Since Russia invaded Ukraine, the significant rise in gas prices has made green hydrogen suddenly become more of a reality. Escalating natural gas prices have resulted in many millions of Europeans struggling with rising energy bills and a shift in focus towards alternative energy resources.
Green hydrogen has become a more affordable solution, driving new investment and interest in an industry that can significantly reduce carbon emissions. Sector analysts have welcomed the boosted support for green hydrogen but point out that there is significant work that Europe must do to deliver a competitive green hydrogen economy.
Stefano Innocenzi, the head of the new energy business at Siemens Energy, explains that there is lots of work to do in getting the manufacturing scaled up and ensuring technology is more cost-competitive. The challenge remains the same as before, focused on reducing the overall costs.
Industry experts estimate that nearly 95% of hydrogen production relies on fossil fuels and generates as much CO2 as the emissions of the UK and Indonesia combined. In contrast, green hydrogen uses water and oxygen and relies on electricity from renewable energy sources. Industry experts believe this alternative can replace fossil fuels in sectors struggling to reduce their emissions i.e. heavy transport and steel manufacturing. The International Renewable Energy Agency (IRENA) believe hydrogen use within the G7 could rise seven times by 2050 compared to 2020 levels.
Some industry experts believe blue hydrogen could be an alternative to reducing carbon emissions before green hydrogen takes off in the years to come. The conflict in Ukraine, however, could accelerate this process. Since the war between Russia and Ukraine, the cost of natural gas has risen by over 70% on International markets, causing the price of grey and blue hydrogen to increase quickly. While costs are starting to ease, the post-war spike has put the average cost of grey hydrogen on par with green hydrogen.
In just a few months, the conflict in Ukraine has generated $73 billion in new investment in green hydrogen. The EU has launched a new green hydrogen bank to support the industry. The United States has introduced a significant tax credit on the production of green hydrogen with its Inflation Reduction Act (IRA).
Europe’s energy crisis has placed a spotlight on the green hydrogen industry. Ursula Von Der Leyen, the president of the European Commission, stated at the EU Green Hydrogen Bank launch that hydrogen could be a game changer for Europe and is vital in diversifying energy sources and reducing the dependency on Russian gas.
Innocenzi explains that we must focus on bringing this niche market to scale, and this can only be done by expanding renewables and their associated infrastructure. Green hydrogen requires a vast and reliable supply of affordable renewable energy. Innocenzi highlights that we need to reduce the approval process for renewable energy and continue developing infrastructure for hydrogen and power distribution.
Siemens Energy has focused on securing renewable power and recently received approval to take complete control of wind turbine manufacturer Siemens Gamesa. The two businesses are working on a commercial offshore wind turbine generating hydrogen via electrolysis. Innocenzi explains that the plan is to test the technology onshore and then move it offshore, with a plan to deliver the first wind-to-hydrogen turbine in the North Sea by 2026.
Another challenge is that Europe is unlikely to generate enough green hydrogen independently to achieve its net-zero emission targets. It will require imports from other areas to produce renewable power, such as Africa and Latin America and other energy producers with high potential for solar generation. Importing and dispatching this hydrogen will require further investment in infrastructure in Europe.
The positive news is that the current pipelines and terminals used for natural gas can be repurposed for hydrogen.
The final area to consider is manufacturing electrolysers, which will require scaling to bring costs down. Siemens Energy has partnered with Air Liquide to focus on expanding electrolyser manufacturing.
Innocenzi highlights that we haven’t reached the required cost, and that is why government support is critical. Other analysts have suggested a direct subsidy plan for green hydrogen that make prices more fair and competitive to unlock private finance potential.