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INTERVIEW: German Heide refinery targets 300 MW electrolyzer by end-2025

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INTERVIEW: German Heide refinery targets 300 MW electrolyzer by end-2025

Highlights

Hyscale, Westkueste 100 projects selected for state aid

Location advantage in wind-heavy region with grid congestion

Green products can't compete on price, regulation key

Germany's Heide refinery aims to scale its 30 MW electrolyzer project to 300 MW by the end of 2025, with related projects already selected for state aid, Heide CEO Juergen Wollschlaeger told S&P Global Platts.

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The 30 MW pilot project is part of the Westkueste 100 consortium with Orsted, while the 300 MW expansion project is part of the HyScale 100 project.

"End of 2025 is very ambitious, but it is doable and we need to move fast," the CEO said in an interview June 24.

A final investment decision of the 30 MW pilot should to be taken this year with a view to a 2023 start date. Pre-qualification to supply electrolyzers has begun, Wollschlaeger said, noting that existing grid and wind access to the site, located in northern Germany, is ample.

Output from the electrolyzers will replace conventional hydrogen generated on-site.

"When we started this project two to three years ago I was surprised how progressive the power utilities were on hydrogen compared to oil companies. Now it is more balanced," he said.

Sustainable aviation fuel

Using hydrogen blended with CO2 to make methanol, the Klesch-owned refinery aims to be supplying 5% of the jet fuel used at the nearby Hamburg airport as Sustainable Aviation Fuel (SAF) by 2024, although pricing is an issue that needs to be addressed.

"Clearly you can't be competitive on price here, you can get closer to conventional fuels as technologies evolve, but it would be naive to assume you can fully close that gap," he said.

The gap currently stands at around $1,000/mt. Platts assessed SAF in Northwest Europe (ex-wharf) at $1,629.86/mt on June 22 while standard jet fuel cargoes were assessed at $612.75/mt FOB NWE.

Wollschlaeger said there were broadly two options going forward: either state support schemes for SAF or placing an obligation on carriers to use it.

"There is also the element of the customer -- what are people willing to pay to travel in a decarbonized way? We need to acknowledge that traveling by plane has to become more expensive if it is to become more sustainable," he said.

Germany is implementing RED II guidelines into law, setting a 2% SAF quota by 2030.

"So far it is uncertain whose obligation the 2% quota is in the draft law, the carrier or the fuel supplier," Wollschlaeger said, noting the cost of flying was a political issue ahead of September's election.

Substation next door

Heide, near the Kiel canal between Hamburg and the Danish border, was ideally located for the project, he said.

"We have the 380 kV West Coast power line passing close by our refinery and the Heide-Sued substation is literally next door to the refinery. We have a big plug, we can tap into renewable electricity, and can store hydrogen at scale in the existing salt cavern system," he said.

A dozen existing caverns allow for hydrogen storage, while the refinery is linked via pipeline to the Brunsbuettel terminal and a cluster of existing hydrogen customers.

Scaling up refinery of the future

The nearby Holcim cement works, meanwhile, is at the core of the Hyscale 100 proposal, which has been shortlisted as a European project of common interest.

A carbon capture unit at the works will supply CO2 to Heide via pipeline. The CO2 would then be synthetized with hydrogen derived from a 300 MW electrolyzer to produce methanol for use in the production of green chemicals.

Covering the refinery's total demand would require 1.8 GW of electrolysis, he said, hence additional plans for carbon capture and usage (CCU) technology at the refinery.

This would allow production of what the CEO described as "blue chemicals".

He noted that CCU would serve as a bridge to address technological challenges for full decarbonization over the next 30 years.

Scaling up electrolyzer capacity would raise the issue of excess heat during the process, for which solutions are being explored.

"Nobody would accept venting massive amounts of heat into the air, but there is plenty of industrial demand for that here in Heide," the CEO said.

If the project gains IPCEI status by the end of this year, planning would start to progress for a 300 MW electrolysis facility by the end of 2025.

While the CEO was not convinced there would be much of a market for personal mobility fuels in 20-30 years' time as EVs will likely corner the car market, heavy transportation and the entire chemical industry would need synthetic hydrocarbons, and this is expected to be Heide's future market.

"My expectation for the next government is to put actions and regulations behind the hydrogen strategy so that it becomes economically viable," Wollschlaeger said.

Optimum load hours

Meanwhile there is ongoing debate on RED II implementation, guarantees of origin (GO) certification and the eligibility of renewable projects providing feedstock for hydrogen production.

Certification for hydrogen produced at Heide remains an issue for a bit further down the line, while for SAF certification, an agreement with airlines body IATA would be needed for synthetic methanol-based production to comply, "but I don't see any reason why we shouldn't get certification," he said.

Regulation may also limit electrolyzer running hours exempt from Germany's EEG renewables levy to 5,000 hours.

"If you are an operator you obviously want to maximize production. On the other hand, if you run 24/7 you also capture price spikes. We've done simulations [based on power prices] and you come to an optimum run-time [for electrolysis] in the area of 5,500-6,500 hours per year," he said.

European power prices have jumped to the highest since 2008 trading above Eur80/MWh.

Platts' cost-based assessment of renewable hydrogen (front-month power, PEM electrolysis with capex) hit a record Eur6.12/kg on June 24, double the cost of natural gas-derived hydrogen with CCS.