VoltH2 targets mid-sized green hydrogen projects to optimize offshore wind

Green hydrogen project developer VoltH2 is targeting medium-scale plants in Northwest Europe as part of a strategy of optimizing production from offshore wind, CEO Andre Jurres told S&P Global Commodity Insights.

The company has just received 15-year operating subsidies under the Netherlands' SDE++ scheme for two of its green hydrogen plants in Terneuzen and Vlissingen.

"The subsidy is an expression of the government's vision of the energy transition and the role it sees in it for hydrogen and the VoltH2 projects," Jurres said in a statement March 6.

The subsidy award depends on the volume of hydrogen produced and the associated CO2 emissions reduction.

Jurres sees the potential for early projects to optimize offshore wind production to supply green hydrogen to customers in existing demand areas such as refining and fertilizer production.

VoltH2 envisages building a network of production facilities in industrial clusters at a scale that Jurres said was not small, but "realistic".

The company's business model is a snapshot of how a medium-scale producer could establish itself in the wider envisaged European hydrogen economy.

The model is predicated on offshore wind, although Jurres said the company was open to stacking with both onshore wind and solar power.

Electrolyzer operating hours will at first be limited to 4,200-5,000 hours/year, which Jurres said "from a factory point of view, it is not very efficient," given a year's 8,760 hours.

But in future phases of green hydrogen development, "we will see the number of working hours stacking up," which will be needed to ensure the steady supply that customers are demanding, he said, noting the critical role the proposed European hydrogen backbone will play for hydrogen storage and flexibility of supply.

Wind optimization

Jurres said flexibility and optimization was key, both for hydrogen producers and offshore wind developers, as offshore wind projects became bigger.

"If you sign a 15-year power purchase agreement, that is really more than just a commercial agreement," he said. "It is not just buying power. On a day-to-day basis, the electrolyzer and the offshore wind park will be one. That means you will start to try to optimize both."

Indeed, recent subsidy-free Dutch offshore wind permits have been awarded to companies that have included large-scale electrolyzer projects as part of their bids, with the award criteria heavily weighted in favor of projects that provided innovation to integrate offshore wind capacity into the Dutch energy system.

The Netherlands aims for 21 GW installed offshore wind capacity by 2030, up from around 3 GW currently.

A 2021 study commissioned by the Netherlands Enterprise Agency found that landing 31 GW of offshore wind via power cables in 2040 would be possible using a coordinated approach based on available transport capacity coupled with electrolyzers.

VoltH2 is looking to long-term PPAs to lock in electricity costs.

"Our biggest cost is power so it has a direct impact on the price of hydrogen," but fixed price, long-term PPAs would help mitigate against volatile power prices, Jurres said. However, he noted high PPA prices in the last 12 months.

PPA specialist Pexapark's latest European offshore wind trend PPA price was Eur65.52/MWh ($72/MWh) on March 3, while its cross-technology country trend price for the Netherlands was pegged at Eur56.76/MWh.

Offtake agreements

VoltH2 is targeting its first final investment decisions after the summer, and then allowing two years for construction.

Jurres said the company would secure some offtake agreements in advance but said that there was some advantage to keeping options open, as a lot of options could present themselves during the construction phase.

The interest from customers was there, he said, driven by an imperative to reduce CO2 emissions.

"We will have a lot of offtakers," Jurres said. "We will never be able to produce enough hydrogen."

VoltH2 plans initial sales to the incumbent hydrogen industry, supplying high-purity, 99.9966% hydrogen, with a strong case for expansion into the mobility sector in the future, particularly for heavy land transport, and shipping.

The company is eyeing pipeline supplies, along with tube trailer deliveries for customers without a pipeline connection.

Green hydrogen not cheap

Important capex cost reductions for renewable hydrogen would help drive down prices but "energy should not be cheap", so as to incentivize efficiency, Jurres said.

"Green hydrogen is not going to be cheap," but it would become "the cheapest solution of all the others," Jurres said, citing a need for a strong carbon price. "If you really want to get rid of fossil, you need to tax it out.

Dutch hydrogen production costs via grid-based alkaline electrolysis averaged around $10.17/kg in January, among the highest globally, the Platts Hydrogen Price Wall showed.

Current EU CO2 prices were still not high enough to drive a switch, Jurres said.

"The EU ETS is going to bite when it is Eur150-200/mt."

Platts, part of S&P Global Commodity Insights, assessed EU ETS allowances at Eur92.18/mt on March 3.

The EU hydrogen market was facing a "bumpy ride" for the next few years, Jurres said, with the challenges of scaling up production and meeting rules under the Renewable Energy Directive.

But the sheer scale of renewable electricity targets across Europe made the case for green hydrogen clear, he said, noting Germany's renewables ambitions.

Germany last year doubled down on renewables, approving new laws to achieve an 80% share of renewables in the power sector by 2030 that will more than double the current output from solar, wind and other renewables to around 600 TWh/year.

Production capacity would spike above peak power demand at times of high output, Jurres said, bringing issues of grid stability.

Planned VoltH2 hydrogen plants

Source: VoltH2, S&P Global Commodity Insights