Firms are urging governments to allow the use of blue and green hydrogen to increase the amount of power produced and reduce costs, writes Rowena Edwards
As more governments commit to net zero emissions targets, momentum is gathering behind the role hydrogen could play in a cleaner energy mix. Oil companies — notably European firms that have committed to net zero targets — are joining the wave of investment, but they remain cautious, concerned about costs and how policy support might influence the sector's evolution.
Policy support in Europe seems to favour so-called "green" hydrogen — derived from electrolysis using electricity produced from renewables. The EU wants 14pc of transport fuels to come from renewable sources by 2030, and is targeting the installation of 40GW of renewable hydrogen electrolysers over the same timeframe, up from around 1GW now.
Oil companies are taking note, and investing in ventures to replace fossil fuel-derived "grey" hydrogen with its greener sibling. Shell and BP, which have been among the most aggressive oil companies in setting long-term net zero targets, are both working on green hydrogen projects at refineries in Germany — BP at its Lingen plant in partnership with Danish wind power firm Orsted, and Shell with UK electrolyser specialist ITM Power at its Rheinland facility, where a 10MW electrolysis scheme could produce its first hydrogen early next year.
Shell is also working with Norway's state-controlled Equinor and German utility RWE on the giant NortH2 wind-to-hydrogen project in the Netherlands, which aims to bring 1GW of offshore wind capacity on line by 2027 to produce green hydrogen. In Italy, Eni and Enel have joined forces to supply green hydrogen by 2022-23 to two Eni refineries that currently use grey hydrogen. In Norway, Shell, Equinor and Total are involved in the Northern Lights transport and storage project, which could help pave the way for production of "blue" hydrogen, where carbon capture and storage mitigates the bulk of emissions.
"We are at the inflection point of hydrogen," Shell chief executive Ben van Beurden told the Energy Intelligence Forum in October. "[But] it will take a long time before it comes anywhere near where our energy business is at the moment… In the long run, we have to see how big the role of hydrogen is going to be. And that depends very much on whether the world is prepared to be colour blind."
Kind of blue
That, essentially, is a plea to governments to allow blue hydrogen to be part of the world's low-carbon solutions. Focusing solely on green hydrogen would limit the amount of power that could be used to produce the fuel, but there is a "larger segment of the economy that we can tap into" if blue hydrogen is also part of the plan, van Beurden adds.
And there are also, as other oil bosses note, cost considerations. "It's very important that governments do not pick winners among green hydrogen versus blue hydrogen, but leave it up to competition to find the most cost-effective technology," Equinor chief executive Anders Opedal says.
Panellists at this month's FT Energy Transition Strategies Summit agreed that governments should bridge the gap between conventional and cleaner hydrogen, but noted that falling costs could make green hydrogen competitive within five years. Blue hydrogen represents a "business as usual" option, ITM Power chief executive Graham Cooley says, as it uses existing infrastructure and assets such as depleted oil fields for storing CO2. But they could also be a risky bet, particularly given their longer lead times. If green hydrogen costs continue to fall as expected, blue hydrogen investments could become stranded, Cooley notes, on top of which is the question of liabilities for stored CO2.
