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Networks, demand, regulation lagging behind boom in hydrogen production projects: FT summit

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Networks, demand, regulation lagging behind boom in hydrogen production projects: FT summit

Highlights

Grid retrofits in design phase

Certification critical to target achievement

Projects closely linked to demand thrive

Network connection agreements, bankable offtake deals and critical sector regulations on financing and certification are all lagging behind Europe's boom in renewable hydrogen production projects, threatening delivery of ambitious near-term goals, delegates at the FT's hydrogen summit heard June 16.

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The REPowerEU program seeks to double the EU's 2030 domestic renewable hydrogen production target to 10 million mt/year, requiring in the region of 80 GW of electrolysis, with an additional 10 million mt/year in imports.

The UK meanwhile has recently doubled its low-carbon hydrogen production target to 10 GW by 2030, with half of this from electrolysis.

"The production is there, the capital is there, but in transportation there is a lot of work to be done. There are a daily stories of new projects, but matching supply and demand is the challenge," said Shehzad Haq, MD, New Energies EMEA for Sumitomo Mitsui Banking Corporation.

Delegates heard that electrolysis projects in Europe were struggling to gain grid connection agreements in time for 2025 production targets, while several panelists noted the critical need for a robust certification system before mass balancing and co-production of mixed origin hydrogen could proceed without the risk of fraud.

"Without certification and the trust throughout the network it brings, you're left with green projects that today produce 10,000 tonnes and you're not going to achieve your 2030 goals," said Ahmed El-Hoshy, CEO of OCI and Fertiglobe.

Retrofit route cheapest

National Grid's Hydrogen Director Antony Green said the UK transmission company first had to demonstrate that existing gas pipelines could be retrofitted securely.

"We know, for instance, that our compressor fleet with have to be updated over time," Green said.

European H2 transmission calculations put the cost of a retrofit conversion at Eur400,000-500,000/km, versus Eur2 million/km ($2.11 billion) for a new dedicated hydrogen pipeline, he said.

A Hydrogen Backbone for the UK of 1,500-2,000-km linking the country's main ports, production centers and demand sinks could cost around GBP1.5-2 billion ($1.9-2.5 billion).

Before National Grid could go much further, however, "we need a clear signal from government that this is needed, that we are the ones to deliver it, and then the regulator can look at how that is funded," Green said, noting NG's next regulatory cycle was from 2026.

"That's a long way away. We need to get going now and we're ready to start on the design phase," he said.

Ammonia quick win

OCI's El-Hoshy pointed to the quick wins to be had from using ammonia and methanol as hydrogen carriers.

"They have higher energy density [than H2] and there is existing infrastructure. Methanol is a liquid at room temperature and there are ports all round the world that hold it but it has a carbon atom. Ammonia's boiling point is much higher than for LNG, so when it is shipped you don't have boil off, or carbon when consumed," he said.

Following demand paths of least resistance, consuming H2 as ammonia in shipping or power generation skipped a conversion-back-to-H2 step, he said.

"These are baby steps in building out demand using existing infrastructure," he said.

Demand elephant

Pierre-Etienne Franc, CEO of FiveT Hydrogen and Hy24, said too much attention was spent on GW-scale electrolysis and not on intermediate projects in the next two or three years to get the sector moving.

"The elephant in the room is demand. This is critical, and makes some projects work better than others – such as H2 Energy/Trafigura's project in Switzerland [supplying heavy duty transport], the hydrogen taxi fleet in Paris [HySetCo], or the HyDeal project in Spain with Arcelor Mittal as an offtaker," he said.

The other barrier was cost, with regulation needed urgently to turn the market to renewable H2, notably via CFDs.

"People forget – feed-in tariffs for solar were 20 times today's costs. CFDs are needed, but not for too long," Franc said.

Franc said Germany's H2 Mobility refuelling network program was predicated on three major European policies – RepowerEU, an EU ban on internal combustion engines from 2035 and the Alternative Fuels Infrastructure Regulation, pushing for compulsory installation of EV and fuel cell recharging stations.

"If you are in medium or heavy duty transport, a logistical freight operator or a municipal authority with garbage trucks, you are waiting for hydrogen trucks [to be available]," he said.

The price of UK hydrogen (PEM electrolysis) averaged Eur13.77/kg in May, according to S&P Global Commodity Insights' Platts hydrogen price wall.