I attended a green hydrogen conference last week in Amsterdam to gather insight into the various players as well as better understand the what, when & where of the sector.
A few key takeaways:
· Green hydrogen (“GH2”) goes hand in hand with the REPowerEU initiative (at least for Europe). Due primarily to Russia’s war in Ukraine, the EU is adamant in reducing – even eliminating - dependency on Russian hydrocarbons. Upping renewable energy targets, implementing more energy efficiency goals & green hydrogen all play a part. The action plan can be seen here.
· High-level, REPowerEU calls for an incremental 80GW of renewables that, put simply, will fuel green hydrogen production. Today, there is a plethora of “coloured hydrogens” - blue, brown, yellow - but green is the objective & the “only colour” to receive significant EU funding.
· The EU will provide €500bn over the next 2 years in support of its 2030 targets of +20m metric tonnes of GH2. Just stop & process that number. €500bn in subsidies to make GH2 a reality. 10m mt of the targets will be produced within the EU whilst another 10m mt will be imported (interesting metric - currently ~9m mt of hydrogen is produced within the EU with natural gas, representing ~9% of EU consumption)
· The EU funds will go towards funding infrastructure buildout (a need for 28,000km of pipelines alone(!) as well as 15-20 hydrogen production ‘hubs’) & project support. The EU estimates that there will be 750 GH2 projects across Europe by year end
· The most realistic region for exporting into Europe is from N. Africa. Pipelining the stuff seems to be much more commercially viable than shipping it. Some conference participants predict that up to 5 new pipelines linking the two continents will be operational by 2030. This seems overly ambitious to me, given permitting times alone, but the EU appear hellbent on this initiative.
Overall, there were about 250 participates at the conference, ranging from technology suppliers to developers to financiers. And, I suppose, renewable folk like myself, there to learn a bit more about the ultimate X, in power-to-x potential.
There was a lot of excitement in the crowd and I couldn’t help draw a parallel to the renewable energy sector circa 10-15 years ago. And I wasn’t alone in this view as many in the audience seemed to believe the same. However, before one firmly places those rose-tinted glasses on, the conference organiser asked how many people in the audience were actually making money from GH2? No one raised their hand. Not. One. Hand. Was. Raised. Renewables (at least project development), on the other hand, has always yielded attractive returns so perhaps there are some differences of import?
Maintaining an open mind, I note that it was only 5 or 6 years ago when competitive auctions collapsed the price of renewable energy (both wind & solar PV), resulting in a subsidy-free marketplace. Today, even with supply chains stretched - like with every sector it seems - renewables remain the cheapest form of new electricity generation in mast countries around the world. No longer requiring subsidies has been the rocket fuel driving ever increasing global renewables growth. And we’re still only in the early phases of global buildout.
Will GH2 be the same by 2030?
Certainly 1/2 trillion € of public money priming the pump will help. And, as expected, there are a plethora of differing approaches from the private sector. To highlight but a few:
· there are “cheap” electrolysers being developed without the need for expensive membranes. As always, economies of scale will play a role so the key question is when can such scale be achieved? One CEO of an electrolyser company boldly stated “demand for his product will outstrip supply for years to come”. Seems to me to be an interesting supply-side investment opportunity. CPH2.
· As expected of the ultimately flex mentality that makes up the world of project developers(!), many differing strategies & approaches are being pursued in this space:
o One is working on small scale grey hydrogen / diesel displacement and claims to be making money on a per kg basis today (note their overheads mean they aren’t yet profitable overall – the CEO’s hand was not raised by the organiser’s question). Their strategy is to start small but get moving now. This makes a lot of sense to me. Not surprisingly, they are backed by a very sharp London-based PE house. Octopus Hydrogen.
o Another is focusing on large scale (~1 GW sized projects) by buying up old German coal plants which, naturally, come with land and grid connection capacity and, at times, proximately to German industrial load. But there is also a bit of “build it and they (i.e., customers) will come mentality”. This particular developer is proven & this strategy seemed to offer the best balance of commerciality & scaling potential. HH2E.
o And yet another approach is of an uber mega scale to capture all (and more) economies of scale. Their pitch was captivating, and they are true “elephant hunters” who were treated, post presentation, a bit like rock stars by the audience. After all, who doesn’t like size? Mega scale, they claimed, was required to drive the target power price down to $0.02/kWh, which is needed to produce competitively-priced GH2 (of note – 70% of GH2 cost comes from electricity prices).
Yet part of me thinks they may be too far ahead of the curve for, unless I got my numbers wrong, they will need more wind turbines for each one of their mega-scaled projects than the entire wind OEM sector produces in a given year.
Still, it takes risk takers like this to change an industry and they certainly seem to be on that path.
One presenter referenced the 4 Ss of hydrogen – namely, scalability, saleability, security & sovereignty. A consequence of Russia’s war in Ukraine has been to embolden the EU and its member states into action. Green hydrogen is now seen as an industrial fuel that, by displacing Russian gas, grants security of supply and reenforces sovereignty. The EU funds, coupled with private sector innovation and technology are delivering on the first 2 Ss of scalability & saleability.
So, back to the title question of this article, Green Hydrogen Cometh?
So, will it?
I was admittedly a bit sceptical pre-conference … but no longer. For when political will, public funding & private sector capabilities are aligned in action & outcomes, only a foolish man would bet against such considerable force.
Just ask the renewable energy sector.