Industry leaders urge realism in green hydrogen push
Hydrogen and its derivatives will have a critically important role to play in accelerating the energy transition but policymakers need to be more realistic given that many of the technologies are still in their infancy, energy industry leaders from the Middle East and Europe said Sunday at a special meeting of the World Economic Forum in the Saudi capital Riyadh.
"The market is a challenge," UAE energy minister Suhail al-Mazrouei said. "There is development of the market, but are we there yet? No. At the same time, are we serious about our production? I would say yes. It's between planning something, and getting the result you are aiming for."
The UAE is planning to produce 1.4mn t/yr of hydrogen by 2031, more than 70pc of which will be green hydrogen, al-Mazrouei said. In the longer term the country aims to build its hydrogen capacity to 15mn t/yr by 2050.
"Clean energy is something we decided to venture into 17 years ago when we began investing in the likes of [UAE state-owned renewables firm] Masdar and started thinking about what would happen after we export the last barrel of oil," UAE energy minister Suhail al-Mazrouei said. "What we did first is regulate and put a strategy of how much to produce."
Al-Mazrouei's Saudi counterpart, Prince Abdulaziz bin Salman, voiced similar concerns. "We don't mind partnering with everybody… With the Koreans, the Japanese, our friends the UAE… but there are challenges," he said. "There is a lack of clarity on the policies, a lack of clarity on the receiving or consumer end, a lack of clarity on the incentives and a lack of clarity around what it takes to develop these technologies."
Arguably more prohibitive is the "economics" of new energies such as hydrogen, he said. The cost of green hydrogen today is "between roughly $250-300/bl of oil equivalent," Prince Abdulaziz said. "What kind of a business acumen would choose to buy at $250-300/bl?"
Al-Mazrouei agreed that costs are too high. "We cannot just treat the consumers as if they are ready to just pay double or triple the price [of conventional energies today]."
Let's be serious
The EU has set ambitious targets on renewable hydrogen. In 2022, the bloc doubled its 2030 production target to 10mn t/yr, from 5.6mn t/yr previously, and it is also working towards a separate pledge to import another 10mn t/yr by the same date.
The production target is an unrealistic goal, according to the Saudi energy minister. "Those projects that have crossed the finishing line only come to 400,000t ꟷ around 4pc of the target," Prince Abdulaziz said. "How is it conceivable that in 2024, only 4pc has been achieved? How can people imagine that 10mn t/yr can be achieved?"
TotalEnergies chief executive Patrick Pouyanne, who was speaking on the same panel, was even more blunt in his assessment, describing the EU's target as "impossible" and "not in reality".
"Let us recognise that we are still at the infancy stage, and stop speaking about 10mn t, 20mn t, just to the media. It makes no sense," Pouyanne said. "Let's just be serious about it and find the right roadmap. Yes, we probably won't reach our target by 2030, but that's not a problem. It's more important to take steps and spend the money economically, to give them affordable and clean energy."
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Japan’s Idemitsu invests in US e-methanol producer HIF
Japan’s Idemitsu invests in US e-methanol producer HIF
Osaka, 13 May (Argus) — Japanese refiner Idemitsu is investing in US synthetic fuel (e-fuel) producer HIF Global to develop a supply chain of e-methanol, as part of a strategy to achieve net zero emissions by 2050. Idemitsu said on 13 May that it has agreed to spend $114mn to secure an undisclosed stake in HIF after the US firm issued new shares. HIF is expected to produce around 4mn t/yr of e-methanol equivalent by 2030 at its production sites in Australia, North America and South America. E-methanol is typically made from green hydrogen and carbon dioxide (CO2). This is used as an alternative bunker fuel and as a feedstock for synthetic fuels, including gasoline, sustainable aviation fuel (SAF) and diesel, as well as synthetic chemicals. Idemitsu is focusing on e-methanol, along with blue ammonia and SAF, as its investment targets to achieve net zero by 2050. The company aims to set up 500,000 t/yr of e-methanol supplies in domestic and overseas markets in 2035 by using its existing oil supply and sales networks. The target includes unspecified volumes from HIF, possible production in the Middle East and domestic output, Idemitsu said. The deal follows Idemitsu's initial agreement with HIF in March 2023 to work on production and promotion of e-fuels, along with a decision to buy e-methanol from HIF and jointly study the possible development of the fuel. Idemitsu also agreed an initial deal with HIF and Japanese shipping firm Mitsui OSK Line to explore opportunities to develop an e-fuel and e-methanol supply chain between Japan and where HIF's e-fuel and e-methanol production plants are located, including CO2 transportation from Japan to HIF's production sites. By Motoko Hasegawa Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Spanish ceramics sector worried about H2 supply, cost
Spanish ceramics sector worried about H2 supply, cost
London, 10 May (Argus) — Supply limitations and high prices of renewable hydrogen will pose a challenge to the Spanish ceramics sector's decarbonisation goals, according to an industry association. Companies in the sector are mulling the use of renewable hydrogen in their operations, "but it is a real challenge because of the volume that we need and the cost", the general secretary of Spain's association of ceramic tile and flooring manufacturers (ASCER), Alberto Echavarria, told Argus . The industry currently consumes around 15TWh/yr of natural gas, accounting for nearly 10pc of Spain's industrial gas demand. This would equate to around 380,000 t/yr of hydrogen, based on the higher heating value of 39.39kWh/kg. And it would not be far off the 500,000 t/yr of conventional hydrogen made from natural gas with unabated emissions that Spanish industry as a whole consumes currently. Making 380,000 t/yr could require some 4GW of electrolyser capacity for the ceramics industry alone, equivalent to over one-third of Spain's 2030 target of 11GW . In any event, existing technology can support no more than 10pc hydrogen blending in the kilns, Echavarria said. ASCER is in talks with kiln manufacturers developing hydrogen-ready ovens, but these are in a testing phase and are not expected to be available at industrial scale in the near future. Alternatives for decarbonisation are thin on the ground. Electrifying operations is not a viable option, Echavarria said. While some parts of the ceramic production process can run on electricity, the industry ovens, known as kilns, fire at temperatures reaching 1,200°C, which are much too high for electricity. And the kilns represent 50-60pc of the sector's energy consumption, according to Echavarria. Another alternative would be to use biomethane or e-methane, at least until hydrogen-fired kilns reach industrial scale. This approach would require minor modifications in facilities and would allow them to continue using the current infrastructure and distribution system. But biomethane is also only available in small volumes, and making e-methane requires electrolytic hydrogen, raising the same issues over supply availability and costs as direct hydrogen use. Net emissions could also be reduced by implementing carbon capture technology but this would be even less cost-competitive, Echavarria said. It would require mechanisms to concentrate CO2 molecules at a focal point, which is an expensive undertaking, he said. Piping hot Future hydrogen use for ceramics production would depend on connections to a hydrogen pipeline system. Spain's ceramics industry, which is the largest in Europe, is mainly concentrated in Castellon, where more than 150 facilities are based. It is not practical to "have 150 electrolysers" and produce locally, Echavarria said, not least because the plants would need round-the-clock hydrogen supply to maintain the high temperatures. ASCER has been collaborating with Spanish gas system operator Enagas on plans for the development of the Spanish hydrogen backbone to ensure access for its companies, he said. Firms have also looked into sourcing hydrogen via trucks, according to Echavarria. But this would require storage facilities, raising costs and safety concerns. By Pamela Machado Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Norway urged to follow EU laws to ensure H2 exports
Norway urged to follow EU laws to ensure H2 exports
London, 10 May (Argus) — Norway has extremely favourable conditions for renewable and low-carbon hydrogen production and harbours ambitions of becoming a major exporter to the EU. But the country's hesitation to adopt EU laws could hamper the sector's development, an industry body has warned. The country has ample potential for renewables including hydroelectricity, natural gas reserves and offshore CO2 storage opportunities . Nearly 60 hydrogen projects are planned with potential production capacity by 2030 reaching 6.6GW from electrolysis and the equivalent of 5.4GW from gas with carbon capture and storage (CCS), according to data from industry body Norsk Hydrogenforum (NHF) — although it remains to be seen how many projects will be built by then. The potential for CCS-enabled hydrogen could even exceed current plans, and a proposed Norway-Germany hydrogen pipeline could eventually carry 4mn t/yr, according to a feasibility study last year, although infrastructure would be shared with other North Sea production sites. But Oslo must implement certain EU rules to maintain free trade access to the single market for Norwegian companies as it is not a member of the bloc. Almost 500 EU legal acts are waiting to be incorporated into Norway's European Economic Area (EEA) agreement with Brussels, including 65 related to energy, according to NHF secretary general Ingeborg Telnes Wilhelmsen. Norway's obligation to EU energy rules has become a political debate in the country, pitting arguments about sovereignty against single market access and leaving the hydrogen sector in limbo. "The hydrogen industry in Norway is highly international, and about two thirds of the turnover is export related," NHF has said. "Sharing the same regulatory framework as the rest of Europe is therefore important to ensure a level playing field for Norwegian companies". NHF has urged Oslo to speed up implementation of the EU's revised renewable energy directive (RED III). RED III targets for 42pc of hydrogen used in industry to be renewable by 2030 are "very demanding", but achievable, according to the association. If Norway's renewable renewable hydrogen output gets anywhere near NHF's projections, the country should comfortably meet the target and still have spare supply for exports and other domestic offtaker sectors, such as transport. Norway consumes around 225,000 t/yr of fossil fuel-gas hydrogen, meaning the target would translate to just under 95,000 t/yr, NHF has said. Certification worries Norwegian hydrogen producers could face difficulties certifying their renewable hydrogen to EU standards unless the country adopts the bloc's legal texts, NHF has warned. Compliance with Brussels' definition of renewable hydrogen should be relatively easy, because renewable power exceeds 90pc in four out of five of Norway's electricity bidding zones, thanks to the high penetration of hydropower. Producers would be free from rules on additionality, temporal and geographical correlation and would not need power purchase agreements . But the delegated act has not yet been incorporated into the EEA agreement and this complicated matters for Norwegian participants in the recent European hydrogen bank pilot auction, NHF said. The EU could theoretically even exclude Norwegian companies from the scheme going forward, if legal texts are not adopted, NHF has warned. That said, multiple Norwegian projects submitted eligible bids including developer Fuella which was among seven companies that won subsidies in the pilot . Funding schemes: you win some you lose some Access to the hydrogen bank looks particularly vital for Norwegian projects now that plans for a domestic contracts-for-difference (CfD) mechanism for renewable hydrogen have stalled. The coalition government discussed a CfD scheme with other political parties during budget negotiations last year, but they could not agree on funding, Telnes Wilhelmsen said, although she noted that there still might be a way back. "We lost the first battle about CfDs but it doesn't mean we give up," she said. Norwegian electrolysis projects can benefit from government-subsidised power prices, which has a "huge impact," one Norwegian hydrogen developer told Argus . Norway recently increased the budget for its so-called "CO2 compensation scheme," which trims power prices for its energy-intensive companies, to 7bn krone/yr ($646mn) and scrapped the price floor. The scheme aims to ensure that prices for clean Norwegian power are not unfairly driven higher by Brussels' emissions trading scheme (ETS), as Norway's electricity market is linked to the EU's. Oslo has also announced several broader support schemes for clean energy including NKr5bn for high-risk loans and grants for green industry, NKr1.5bn to reduce emissions in energy-intensive industry, and NKr285mn for zero-emission trucks. But the relevance of these for the hydrogen sector is "still unclear," Telnes Wilhelmsen said. By Aidan Lea Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Mauritanian cabinet to study H2 tax regime next week
Mauritanian cabinet to study H2 tax regime next week
London, 7 May (Argus) — Mauritania could soon pass tax laws for its renewable hydrogen sector, including several tax breaks designed to lure project developers to the windy coastline of northwest Africa. Officials are set to present the so-called "hydrogen code" draft laws to the cabinet next week, Khroumbaly Lehbib, Mauritania's project manager for the energy transition and the development of green hydrogen, told Argus . The government will then present it to parliament for approval, he said. Key terms include exemption from value added tax (VAT) and export tax for renewable hydrogen projects. Mauritania will cut import customs duties to 2pc for projects starting construction before 2030, and 4pc for projects built thereafter, compared with the standard rate exceeding 16pc. This will reduce capital costs of building materials and equipment such as electrolysers, solar panels, and wind turbines. Corporate income tax will be levied at 15pc until the project's revenue exceeds the investment costs, after which it would rise to 25pc. In the event developers earn revenues three times higher than their costs, which the government termed "super profits", the tax rate would rise to 30pc. Lehbib stressed the draft incentives are still subject to approval. Other countries in north Africa have also set out their stalls to attract hydrogen developers, notably Egypt which finalised tax breaks in January, and Morocco, which in March outlined plans for a land allocation process . Mauritania trails both of these in "ease-of-doing business" according to the World Bank's ranking system but has not struggled to attract project proposals. Mauritania would have 80GW of electrolyser capacity if all its planned hydrogen projects come to fruition, a government minister said last year. The promise of government incentives and strong renewable resources are attractive, one developer in the country said recently. Mauritania could potentially produce renewable hydrogen for $2.2/kg by 2030 , according to Paris-based International Energy Agency (IEA). By Aidan Lea Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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