Meeting need for more electricity and electrolysis
Sometimes you’ve gotta spend money to make money. To reach Net Zero, we have to increase electricity production to reduce GHG emissions. Much of this is to power the rapidly growing need for electrolysers — the powerhouses behind the new hydrogen economy and the key to decarbonising hard to abate industrial sectors.
The EU aims to be climate-neutral by 2050 — an economy with net-zero greenhouse gas emissions. This objective is at the heart of the European Green Deal and in line with the EU’s commitment to global climate action under the Paris Agreement.
However, this ambitious target cannot be realised without a significant increase in electricity production. To reach Net Zero requires more than 80,000 terawatt-hours of electricity to be generated worldwide, more than three times the amount generated today (BloombergNEF New Energy Outlook 2022).
The decarbonisation of the electricity sector is the linchpin of any successful energy transition. Fossil fuel-powered plants still dominate the energy landscape, emitting substantial amounts of greenhouse gases and exacerbating global warming. To reverse this trend, Europe must significantly ramp up its renewable energy generation and decrease its reliance on fossil fuels. Renewable sources such as wind, solar, and hydroelectric power hold immense potential in meeting Europe’s electricity demand while drastically reducing its carbon footprint.
This means more infrastructure, more renewable or non-fossil energy production and more innovative methods for electricity storage. The driving reason behind this is the need to decarbonise hard to abate sectors such as steel, cement, chemicals, and aviation (due to their reliance on fossil fuels and energy-intensive processes) without relying on increased natural gas and coal usage.
The need for green hydrogen
Industry needs to rapidly decarbonise. While progress has been made in decarbonising the power sector and promoting renewable energy adoption, heavy industry remains a significant source of greenhouse gas emissions. By transitioning to cleaner energy sources, implementing energy efficiency measures, and investing in breakthrough technologies like carbon capture and storage (CCS) and green hydrogen, we can pave the way for a sustainable and low-carbon future, ensuring the long-term viability of heavy industry while mitigating the impacts of climate change.
Crucially, one of the most promising avenues for decarbonising industry lies in the production of green hydrogen. Hydrogen, when produced using renewable electricity through a process called electrolysis, is a versatile and clean energy carrier that can replace fossil fuels in various sectors, including transportation, industry, and heating. However, to harness the full potential of green hydrogen, Europe must scale up its electrolyser capacity, and to do that, the amount of installed renewable energy capacity needs to increase dramatically.
Take for example Hydrogen Breakthrough Ironmaking Technology (HYBRIT) demonstration project being deployed in Sweden. This will replace coal-based blast furnaces with direct hydrogen-based reduction technology. HYBRIT will thus demonstrate a complete industrial value chain for hydrogen-based iron and steelmaking. The new facility will be established for first-of-a-kind hydrogen-based direct reduction, with 500 MW fossil-free electrolysis and two blast furnaces will be replaced by an electric furnace. The project, which will The project will produce approximately 1.2 Mt crude steel annually and reduce greenhouse gas emissions by 14.3 Mt CO2 over the first 10 years of operation, was one of the first projects to be funded by the EU Innovation Fund scheme.
The promise for hydrogen technology is high, but so is the demand. Under a Net Zero scenario, power demand for Hydrogen production is close to 23,000 TWh per year by 2050 and it is estimated that 88% of hydrogen production is achieved via grid-connected electrolysers. That makes hydrogen the single biggest source of power demand globally by 2050, equal to total global demand in 2020.
Currently however, Europe’s electrolyser capacity falls short of the requirements to produce enough green hydrogen to meet the continent’s growing demand. A major bottleneck in this development is securing sufficient renewable or non-fossil energy.
Take the ambitious Green Hydrogen project being developed in the Sines port region of Portugal. The project is being developed by MadoquaPower2X, a consortium comprised of Madoqua Renewables, Power2X and Copenhagen Infrastructure Partners (CIP) and will produce 500k tonnes of green ammonia per year — one of the first such projects to produce green ammonia on this scale. Running this plant with a planned 500MW electrolyser would require 4.3TWh (if running at 100% 24/7 — the actual amount would be less than this) of energy- roughly equivalent to 2/3 the entire consumption of the city of Lisbon. So this begs the question:
How much do we need?
To bridge the energy gap, significant investments are needed to expand electrolyser infrastructure and encourage the widespread deployment of these technologies. Reaching Net Zero Emissions by 2050 requires expanding electrolysis capacity to above 230 GW by 2030, more than 200 times the installed capacity today. At the moment, the amount of committed projects falls far behind this requirement.
At the end of 2022, there was 700MW of electrolyser capacity deployed world wide, but over 230 GW worth of electrolysers has been announced to be operational by 2030 (Hydrogen Insights May 2023 — Hydrogen Council & McKinsey). Over 80GW of this has been announced within Europe, which is the single largest region, but so far only 1.5GW of this has reach final investment decision (FID). Worldwide, this figure is only 9GW.
The announced amount is in line with the Net Zero requirement for 2030 (estimated at 233GW by IRENA), but to reach the ultimate goal by 2050, this needs to increase massively to 5,722 GW of electrolyser capacity. So in one sense, it would look like the world is on course, but only is those announced projects are committed to with sufficient investment, and only is the number of projects grows significantly.
By 2050, we the world needs 35 339 GW of total installed renewable energy capacity, growing from just 2,813 GW (as calculated in 2020) (IRENA — World Energy Transitions Outlook). This means adding 1,066 GW of new renewable capacity every year until 2050.
The total requirement for electrolysers would take up around 16% of this renewable energy, however, only around 2/3 of the announced hydrogen production will be green (renewable), with the remainder being ‘low-carbon’ hydrogen (Hydrogen Insights 2023, Hydrogen Council & McKinsey).
Does it need to be renewable electricity?
The need for renewables is clearly a bottleneck in terms of electolyser deployment. Is it possible therefore to utilise other forms of energy to power the required 5,722 GW of electrolysers by 2050.
Increasing fossil fuel usage is clearly not an option here is we want to lower emissions, but there are two others — carbon capture from natural gas plants, and nuclear. Carbon capture of otherwise grey hydrogen (that is hydrogen produced with natural gas) would be termed blue hydrogen. This option is less than optimal, as rates of carbon capture can be low, and fugitive emissions from the natural gas process means that significant amounts of GHG are still emitted, but the IEA estimate that by 2050, 38% of low-carbon hydrogen production will still be produces through natural gas with CCUS (Net Zero by 2050 — A Roadmap for the Global Energy Sector). Although blue hydrogen has been touted by some as greenwashing, it appears to be a necessary step especially in the short term transition of many hard-to-abate industrial sectors as we have discussed here.
Nuclear power is seen by many as one of these essential tools in reducing emissions, but as a dangerous alternative by many others who don’t want to see the focus and investment drain away from other renewable energy sources. In terms of practicality however, given the speed at which we must deploy electrolysers to decarbonise industry, nuclear remains a part of all Net Zero models and therefore remains a tool that must be used to reach these targets as we discussed in an earlier article.
The need for energy storage
Of course, along with the need for increased electricity production comes the need to store it, especially when it is being produced by intermittent energy sources such as wind and solar. Electrolysers are being developed that can handle ramping up and down of operations in response to varying power input from renewable sources, but long duration energy storage is another infrastructure development that must go hand in hand with the increased electricity production.
Increasing electricity production and expanding electrolyser capacity go hand in hand. Renewable energy sources, like wind and solar, produce electricity intermittently, and their availability does not always align with energy demand. By utilising excess renewable electricity to power electrolysers, Europe can convert it into green hydrogen, effectively storing and utilising clean energy even during periods of low demand. This process, known as Power-to-X, can help balance the grid and ensure a stable and reliable energy supply.
Power-to-X solutions however, are useful only for seasonal energy storage, not for responding to variations of hours to days without energy production. Batteries are one promising solution for this, and not the large scale lithium deployments that you might be thinking of. Long term energy storage in novel battery systems might unlock the key to more sustainable and effective renewable energy storage, to be dealt with in an upcoming article.
Final thoughts
By scaling up electrolyser capacity, Europe can unlock the true potential of green hydrogen, which not only enables the decarbonisation of multiple sectors but also provides a versatile long duration energy storage solution for intermittent renewable sources like solar and wind power. The deployment of electrolysers goes hand in hand with the deployment of renewable energy, both of with face bottlenecks and are lagging behind the requirements for Net Zero by 2050.
Government support, especially in Europe, is not sufficient and is required to de-risk these large scale projects for private investors. At the other end of the value chain, off-take commitment is also lacking, with many hydrogen off-takers unwilling to commit to ‘green premiums’. Even once this demand is firmly in place, broader infrastructural changes are needed to ensure transport and delivery of green hydrogen to the off-taker.
It is a complex and daunting problem, but with the momentum picking up behind hydrogen energy, one that is no longer insurmountable, so long as the stakeholders can commit to, and deliver on their announced plans.
