Paper explores scaling up green hydrogen in Europe


Green hydrogen can be scaled up from tens-of-MW scale projects in the early 2020s to tens of GW production capacity if purposeful action begins now, a report has said.

On 26 February, Dentons, ILF and Operis published a white paper, analysing how to scale up green hydrogen in Europe. To follow in the footsteps of renewables, it will need to close the gap between the costs of production and use with the higher carbon alternatives it is aiming to displace. On the supply side, this will involve reducing the lifetime costs of electrolysers, ensuring the costs of accessing the raw materials of production remain low, keeping the costs of transporting hydrogen low and ensuring any conversion it goes through is economically efficient as possible. On the demand side, higher carbon prices or other policy interventions making fossil fuels more expensive was cited as the key driving factor.

The paper focused its analysis on part of North-West Europe, including Germany, Belgium and the Netherlands, which is an area with the right characteristics for developing low carbon hydrogen supply chains. This has seen many potential green hydrogen projects proposed in this region, owed to its high potential demand for green hydrogen, gas transportation infrastructure suitable for hydrogen use and favourable conditions for sourcing renewable electricity.

Because of this, it devised a business case based in this region, starting from 2023, exploring what a regional hydrogen economy could look like. It forecast an installed green hydrogen capacity of 6GW by 2030, reaching 35GW by 2050. This is based on a future ramp-up in electrolyser production as well as electrolysers becoming more efficient – from 60% today to 75%. Capital costs should also drop for producers of hydrogen investing in electrolysers with larger plants and larger quantities.

It also forecast a fall in the levelised cost of renewable electricity (LCOE) – likely to usually be the largest share of green hydrogen supply-side costs. It will drop from €5 cents/kWh to €3 cents/kWh between 2023 and 2035. Co-locating low cost renewable energy and hydrogen production, before transporting the hydrogen through dedicated pipeline networks, was deemed the most economically attractive option in the short-term, assuming the hydrogen is produced within 3,000km of the end-users’ location. In the longer-term, there will be increasing volumes imported from distant sources. Lower LCOEs in Southern Europe (€2.5 cents/kWh in 2035) and North Africa (€1.5 cents/kWh in 2035) would make transportation of increasing volumes of hydrogen from these high energy yield regions economically feasible.

Despite the number of projects planned for the target demand region, these are likely to be relatively small and will not realise the economies of scale key to improving the economic viability of green hydrogen production in all aspects of the supply chain.

It set out there is plenty investors in and lenders to renewable generation projects, hydrogen production facilities and potential end-users of green hydrogen can do plenty to help themselves, including cross-shareholdings, joint ventures and the formation of a cooperative virtual utility structure, spreading supply-side and demand risk.

In the EU and national strategies for hydrogen, meanwhile, there is much that will aid the industry in scaling up. Despite this, legislative and regulatory processes can take time and those developing projects with a strong business rationale should not wait for public authorities to make progress. Elsewhere, the experience of designing and administering renewable electricity and other clean energy support schemes should allow for effective and efficient support frameworks for green hydrogen to be designed and implemented at pace.