Renewable hydrogen has a crucial role to play in industry, posing “major challenges” for gas distribution system operators, a report has found.
In its 12 Insights on Hydrogen report, Agora Energiewende outlined how carbon free hydrogen or hydrogen-based fuels are set to supply around a fifth of energy by 2050, with priority uses including decarbonising industry, shipping and aviation, and firming up a renewable-based power system. It will only have a limited application in the building sector, along with less use in the ground transport sector as had been foreseen in EU scenarios.
Therefore, a green hydrogen infrastructure in Europe should be anchored around no-regret industrial, port and power system demand. Policy instruments will be crucial for incentivising hydrogen use and while there are options that exist at a reasonable cost in industry, power and aviation, no such credible financing strategy for hydrogen use is available for households. Blending is not enough to meet EU climate targets and carbon prices high enough to deliver hydrogen heating would be unacceptable for customers.
To support an expansion of green hydrogen, it recommended using carbon contracts for difference in industry; a power-to-liquid quota for aviation; auctions that can support combined heat and power plants; measures to encourage markets for decarbonised materials; and hydrogen supply contracts.
Gas distribution grids will face a disruptive end to their business model as part of this future, with the report explaining this is down to net zero scenarios seeing very limited use of hydrogen in buildings. To stay on track for 1.5C, Europe will have to reduce the consumption of natural gas in buildings by 42% over the next decade. Land-based hydrogen mobility, meanwhile, will also remain a niche option. Any low-pressure gas distribution grids that survive will likely be close to ports, where refuelling and storage infrastructure can provide an impetus to the decarbonisation of maritime and aviation.
Overall, from its study, it found Europe has enough green hydrogen potential to satisfy its demand to manage two key challenges of acceptance and location of renewables. Each gigawatt of electrolysis will have to come with 1-4GW of additional renewables. Therefore, in an effort to keep industry competitive, it called on the EU to look to access cheap hydrogen from its neighbours through pipelines. This will reduce transport cost, while it noted that imports from a global market will likely focus on renewable hydrogen-based synthetic fuels.