energy transition, when the main electricity demand is met by renewables, according to Pierre Wunsch, a senior banker in Belgium.
By Tsvetana Paraskova, an Oilprice.com writer with over ten years of experience writing for news outlets such as iNVEZZ and SeeNews. It was first published on the price of oil.
- The initial excitement surrounding low carbon hydrogen has faded due to high project costs, regulatory uncertainty, and weak demand.
- Only a small percentage of hydrogen projects in North America and Europe have reached final investment decisions.
- Energy giants such as Shell and Equinor have suspended green hydrogen projects in Europe, citing poor project economics and unclear regulatory frameworks.
The low-carbon hydrogen hype has started to fade in recent months as companies and investors realize that their ambitions are facing the reality of expensive projects amid regulatory hurdles and uncertain future demand.
The push for green hydrogen over the past two years, generated by the IRA, has slowed amid high costs and major economic headwinds. In addition, regulatory uncertainty and a lack of committed demand undermine the 2030 production goals of low carbon hydrogen, both in the United States and Europe.
As a result, investors are rethinking financing, companies are redrawing hydrogen production strategies, and the share prices of major hydrogen players are crashing.
For example, Denmark’s Green Hydrogen Systems (CPH: GREENH ), a supplier of conventional alkaline electrolyzers, is down 65% year to date. US Plug Power (NASDAQ: PLUG ) has seen its stock fall 53% year to date, while Ballard Power Systems Inc (NASDAQ: BLDP ) is down 58%.
Other firms focused on green hydrogen and technology have also seen their prices reduced amid signs that despite the progress of project announcements, project commitments with final investment decisions (FID) are a fraction of the total pipeline of projects.
Only 18% of US low-carbon or renewable hydrogen projects in North America, and only 5% of such projects in Europe aiming to start operating in 2030 have reached FID so far, McKinsey & Company and the Hydrogen Council said in a report the last one. month.
“A key sector-specific challenge for the hydrogen industry is the uncertainty related to a number of regulatory frameworks,” including the EU regulatory framework and the IRA investment tax credit legislation. All this “affects the bankability of the project,” the report’s authors wrote.
“Along with the rising costs of renewable energy and electrolysers, this has led to delays and cancellations of projects – in particular, renewable hydrogen projects,” they added.
In Europe, the European Commission has set impossible hydrogen production and import targets—the EU is not on track to meet them, the European Court of Auditors, the EU’s top audit institution, said in a report this summer.
The Commission has partially succeeded in creating the necessary conditions for an emerging hydrogen market and hydrogen value chain in the EU, but now it needs a “reality check,” the European Court of Audit said.
Even the International Energy Agency (IEA), the strongest supporter of all renewables, has warned that policy and demand uncertainty are limiting the adoption of green hydrogen around the world.
According to the IEA, the main reasons for low carbon hydrogen uptake “include unclear demand signals, financial constraints, delayed benefits, regulatory uncertainty, licensing and permitting issues and operational challenges.”
Lack of visibility of demand and regulatory uncertainty have stalled several major projects in Europe this year alone.
Spanish energy companies Repsol and Cepsa, for example, are halting investments in green hydrogen in Spain, as one of the EU’s most promising markets for renewable hydrogen is considering making the windfall tax for energy companies permanent.
The idea that the tax could be permanent upsets many large companies, including energy firms with plans to invest in green energy projects.
Spanish firms halt projects The latest European firms to temporarily suspend or abandon green hydrogen projects due to policy or demand concerns.
Recently, Shell and Equinor have abandoned plans for downstream hydrogen production and transport in northern Europe due to lack of demand.
Investors are not rushing to invest in supporting green hydrogen projects, either, due to poor economics and potential returns.
“Green hydrogen has not been developed. It’s rubbish in terms of investment,” Mark Lacey, head of thematic equities at UK asset manager Schroders, told the Financial Times.
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