HIL Issue 08

WHAT’S ON THE HORIZON FOR HYDROGEN IN 2023?

WHAT’S ON THE HORIZON FOR HYDROGEN IN 2023?

Despite growing optimism, it feels like a make-or-break

RENEWABLE MOMENTUM

TURNING MOMENTUM INTO CAPACITY: THE RENEWABLE SURGE

With the uptake of renewables reaching unprecedented levels, partly due to profound policy changes and security concerns, the International Energy Agency has released an upward revision of 2027 renewable energy forecasts.

Fossil fuel supply disruptions have underlined the energy security benefits of domestically generated renewable electricity, leading many countries to strengthen policies supporting renewables. Coupled with higher fossil fuel prices worldwide, there has been a drastic improvement in the competitiveness of solar PV and wind generation against traditional fuels.

Based on the changing landscape, the IEA concluded that renewable capacity expansion in the next five years will be much faster than expected just a year ago. “Over 2022-2027, renewables are seen growing by almost 2400 GW in our main forecast, equal to the entire installed power capacity of China today.”

That’s an 85% acceleration from the previous five years and almost 30% higher than what was forecast in last year’s report, making it their largest ever upward revision. Continuing, the report explained: “Renewables are set to account for over 90% of global electricity capacity expansion over the forecast period. The upward revision is mainly driven by China, the European Union, the United States and India, all implementing existing policies and regulatory and market reforms while introducing new ones more quickly than expected in reaction to the energy crisis.”

China’s 14th Five-Year Plan and market reforms, the REPowerEU plan and the US Inflation Reduction Act, are thought to be the main drivers of the revised forecasts, echoing sentiments from the industry that public sector policy direction is integral to sparking private sector interest and investment.

According to the agency, renewables will transform the global power mix through 2027, becoming the largest source of electricity. If projections come to fruition, renewables will become the largest source of global electricity generation by early 2025, surpassing coal.

The share of the renewable power mix is forecasted to increase by 10 percentage points

Breaking this down further, it stipulated: “Their share of the power mix is forecast to increase by 10 percentage points over the forecast period, reaching 38% in 2027. Renewables are the only electricity generation source whose share is expected to grow, with declining shares for coal, natural gas, nuclear and oil generation. Electricity from wind and solar PV more than doubles in the next five years, providing almost 20% of global power generation in 2027.”

With a specific focus on the role of hydrogen in the renewable sector up to 2027, IEA asked, will renewable hydrogen production drive demand for new renewable energy capacity by 2027?

Hydrogen production from renewable electricity is expected to play an important role in reaching long-term decarbonisation goals and improving energy security. While less than 1 per cent of global hydrogen production comes from renewable energy sources today, renewable hydrogen is receiving increasing policy attention.

A total of 25 countries, plus the European Commission, have announced plans that include hydrogen as a source of clean energy, and several have begun to introduce financial support schemes.

International Energy Agency

As a result of the commitment from these countries and more robust policies being released, the pipeline of projects has dramatically swelled over recent years from initial phases, prototypes and some further along the line and waiting for a final investment decision.

Will momentum equate to more capacity?

With the growing optimism around the sector, the report delved into the core issue of how much this momentum is expected to increase renewable capacity needs. It stated: “For 2022-2027, the main case forecasts around 50 GW of renewable capacity to be dedicated to hydrogen production, accounting for 2% of total renewable capacity growth. China leads expansion, followed by Australia, Chile and the United States. Together, these four markets account for roughly twothirds of dedicated renewable capacity for hydrogen production.”

Looking on a global scale, solar and wind capacity is growing equally, with regional shares differing on geography and availability of resources. The scope of renewables globally is improving, with solar PV making up most of the growth in the MENA, while in Latin America, the electrolyser project pipeline is expected to be mostly filled by onshore wind projects in Chile.

Several member states across Europe have formulated additional hydrogen policies alongside wider EU policy. This will root the hydrogen economy across Europe, with Germany and Spain setting ambitious electrolyser targets by 2030.

Public finance is needed to secure a hydrogen economy

International

Aligning public and private funding is an important aspect and establishing this early on in the adoption phases is integral to the future landscape of hydrogen technologies. The report expanded on this: “Projects that are financed are at least partially funded by public support, for instance, through the Important Projects of Common European Interest (IPECI) programme, or by other state-specific funds. For example, Spain is providing financial support from funds allocated to Covid-19 crisis recovery in its National Recovery and Resilience Plan.”

Despite the optimism, there are two key uncertainties in the forecast for dedicated renewable capacity expansion in Europe. “The first is regulatory, concerning how hydrogen will be defined as renewable and how additionality will be implemented. Developers are awaiting clarity on how electricity from the grid will be monitored to qualify hydrogen production as renewable.”

This will ultimately affect size and location decisions for dedicated onsite solar and PV wind capacity.

Finally, despite policy improving across the board, there is still considerable policy uncertainty, most notably in the UK, where the government are reluctant to commit to the funding of hydrogen.

“Policy uncertainty over industry and transport mandates makes it challenging to assess renewable hydrogen demand potential and plan new electrolyser investments. The European Union is considering three different proposals for binding targets for renewables in existing hydrogen use in industry (ranging from 35% to 50%) and renewables of nonbiological origin in transport (2.6% to 5.7%), but a final decision has yet to be taken. Whether developers can secure off-takers and bring projects to financial close also poses a risk to the forecast.”

While the report offered a sense of caution around policy agendas and the future of financing the hydrogen economy, it is undeniable that the excitement around renewables is growing, and the momentum is likely to continue and thrive by 2027.

EUROPEAN PARTNERSHIPS

HYDROGEN PARTNERSHIPS FORMING IN EUROPE

After breakthrough negotiations between RWE and Equinor, there has been an agreement on a strategic partnership for the security of supply and decarbonisation between Norway and Germany.

Anders Opedal of Equinor and Dr Markus Krebber of RWE recently agreed on a strategic energy partnership between their companies. The agreement includes large-scale projects that will contribute to the European energy supply as well as to the ramp-up of the hydrogen economy in Germany and the EU. In addition, the partnership will strengthen the longterm security of supply of a decarbonised European power sector.

The investments are contingent on the construction of a hydrogen pipeline between Norway and Germany and a German hydrogen downstream infrastructure. In anticipation of this infrastructure, Equinor and RWE propose a series of investments that would be major building blocks for European hydrogen supply and its utilisation in the power sector from 2030 onwards.

“Through this collaboration, we will strengthen the long-term energy security for Europe’s leading industrial country while at the same time offer a viable route to a necessary energy transition for hardto-abate industries. The collaboration has the potential to develop Norway into a key supplier of hydrogen to Germany and Europe. This is a unique opportunity to build a hydrogen industry in Norway where hydrogen also can be used as feedstock to domestic industries,” says Anders Opedal, Equinor’s CEO and President.

Markus Krebber, CEO of RWE: “In order to make progress in the conversion from fossil fuels to hydrogen, there is an urgent need for a rapid ramp up of the hydrogen economy. Blue hydrogen in large quantities can be the start, with subsequent conversion into green hydrogen supply.”

Blue hydrogen used for the initial phases, green will follow

Blue hydrogen will be produced by a steam reduction process from natural gas. In the process, the gas will split into hydrogen and CO 2 . During the production of blue hydrogen, the resulting carbon dioxide will be stored using carbon capture and storage technology (CCS) with safe storage underground, offshore in Norway.

Equinor has the ambition to invest in clean hydrogen to Europe projects with an initial 2 GW of low-carbon (blue) hydrogen production capacity in Norway by 2030 and up to 10 GW by 2038.

These facilities are to feed into a pipeline to Germany, which is currently being assessed by Gassco, Equinor and third parties. Provided this pipeline is in place, Equinor will transport the blue hydrogen, which RWE will purchase and use in hydrogen-ready gas plants.

In addition to this, RWE and Equinor will collaborate in projects aimed at generating green hydrogen. Offshore wind energy is by far the most effective form of renewable power generation. Combined with electrolysers it will play an important role in the ramp-up of the hydrogen economy. In this context,

RWE and Equinor are planning to jointly explore possibilities for offshore production of renewable hydrogen in Norway, Germany and countries adjacent to the proposed hydrogen pipeline. Both companies are already engaged in developing AquaSector – a project in the North Sea aimed at creating a 300 MW offshore wind farm connected to offshore electrolysers that produce green hydrogen.

Flexibility is key to continued collaboration between both parties

RWE and Equinor also plan to jointly invest in flexible hydrogen-ready gasfired power plants (CCGT) in Germany with a total capacity of 3 gigawatts by 2030. Hydrogen-ready gas-fired power plants are based on technology that is available at scale to balance the fluctuating electricity generated from renewables and electricity demand.

In accordance with specifications from the German Federal Ministry of Economic Affairs and Climate Protection, the CCGT plants shall be able to reach 50% vol hydrogen combustion at the time of commissioning.

The companies will pursue a roadmap to reach 100 per cent hydrogen combustion capability by the mid-2030.

As offshore hydrogen production plants get connected over time, green hydrogen will gradually complement and ultimately replace its blue counterpart in imports to Germany. Green hydrogen from RWE’s and Equinor’s joint projects will fire the joint CCGT fleet to complete its decarbonisation journey.

In addition, RWE and Equinor will continue to explore joint investments in offshore-wind-only projects in Norway and Germany as well as green hydrogen production in Norway.

2023 HORIZON

WHAT‘S ON THE HORIZON FOR HYDROGEN IN 2023?

The hydrogen landscape has been evolving on a dramatic scale, with 2021 producing the UK hydrogen strategy and 2022 seeing a huge focus on the delivery of projects; so what is 2023 expected to bring?

The future of hydrogen is in a state of purgatory at the moment; the groundwork is being laid for a secure hydrogen economy, but political uncertainty surrounding renewables in the UK and growing support from other countries has increased the competitiveness of hydrogen markets over the last five years.

With a delay in the Energy Security Bill, 2023 seems to be the year of ultimatums for the hydrogen economy in the UK. The US, EU and Canada are implementing policies to increase capacity and encourage growth, so the UK must adapt to its geographical strengths and build on ambitious climate targets. Despite disruptions to legislation and policy decisions, there are still plenty of exciting projects in the pipeline. Delays hinder opportunities with narrowing window for early market engagement

Without further delays, the Energy Security Bill should be passed within the coming months. With the Bill returning to parliament in December 2022, there are growing feelings that the Bill is edging to completion.

Ensuring 2023 is the year of hydrogen, the UK needs to get off the back foot with hydrogen projects and catch up with countries such as the US, which launched the Inflation Reduction Act. The devil is in the detail of the UK’s Bill, with hopes that

hydrogen is at the forefront of the UK’s energy strategy.

Make or break year for hydrogen for heating

Another development of the hydrogen economy expected in 2023 is the role of hydrogen in heating. As previously reported by Hydrogen Industry Leaders, Ellesmere Port and Redcar will be building the business case for hydrogen in domestic heating through village trials, and 2023 will give a clearer insight into the scalability of this.

Additionally, the government recently announced a call for evidence on the mandate for hydrogen-ready boilers by 2026. Throughout 2023, the sector can expect to see more policy decisions as more evidence is collected from BEIS.

The year of final investment decisions? 2023 is expected to be the year of final investment decisions; with many projects announced through the early 2020s reaching the end of their ‘WIP’ status, many projects that are deemed investable are waiting for further finance from the HBM fund.

With the use of hydrogen in the UK likely to be a transitional process, working on increasing hydrogen blend capacity is at the top of the agenda for 2023. The UK government will make firm decisions on whether hydrogen will be blended into the gas grid and what percentage to aim for over the upcoming years.

Firm policy decisions will unlock production and storage opportunities

Once firm policy decisions have been made, hydrogen production projects are set to increase to meet gas grid demands, with the security of a reliable demand sink during the early stages when demand is less reliable, and storage capacity is being built.

Building on the Government’s Ten Point Plan of two CCUS clusters by the mid2020s, the sector can expect to see rapid progressions in the frameworks for the delivery of Track 2 clusters. However, confirmation on Track 1 is overdue.

Despite further delays, 20 projects have been shortlisted as viable solutions to the government targets. Once more, 2023 becomes an integral year for the future of hydrogen in the UK, and the sense of urgency is increasing across all aspects of the sector.

One mindset change that could enable hydrogen projects further would be the eradication of the hydrogen vs electric debate as we push through 2023.

Understanding that new and existing technologies have a role of complementing each other rather than competing with each other will enable policy to scale up all forms of technology to align themselves with ambitious decarbonisation goals.

While the sector is brimming with optimism on a global scale, reservations in the UK mean that success for the hydrogen economy in 2023 could go either way.

HYDROGEN ECONOMY

CHANGING THE PERCEPTION OF THE HYDROGEN ECONOMY: ARE WE TURNING THE TIDE?

Future technological progress will be the key to combating climate change. That’s the view of 83 per cent of worldwide respondents to Bosch’s latest sustainability report.

As we enter 2023, and the renewable sector continues to push on with its net zero agenda, global public perceptions are slowly aligning with the ideologies of the wider agenda, and the use of technologies, such as hydrogen, will play an integral role in this.

When discussing the idea behind the research, Dr Stefan Hartung, Chairman of the Board of Management at Bosch, explained: “It is important to take responsibility for people, the environment, and society – especially in times of fundamental change.”

“This is why sustainability and technology are at the core of what we do at Bosch. Our aim is to improve people’s quality of life whilst safeguarding the livelihoods of present and future generations. We believe that technology should be invented for life,” he continued.

Introducing new technology is the key enabler of fighting climate change

Countries involved in the project included the UK, the US, Brazil, China, France, India and Germany. Exploring some of the quick-fire findings from the survey, Bosch highlighted that: “62% of people around the globe favour solar, 83% believe technological progress will play a key role in combating climate change.”

On the global index, hydrogen technology is seen as particularly favourable, with 41 per cent of respondents seeing hydrogen technology as having the greatest potential to drive sustainability in the future. This was the joint highest favourable technology, alongside climate engineering.

Interestingly, the report highlighted: “While Western countries have the highest hopes for green tech, China and India believe AI to be most promising when it comes to achieving sustainability. Once again, Germans favour hydrogen, and the technology is equally popular in the UK –even more so than last year.”

On a regional level, hydrogen is top of the class Focussing more regionally, hydrogen came in the top two most promising technology in China, Germany, and the UK showing the hype around hydrogen is growing all over the world as we phase out traditional fossil fuels.

Looking more regionally, participants were asked: ‘In which of the following energy areas should your country foster technological progress?’ This created a mixed response, indicating further that the is no silver bullet to net zero and each country can play a significant individual role in contributing to the net zero agenda.

Within a global context, respondents around the world would like to see their countries invest in new technologies for solar (62%), wind (44%) and water (32%) power. The report found on a regional basis that: “While Germans would like to see more investment in hydrogen technology, the Chinese and the French feel comparatively positive about nuclear energy.”

Continuing this trend: “The British would like to see more resources allocated to developing wind energy technologies. Brazilians have a strong preference for solar power. In the US and India, a relatively large number of people see a future for oil and gas” despite Joe Biden’s commitment to the scalability and role of renewable technology.

Confidence in people’s own country’s ability is wavering

Despite the optimism surrounding the future of sustainable technology from China, India and the US, who are especially confident in their country’s abilities: “A majority of those in the UK, France and Brazil are at least optimistic about their own countries. More than half of Germans, however, believe that Germany is ill-equipped to deal with accelerating technological change.”

With the disparity in optimism across the planet potentially linked to policy decisions, issues surrounding funding and economics, people still believe hydrogen will be one of the most influential technologies, with 24% agreeing, just below Ai, 5G and selfdriving cars.

Delving into this perception in more detail: “People in India and China are particularly convinced that AI and 5G will become most relevant, whereas Western countries think self-driving cars will play a bigger role. What stands out is that 42% of Germans consider hydrogen to be the defining technology of their country’s future (9 percentage points more than last year*).”

With the increase in hydrogen being seen as defining technology for the future of their country, it is essential that the hydrogen market and public figures across the globe push to build a secure hydrogen economy.

With a nine percentage point increase in Germany alone, there is a clear journey for hydrogen, but it must be backed by policy and funding from central governments across the globe to incentivise the private sector to invest in future technology.

Credit: Bosch

Putting customers at the heart of net zero

Our purpose

SGN keeps communities across the whole of Scotland and much of the South of England safe and warm. Our vision is to give our 6 million customers the best clean energy experience.

Achieving net zero emissions will require transformation across the whole economy. We are investing in world leading R&D projects in the UK, advocating for the solutions that meet our customers’ needs and supporting industry make the transition to net zero to maintain jobs and skills here in the UK.

The scale of the challenge

The UK’s biggest net zero challenge is decarbonising our homes and buildings. It’s the second biggest emitting sector with around 30% of our national emissions coming from around 25 million homes which are connected to gas networks across the UK.

Millions of homes and people will be heavily impacted by this change. The decarbonisation of homes is first and foremost a customer challenge.

Customers react differently to the shared challenges we face: their own experience informs the choices they make. So when it comes to delivery of net zero we know we must put our customers’ different needs at the centre of any solution that is offered to them.

We need to listen to and understand what our customers actually want from their future home heating solutions. By doing this, and really understanding our customers’ needs, we can inform policy development and technological solutions that will help deliver a transition to net zero homes more quickly and at lowest cost.

So, what do our customers tell us?

Our customer attitudes research tells us that the willingness of customers to move to a zero-carbon heating system is high. Importantly, customers do not want to lose the attributes of heat that they have today. They want the

control, flexibility and immediacy of a heat source they can turn on and off, up and down.

But when you ask customers what action they will personally take and how much they are prepared to pay, that support for change drops to around a third. We call this the “action gap”.

The case for change

For most customers, the technology itself isn’t a relevant consideration for them. It’s what it delivers and how it delivers which they are concerned with.

Some customers tell us they are worried about being left behind when it comes to adopting new technologies. But on the flip side, many customers are also worried about being the first mover. They see a world of uncertainty and risk and for many a do-nothing approach represents the least risk option.

Customers expect government and business to take the lead by providing clarity on what the choices are and a roadmap of how they can be made a reality.

If we are going to make progress on the decarbonisation of our homes in the 2020s, hydrogen needs to be part of the choices on offer to customers.

We know about the home heating technologies available in market today, and we’re very clear – we will need all of them to reach net zero.

To maintain progress on decarbonisation, we in industry need to work alongside regulators and policymakers and ensure a customer centric approach is the backbone of the pathway we use to decarbonise our homes.

Get in touch

Please get in touch or visit our website if you would like to learn more about our world leading R&D or customer analysis, or how we are helping industry to meet net zero. josh.aulak@sgn.co.uk sgn.co.uk/about-us/future-of-gas

INTERNATIONAL PROJECTS

HYDROGEN PROJECTS FROM AROUND THE WORLD

Morroco

Belgian mechanical engineering company and alkaline specialist John Cockerill has announced a joint venture agreement aimed at the creation of a gigafactory to produce electrolysers in Morocco.

The agreement is with an unnamed leading Moroccan energy company and is said to include alkaline electrolysers of above 5 MW.

Offering an integrated green hydrogen solution, the firm has said that together with its partner, it will develop a value chain for green hydrogen production in Morocco.

It is aiming to help local large industries to establish a national energy ecosystem focused on renewable energy sources.

Raphael Tilot explained that it is essential to see Morocco’s hydrogen sector elevated: “Just like the Kingdom’s great successes in other industries, we are determined to establish such a local ecosystem around hydrogen technologies together.”

Norway

Nel ASA and Europe’s largest supplier of renewable power, Statkraft ASA, have signed a contract for the delivery of 40 MW electrolysers.

It will see the electrolyser stacks being produced at Nel’s manufacturing plant at Herøya and used to produce renewable hydrogen in one of Statkraft’s many hydrogen projects.

Worth NOK 120 million, the contract will also include a front-end engineering and design study related to the deliveries and includes pass-through mechanisms for steel and nickel price adjustments. The production of electrodes is estimated to be completed by the end of 2023. This project will help Statkraft to strengthen its efforts in developing new renewable power production as well as flexibility within hydropower and wind power both on and offshore in Norway.

Spain

Throughout January 2023, technicians from Valenciaport, the National Hydrogen Centre and Carburos Metalicos are expected to carry out the first hydrogen test for a refuelling station in Valencia, Spain.

The project aims to highlight how the Port of Valencia is positioned as the pioneering port in Europe in the development of hydrogen technologies.

It will see different tests being carried out with materials such as nitrogen, helium, and hydrogen to test the elements and mechanisms that make up the hydrogen generator of the Port of Valencia.

Being designed and built by the National Hydrogen Centre, the hydrogen supply station will include a fixed part that will be dedicated to the reception, storage, and compression of hydrogen up to delivery pressure and a mobile part which will store the compressed hydrogen and include a dispenser of this fuel for refuelling the port machinery.

Involving a total investment of more than 4 million euros and involves, the initiative is part of H2Ports – Implementing Fuel Cells and Hydrogen Technologies in Ports.

Finland

Norwegian start-up Blastr has announced plans to build a €4 billion green steel plant in southern Finland, complete with its own wind-powered green hydrogen production facility.

The project, which has the support of the Finnish government and is said to see the production of 2.5 million tonnes of highquality green steel annually.

Blastr also explains that using wind power will further reduce its carbon footprint, seeing the project reduce carbon emissions by 95 per cent compared to conventional steel.

Mika Lintilä, Finland’s Minister of Economic Affairs, said: “I’m extremely pleased that the site location has been now confirmed, as we have worked on this project for a long time.”

“Blastr’s decision to locate in Inkoo is proof of the competitiveness of the Finnish industry and infrastructure. Finland is an excellent place for carbon-neutral industry and production of decarbonized steel: We have a strong and reliable electricity grid, good conditions for producing emissionfree energy and efficient logistics.”

WEBINAR

The Hydrogen Insights webinars are 90-minute sessions, led by industry professionals, for industry professionals. These events allow you to see best practices from the experts and allow for greater communication through direct Q&A discussions.

Building the Hydrogen Economy

The HIL London conference will bring a wide range of stakeholders responsible for delivering the UK’s hydrogen objectives and discuss practical ways in which we can produce and distribute hydrogen successfully.

Located at the Radisson Hotel & Conference Centre, London Heathrow, on 5 July 2023, join key leaders and decision-makers from within the hydrogen industry and discover the upcoming opportunities available to you.

Radisson Hotel & Conference Centre London, Heathrow