Prospects for green hydrogen in the next 30 years

AleaSoft, July 21, 2021. The authorities and companies in charge of making the energy transition a reality to accomplish with the European climate objectives are increasingly aware of the important role of green hydrogen. Although there is still a long way to go in this regard, concrete steps forward are already being observed and the future is promising.

The European climate targets establish a roadmap to climate neutrality in 2050. This path mapped out for Europe has a first stop in 2030, where certain partial targets must be reached. Fundamentally, it is about reducing greenhouse gas emissions by at least 55% compared to 1990 figures. Furthermore, by 2030 at least 40% of all used energy must be of renewable origin.

Currently, the Spanish electricity sector is on the right track. More than 70% of the electricity generation during the first half of 2021 in Spain was carried out with CO2‑free technologies. However, there are other areas such as transport, industry and the domestic sector where the objective is much further away.

AleaSoft - spain generation mix first half 2021Source: Prepared by AleaSoft using data from REE

In the industrial sector, the way forward to reduce its emissions might be from its electrification. With this change, greenhouse gas emissions could be reduced by approximately 50%. This is largely due to the fact that industrial processes that depend on working with high temperatures will require alternative solutions, since the generation of very high temperatures is not efficient from electricity. It is precisely in that other half of the emissions to be reduced where the solution might be the use of green hydrogen in the industry, either directly or through other synthetic fuels that can be obtained from green hydrogen, such as green ammonia.

In this sense, at the European level what is proposed is the installation of electrolysers for the production of green hydrogen, until reaching a capacity of at least 6 GW in 2024, that it increases to at least 40 GW in 2030 and finally, in 2050, it should have the capacity to produce hydrogen in such a way that the demand is fully covered. Regarding the production figures, it is hoped to reach one million tons in 2024. In 2030, the production should be at least 10 million tons and, in 2050, producing all the green hydrogen that is necessary to cover all the demand for this gas.

Specifically in the Spanish case, the goal for 2030 is having electrolysers with a total capacity of 4 GW. At least during this initial stage of the large‑scale deployment of this technology, the electrolysers should be located close to the consumption points, industries or recharging points of vehicles that use it as fuel. This limitation is due to the fact that there would not yet be a sufficiently developed distribution grid.

A clear example of the will to achieve this goal in Spain is the green hydrogen plant that Iberdrola is building in Puertollano (Ciudad Real). This facility will have a 100 MW solar photovoltaic energy plant, a 20 MWh Li‑ion battery system and a 20 MW electrolyser that to date will be one of the largest green hydrogen production systems in the world. It is estimated that the operation of this plant will avoid the emission of 48 ktCO2 per year and the produced hydrogen will be used in the ammonia factory located in the same town.

This hydrogen factory will be the largest in the country, but not the only one, Endesa recently announced that it increased its investment in the hydrogen project of As Pontes (Galicia) and Naturgy is also studying electrolysers projects to generate hydrogen from renewable energies.

In this way, Spain intends to cover at least a quarter of its industrial hydrogen demand with green hydrogen in 2030. Also in the transport there will be an increase in demand with the incorporation of between 150 and 200 fuel cell buses, between 5000 and 7000 light and heavy vehicles, also with hydrogen fuel cells, and from 100 to 150 public access hydrogen stations to refuel. Another application in transport that is intended for this date is the installation of hydrogen‑powered trains on, at least, two mid and long‑distance commercial lines that currently do not have electrified tracks. This mode of rail transport already has success stories in Europe, such as the case of the Coradia iLint in Germany, which has a range of 600 km to 800 km and reaches speeds of 140 km/h. These goals in the transport sector are still considered poor at AleaSoft, however, they represent a good starting point that will probably be exceeded.

AleaSoft - hydrogen train coradia ilintCoradia iLint hydrogen fuel cell train

In addition to this direct demand for hydrogen, it will also be used as an energy storage system and as an alternative for times of overproduction of renewable energy.

Moving forward to 2050, green hydrogen, as previously mentioned at AleaSoft, will be the fuel par excellence. And not only because of its environmental impact, but also because Europe is currently a net importer of fossil fuels. If all this fuels demand is satisfied with green hydrogen produced in Europe, imports worth billions of Euros per week would be replaced.

In the analyses carried out at the European level, estimations of the variables are made considering a linear advance towards the set objectives. However, at AleaSoft, a more exponential behaviour is expected. It makes sense to expect that the behaviour of the energy transition will be similar to that of the assimilation of the information and communication technologies, so it should not be surprising that the set objectives are achieved a few years before the current deadline.

Thus also, to the extent that its production is on a larger scale, the green hydrogen production cost will reduce. This factor is important because, just as electricity prices currently have a strong dependence on gas and CO2 emission rights prices, the dependence of the electricity markets prices on the hydrogen prices will gradually increase.

In this way, hydrogen will influence electricity prices doubly, on the one hand as a technology for storing and generating electricity from fuel cells, and on the other, as a floor for electricity prices, by taking advantage of hours with low prices in the market to produce green hydrogen with electrolysers.

This topic and others of interest for the energy sector were discussed by Oriol Saltó i Bauzà, Manager of Data Analysis and Modelling, and Alejandro Delgado, CTO, both from AleaSoft, in the webinar held on July 15 and of which the recording is available. The next webinar organised by AleaSoft will take place on October 7 with the title: “Energy markets in the recovery from the economic crisis one year later”. On that occasion, speakers from Deloitte will be present and the registration period is already open. The main topics to be discussed will be the year‑on‑year analysis of the evolution of the European energy markets, the prospects for the recovery from the economic crisis, the renewable energy projects financing and the importance of the electricity markets prices forecasting in audits and portfolio valuation.

There is no doubt that the current situation of the energy markets prices is worrying for consumers and that it may put the recovery from the crisis at risk. However, beyond the alarming headlines of the current behaviour of the markets, the fundamental element for decision making must be the forecast of the market trend in the mid and long term. Given the growing need for this information, AleaSoft is offering a special promotion of long‑term prices curves forecasting reports, with a 30‑year horizon, confidence bands and hourly granularity. These forecasts are made for most European markets, including those that show very attractive opportunities in the field of renewable energies, such as Poland, Greece, Romania or Serbia.

Source: AleaSoft Energy Forecasting.
Long term forecasting

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