Green hydrogen – the oil of the new millennium on the rise
Green hydrogen is at the heart of the energy transition: without it, complete decarbonization of society is not possible.
Hydrogen production is not new, but only in recent years with cheaper prices for green electricity in some parts of the world is the production of green hydrogen becoming increasingly economical.
The anticipated market size and growth are gigantic in all areas of the hydrogen economy (technology, production, transport, storage, applications) – the sky is the limit. But what of it all is realistic and when does the market set in?
The implementation of the announced projects depends critically on the regulatory environment – demand stimulation, infrastructure provision and technology scaling in order to reduce costs.
Green hydrogen is on everyone’s lips and is at the center of the energy transition: without it, complete decarbonization of society is not possible, since only a maximum of 50% of the final energy demand can be met by electrification with renewable energies. Aviation, shipping, heavy transport, some industries such as steel, cement and chemicals, and high-temperature processes present particular barriers to direct electrification with renewables. Hydrogen opens up the possibility of “coupling” renewable energy sources, essentially wind power and photovoltaics, with the industrial and mobility sectors (the so-called “sector coupling”), thus also compensating for their volatility through long-term storage in large quantities and thus making an important contribution to security of supply.
The industrial synthesis of hydrogen and oxygen by electrolysis was invented as early as 1888. Well-known manufacturers, such as Siemens AG, entered the development of water electrolysis plants almost two decades ago with the so-called PEM (Proton Exchange Membrane) technology, which uses a solid polymer electrolyte as a proton exchange membrane. However, it is only in recent years, with green power prices well below 2 to 3ct/kWh in some parts of the world, that green hydrogen production is becoming increasingly economical.
There is no alternative to the development of the hydrogen economy, and it is currently generating strong momentum, even enormous hype in the market. The anticipated market size and growth are gigantic in all areas of the hydrogen economy (technology, production, transport, storage, applications) – the sky is the limit.
But what of it all is realistic? When does the market set in?
The implementation of the announced projects depends crucially on the regulatory framework.
1) Stimulating demand:
The market must be stimulated. It stands and falls with the offtake. The willingness of the offtakers to enter long-term contracts (usually 12-15 years) with a price premium is currently almost non-existent. This is also not surprising given the FOIK (first of its kind) risks.
Regulatory framework conditions must be set accordingly. CCfDs, for example, are a good instrument. And the subsidies adopted in the USA for a hydrogen ramp-up (minimum price for green hydrogen of about 3 USD/kg) are exactly the right means to stimulate the market. We need similar pragmatic determinations for a ramp-up in DE/EU, and thus the recognition of green hydrogen/derivatives in the sustainability requirements of all industrial sectors.
2) Provision of infrastructure
Enormous efforts will also have to be made to expand the infrastructure in order to enable the market ramp-up of the hydrogen economy. The power requirements of electrolysis plants in Germany alone will ramp up to values between 50 and 90 GW by 2050. This will also require significant expansion of green power production and grid infrastructure (gas and electricity). For comparison: In 2021, the installed capacity of all wind energy and PV plants in Germany was approx. 123 GW.
3) Technology scaling to reduce costs
Boosted by market demand, investments in large-scale production of hydrogen have increased. For example, the power class of Siemens Energy’s portfolio scales by a factor of 10 every 4 – 5 years, having started with a 0.1MW electrolysis plant in 2011 to plants of about 1MW in 2015, about 10MW in 2018, and 100MW starting around 2023.
Nevertheless, the global production capacity of electrolysis plants is still very limited and needs to be further expanded. IRENA (IRENA 2022, Geopolitics of the Energy Transition: The Hydrogen Factor) estimates this at 16 GW in 2024 based on the producers’ investment plans.
There is still a need to invest a lot in R&D, e.g. to reduce the precious metal loadings of the electrolyzers or to develop alternative catalysts. This is because the current global production volume of iridium (about 6-8 tons per year) would be sufficient for about 10-12 GW of PEM electrolyzer power at current power densities and loadings (about 650 to 700 kg of iridium per one GW of power). To enable scaling up to GW classes, the specific iridium consumption should be reduced to about 50 kg/GWel. (Source: Reimund Neugebauer ed., Water Technologies, 2022, p. 227 et seq.).
Generally speaking, it will take significant political will, private investments, and a “doer mentality” to both support current technologies as they advance as well as drive important innovations forward.
Nevertheless – we have good examples where we have succeeded in such a transition. One example is the introduction and scaling of wind energy in Germany since the 1990s. And then, accompanying this, the development of photovoltaics – in the period between 2010 and 2021 alone, module costs have decreased by 90%.
The Stone Age did not end because there were no more stones. The oil age will not end because there is no more oil! With green electrons (electricity) and green molecules (based on hydrogen), alternatives are available that enable a successful implementation of the energy transition. There is no “plan(et) B” – we have to act! Fast!!
We are happy to be your partner for this!