EU member states and US state governments may have more impact on the development of the hydrogen economy than EU institutions or the US federal government
While the development of a hydrogen economy is likely to become a global enterprise in the coming decades, it may well be that local layers of government take a leading role in its early stages, the panellists on the PE Live 8 webcast discussed.
The European Commission announced the EU Hydrogen Strategy in early June to much fanfare. But several national governments within the bloc are already pushing ahead with their own plans and even some regional or local authorities have strategies for nurturing local development.
Germany is taking an early lead among European countries. “The most effective one right now was the release of the [German] National Hydrogen Strategy,” says Tobias Merten, senior manager strategy, transaction advisory services, future of green & smart economy, at professional services firm EY.
“It shows not only a concrete value for the level of support the government is willing to give to the industry—for development and research as well as market activation—but also to the industry, people, cities, communities and municipalities that the government is committed. This clear statement by the government is a very positive sign.”
That said, the “big amount of money” is also clearly important. The National Hydrogen Strategy is being funded by a stimulus package to help the economy recover from Covid-19, setting aside €7bn ($8.2bn) for R&D and market activation. It also includes a further €2bn for “building up international partnerships and really looking to bring it to a European and global scale”, he says.
“The governmental support will definitely help advance hydrogen—I think it will make a difference” Greer, King & Spalding
Below the federal government plan, local levels of German government are also encouraging development. “It is not only the federal government. We see a lot of regional governments—such as separate states or even smaller regions—having their own funding programmes and supporting the local actors with funding for easy access and demonstration projects to really bring all things together and create value for their region within the overall picture for the country.
“I find it interesting that in Germany the main measures are really in regions, looking at where we already have activities such as refineries or chemical industries already using hydrogen while other countries such as France, Holland or Poland are taking a more centralised approach.”
EU vs US development
While the German and European governments are placing a greater emphasis on hydrogen compared to the US administration, there are a multitude of state-level initiatives that are supporting the industry’s development.
“The US does not have a specific hydrogen initiative,” says Scott Greer, partner at law firm King & Spalding. “However, it does have various energy incentives that apply to renewables and hydrogen. The governmental support will definitely help advance hydrogen—I think it will make a difference.”
The range of incentives, some of which are set to expire and will need to be renewed, include the following: the Airport Zero Emission Vehicle Law; Alternative Fuel Excise Tax Credits; Alternative Fuel Tax Exemption; Alternative Fuel and Advanced Vehicle Technology Research and Demonstration Bonds; the Fuel Cell Motor Vehicle Tax Credit; and Improved Energy Technology Loans. “That gives you a little bit of an idea,” he adds.
Despite fewer overarching US incentives, there are very significant green hydrogen projects under development, such as the proposed development by Magnum and Mitsubishi Hitachi Power Systems (MHPS) in central Utah. “This includes 1,000MW of energy storage, and it will be the world’s largest of its kind,” says Greer. “It will provide energy to 150,000 households for a year and will rely on wind and solar energy for electrolysis. The turbines will be by MHPS with 70pc natural gas and 30pc hydrogen.”
Another project in the US is SGH2 in the city of Lancaster, California, which once built promises to be as three times larger than any green hydrogen plant in the world. “It uses recycled mixed paper that would produce 11,000kg of green hydrogen per day,” says Greer. “It will provide hydrogen fuel to all the 42 hydrogen fuel stations in California with a goal to rise it to 100 then 1000.”
The multitude of approaches to hydrogen around the world presents a challenge to multinational companies looking to be involved but also presents opportunities.
“The advantage of a large organisation is always that you have subsidiaries in different countries,” says Christian Bergins, strategic marketing manager, new technologies, Mitsubishi Hitachi Power Systems. “You can take a local view on local developments and then look at business cases, needs and opportunities. And that is what MHI Group and MHPS is doing together at the moment.”
For example, in Germany Bergins says MHPS is looking at green hydrogen opportunities in most EU countries, whereas in the UK the focus is on whether its carbon capture system would work in specific proposed clusters. “We are also involved when it comes to possible retrofits or cofiring of hydrogen. We look at each region of the world, what is moving there and what technology is needed,” he says.
“The first projects will produce near sources of demand. The large, continental transportation of hydrogen fuels and derivatives will come later” Bergins, MHPS
The transportation of hydrogen and its derivatives is quite costly no matter the method. While equatorial countries benefit from cheap solar PV power, the cost of moving the resulting green hydrogen to sources of demand could negate much of this benefit.
“Cooling down hydrogen to -252C for liquefication costs energy and investment, the ships to transport hydrogen cost a lot, and conversion into ammonia creates losses and requires modification to ships,” he says. “Therefore, cheaply produced hydrogen loses a little bit of competitiveness.”
In the hydrogen industry’s early stages it is likely that supply will be created near sources of its consumption, but this may change as demand builds. “Small countries with heavy industry will, partially, have to import it in the future. But for the time being, the first projects will produce near sources of demand. The large, continental transportation of hydrogen fuels and derivatives will come later.”
PE Live webcasts on the uses and production of decarbonised hydrogen, PE Live 8 and PE Live 9 respectively, are available on demand here.