Christian Pho Duc on the role hydrogen can play in the decarbonisation of heavy industries

After the Sustainable Innovation Forum 2020, we caught up with Christian Pho Duc, Managing Director H2 Projects at Smartenergy, to discuss the role hydrogen can play in the decarbonisation of heavy industries.

What, in your opinion, is hindering the hydrogen economy from being a reality right now?

Green hydrogen generation cost is not yet competitive with fossil fuel based production. However, if we are seriously committed to a more sustainable future and to the emissions reduction targets, fossil fuels are no longer an option. Every ton of green hydrogen generated can help us to save roughly nine tons of emitted CO2. There is an immediate benefit but there are two important dimensions that have to be considered: scale and time. Hydrogen technology is on a very good track but scale-up is essential in order to bring down the costs. Governmental support is needed to support early adopters right now with large scale projects which will be beneficial to all following projects. This refers not only to financial support, but also to have the right policies in place, such as permitting legislation that enables a fast-track implementation; a fair CO2 pricing to encourage investments into green alternatives; clear targets and incentives for various promising use cases for Green Hydrogen to stimulate the demand side. 

How will green hydrogen help to scale up Renewable Energies? What needs to be done to ensure that can happen/be achieved?

The luckily increasing share of renewable energies is approaching a barrier due to its intermittency. Combining hydrogen generation with renewable energy sources helps to balance demand and supply. Whereas generated electrons have to be consumed immediately, hydrogen molecules and in particular follow up products such as green ammonia green methane or green synthetic fuels can be stored. As an element, hydrogen is versatile in its possibilities – as an energy carrier, storage and feedstock. Green Hydrogen will therefore play an important  role in the further energy transition by enabling large-scale renewables integration and power generation, act as a buffer to increase system resilience and distributing energy across sectors and regions. For Smartenergy, adding H2 projects to our RES portfolio is both an investment opportunity as well as a hedging mechanism to reduce the risk on pure PV and wind investments through fluctuating electricity pricing.

If heavy industries return to business as usual after the pandemic, they will account for the entire carbon budget in 2050. What industries do you think hydrogen has the biggest potential to help decarbonise? And why?

Green Hydrogen is an important opportunity for hard to abate industries which so far didn’t know how to decarbonise but are facing strict targets on the reduction of carbon emissions. It can be burned for high-grade heat in industry feedstock and used for alternative chemical reactions, what makes it competitive for industries like steel, ammonia, methanol and refining. Notwithstanding, hydrogen provides more space and energy efficiency for usage in heavy transportation than other alternatives, e.g for buses, trucks and trains, in the form of Green Ammonia even for cruise and cargo ships. Even aviation has a great potential with hydrogen on short- and mid-distances and in the form of Green synthetic fuels for long-haul flights which is crucial to overcome their pollution image and meet the upcoming emission targets.

The number of emission allowances is expected to decline significantly from 2021 onwards and CO2 emissions allowances are expected to reach prices above 50€ and beyond per ton. Some energy intensive industries, like the ceramics and cement industries for instance, are examples of use cases with urgent need for decarbonisation which will have to adapt quickly to this new reality.

The cost of renewable energy generation has decreased greatly over the last decade and the cost of electrolysers is set to decrease. How would you suggest scaling up can be supported, in order to ensure that costs actually come down?

The cost of renewable energy generation has indeed decreased dramatically over the last decade. For instance, levelized costs for utility-scale solar have dropped by 88%. A decade ago, few would have said that solar would become competitive so fast with other sources of energy, like gas for example. Today, it is the cheapest source of electricity. The main cost factors for green hydrogen are first the costs for electricity to run the electrolysers and second the electrolysers themselves. Renewable energy has a roadmap to further significant cost reductions until 2030, the electrolyser costs are set to be cut at least by half due to scaling effects and technology development until 2030. Therefore, besides government support, in order to scale up green hydrogen we need to overcome challenges in three main dimensions: off-taking, transport and legislation. Green hydrogen projects require long-term off-taking agreements, as well as the parallel development of transport logistics. Last but not least, it is important to note that hydrogen generation through electrolysis is no longer the industrial factory it used to be and therefore it should not be considered the same way. As such, the right permitting legislation has to be in place to enable a fast-track possibility for implementation, with a focus on local production.

Hydrogen will be a pivotal part of decarbonisation targets. But with many hydrogen projects still at the early stage, government support is vital. What support would you like to see governments provide in order to support early mover projects?

The earlier we make the transition, the earlier we get the outcomes from scaling. Governments can play a major role in creating a fair level playing field with the emissions trading.

We have given our feedback in the request for consultations of several EU member states, focusing on the following three points: support to hydrogen from RES only, stimulation of broad H2 demand and establishment of qualitative market targets in bi-annual steps.

We support the vision that RES should be put in the core of political will and, therefore, only hydrogen production from 100% renewable sources which create local value on a shorter time scale should be supported. Given the strong impetus for lowering carbon emissions, support schemes should not go in the direction of transition solutions. This will trigger investments into assets that are not sustainable in the long-run and result in unnecessary costs for citizens.

Moreover, provided that hydrogen production projects are challenged by the lack of reliable offtake, governments should stimulate broad H2 demand and target financial support to create meaningful anchor offtake volumes. This could be done by targeting potential offtake routes and promoting H2 in the public sector, like public bus fleets, for example.

Lastly, an ambitious trajectory with quantitative targets of each applicable market segment in bi-annual steps should be set. This will give a credible sign to market participants and notably to investors, enabling them to build up their business cases on the corresponding revenue streams. More predictable revenue streams would facilitate investments in hydrogen projects, already in the short term, and accelerate the green hydrogen path to cost competitiveness.

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