Handelsblatt from 02.02.2022

A pragmatic approach is necessary for successful hydrogen expansion

A pragmatic approach is necessary for successful hydrogen expansion | Sopna Sury guest commentary in Handelsblatt

A framework must be created that enables investment decisions to be made at all stages of the value chain. However, there is not enough time for perfect regulation, according to Sopna Sury.

Sometimes it takes only a moment to absorb the true scale of a task. Take last December, for example, when energy prices went through the roof. The reasons? Gas was in tight supply in Europe and demand from Asia has been rising massively, the amount of electricity generated by coal-fired and nuclear power stations is constantly declining, and the geopolitical situation is casting dark clouds over the eastern part of the continent.

It’s therefore hardly surprising that Germans are worried about their power costs. It’s also no surprise that industrial concerns fear for their existence when they suddenly face power costs that exceed their revenue. Fortunately, the spike was only short-lived, and prices have fallen a little since then. But the situation showed that our country’s economic strength is not set in stone. Instead, it depends on many factors, one of which has to be a reliable and affordable energy supply system.

So now, of all times, is when we are supposed to increase the pace of the energy transition? Must wind turbines and solar power plants replace nuclear power and coal? And generate costly hydrogen? Yes. Right now!

The point is that the faster Germany becomes carbon-neutral, the sooner the costs will come down.

Costs for wind turbines and solar power plants are already significantly lower  than in the past, and we can expect the same to happen with hydrogen. Of course, the transitional period, as we move from the age of conventional power to the age of renewables, will be cost-intensive.

That’s why the major challenge lies in structuring the energy transition in a way that will enable industry to remain competitive. Policy-makers recognise this fact and want to put countermeasures in place. And so they should, since our economy cannot be transformed in an instant. The good news is that it’s in our hands as a society.

Green hydrogen will be key

Green hydrogen will play a crucial part in making this transformation a success. This will be the only way to decarbonise industrial processes for which electrification is not an option – for steelmakers, chemical businesses and heavy goods transport, it’s the only choice if their climate targets are to be met.

But hydrogen is still scarce. To make it as readily available and affordable as tap water, we need a functioning hydrogen economy, with green generation capacity, producers, traders, customers, and – above all – infrastructure. This must all be built up as fast as possible, simultaneously, pragmatically, and be fully integrated.

We must take the notion of “building up” literally. New structures are required everywhere. Starting with the wind farms and solar power plants that produce the renewable electricity for the electrolysers. Then massive electrolyser capacities. And on to the pipelines (repurposed where possible), to carry the energy source from the producer to the customers. In addition, storage systems will be essential to meet the need for reserves.

That sounds complex, but it’s manageable. We are not starting from scratch, by any means. Ambitious goals have been set by hydrogen strategies at a national level and Europe-wide. The important thing now is to support these goals with the right tools. Germany’s new government hopes to expand electrolyser capacity for generating green hydrogen to 10 gigawatts by 2030. That’s twice the previous target. But even so, that will just about suffice to cover one-tenth of the seven million tonnes of hydrogen that experts believe we will need per year by 2030.

Framework conditions must be right for all concerned

Companies in Germany and throughout Europe have banded together to form hydrogen consortia. Integrated projects are vital during the start-up phase of the hydrogen economy in particular, to bring together players all along the value chain to combine their individual projects into a smoothly functioning, orderly system.

One example is GET H2 at RWE’s location in Lingen, one of the most advanced projects in this field in Germany. Working with industrial gas specialist Linde, we began the approval planning process for the first two 100 MW electrolysers in December.

But we still aren’t in a position to get everything under way. The overall conditions must first be right, and at the same time, for everyone involved. And to enable fully matured projects such as GET H2 to go live in good time, companies need to be able to plan their finances with confidence.

Germany has raised the prospect of €8 billion in federal and state funds for Important Projects of Common European Interest (IPCEI). Funding commitments at this level will be needed as early as this spring, otherwise it will not be possible to meet the timeframes. The key factor is to get the entire system operating. It’s rather like trying to erect a large tent – all the poles need to be put up together, otherwise it will never get off the ground.

We therefore need the overall conditions to be set in place now, to enable pragmatic investment decisions to be taken all along the value chain. That also includes getting the conditions right for hydrogen imports. Even in the best possible case, domestic generation will cover only a fraction of the hydrogen that will be needed.

We do not have time to develop perfect regulations down to the very last detail. For example, the criteria for green electricity, which are being discussed at a European level. These will determine which renewable electricity is permitted to be used to generate green hydrogen. The idea currently under discussion – to allow only electricity from new, unsubsidised wind turbines and solar power plants – makes no sense.

Launch of hydrogen economy cannot be delayed

At least not if industrial concerns are required to switch over to climate-friendly production using green hydrogen as quickly as possible. In practical terms, this proposal means it will take years before new wind turbines and solar power systems of this nature go onto the grid.

No-one is going to set up electrolysers on that basis. And no steelmakers are going to convert their blast furnaces from coke to green hydrogen, and no refineries will make the switch from gas. Companies such as these need certainty that the green energy source will be available reliably and in sufficient volumes. To put it in a nutshell: Proposals of this nature will not get the overall system moving, but will instead bring it to a standstill.

The longer the launch of the hydrogen economy is delayed, the greater the level of uncertainty companies will face. That increases the risk that investments currently in the pipeline will be made elsewhere.

No-one can seriously want that to happen. That’s why pragmatism rather than textbook regulation is the order of the day. We all know that trying to make everything green overnight won’t work. But by cleverly selecting the steps along the way and making compromises where necessary, we can dramatically cut our carbon emissions during this decade, the key decade of the energy transition.

I firmly believe that the more pragmatically we act, the faster we will achieve our common goal of a climate-neutral society.


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