By Mr.J 2019-11-27 13:58:24
Main conclusions and recommendations
1. Priority should be given to starting the industrial hydrogen economic layout
The EU's goal is to achieve carbon neutrality by 2050. Various fields in today's society with different energy densities-industry, transportation, agriculture, residential applications-are driven by either electronics (electricity) or molecules (heat generated by burning different types of fuel from coal). At present, several important measures have been taken to reduce carbon emissions during power production, but the production of molecules is still highly dependent on fossil fuels. This is problematic, and as most models predict, molecules will continue to play a significant role in providing energy to our economy.
The technical route to providing carbon-free molecular energy is limited. Hydrogen is the only molecular-based energy carrier that can be completely free of carbon. Green hydrogen can be produced using renewable electricity or nuclear power, and blue hydrogen can be produced from fossil fuels and capture and store carbon dioxide byproducts (carbon neutral). This allows products such as synthesis gas, biomethanol, and ammonia to use carbon neutral hydrogen as a raw material for production. In short, hydrogen will play an important role in the EU's carbon-free plan by 2050.
Hydrogen is an energy carrier with many potential applications in many different economic sectors. It can help us decarbonize the production of energy consumed in areas such as transportation, residential environments (especially heating) and industrial production. This report focuses on industrial applications and draws relevant conclusions. There are two reasons why industrial hydrogen economy development should be prioritized:
First of all, not all industrial production processes can be driven by electricity, and many need carbon neutral energy carriers to completely decarbonize industrial production. Hydrogen is just one of the very few substances that can be used for this purpose. In addition, hydrogen and its derivatives have become key raw materials in many industries, especially in chemical production and refining. So far, industrial applications are the largest consumer of hydrogen. Our analysis and case studies (see Chapter 2) show the wide range of applications of hydrogen, such as the use of hydrogen to power industrial processes (such as high temperature heating). In all of these applications, hydrogen has great potential as a carbon-free alternative in replacing carbon-based processes.
The second reason is that industrial activities are conducive to the rapid development of hydrogen energy in other fields. It is one thing to claim that hydrogen is the most promising molecular-based energy carrier, and it is another to achieve large-scale, low-cost production. The scale of hydrogen energy required to truly reduce the cost of hydrogen production is large. In industrial applications, a small number of larger companies produce a larger share of hydrogen, which is sufficient to influence and promote the use of hydrogen. This is an advantage over transportation or residential use. In general, the stakeholder landscape in the transportation and household sectors is more fragmented. Finally, there is already a wealth of hydrogen-related expertise and infrastructure in various industries.
2. Many industrial hydrogen applications are currently facing the "Valley of Death"
The hydrogen produced in the industry is still mainly carbon-based (gray hydrogen), which is usually produced by steam methane reforming (SMR). Over time, the challenge for hydrogen production will be to implement carbon-free or carbon-neutral (green or blue hydrogen) technologies to replace these methods. These technologies include the use of renewable electricity to produce hydrogen through electrolysis or the recycling of carbon to produce syngas that can be used as a synthetic fuel.
Many such carbon-free or carbon-neutral technologies are still in the early stages of technological maturity. They have been technically validated and are implementing small-scale experiments; at present, these technologies are urgently needed to be promoted and applied on a larger scale in order to help reduce production costs and generate economic benefits. In other words, these technologies belong to what the economists call the "valley of death" of the technology curve.
We have modeled the economic feasibility of using electrolysis as a carbon-free alternative to SMR (see Chapter 3), and the results show that electrolysis may be economically feasible around 2030. This is based on the assumption that an ambitious cost reduction strategy is adopted, which is reasonable compared to the amazing cost reduction rate of offshore wind or solar photovoltaic power generation.
In any case, there are few positive business cases for large-scale deployment of green hydrogen. Reducing costs and technological progress require a longer period of time. It is expected that by 2050, we will still need a large number of energy carriers in the form of molecules. Although we set ambitious 2050 carbon neutralization goals, it is difficult to achieve the goals according to the current development route. In order to ensure the large-scale promotion of carbon-neutral hydrogen applications from 2030 and achieve green hydrogen by 2050, we need to take immediate action.
3. Blue hydrogen can reduce emissions and promote the establishment of a hydrogen energy economy
This report believes that the achievement of a carbon-free economy by 2050 is likely to require hydrogen-based technologies, and industrial applications are the "main battlefield" for starting a hydrogen economy. However, most of the hydrogen produced in current industrial production is not carbon dioxide neutral, as it is mainly derived from fossil fuels (gray hydrogen is formed). It will take at least a decade for green hydrogen to replace gray hydrogen on a large scale.
Blue hydrogen obtained by capturing and storing carbon dioxide emitted during manufacturing provides a way to reduce emissions faster. Our model studies show that SMR with carbon capture and storage (CCS) is approaching the level of commercial application. If the carbon trading (ETS) price rises to around € 30 / ton and proper transport and storage facilities can be built, blue hydrogen may become a viable option in the coming years instead of decades.
Therefore, using CCS to make carbon neutral for SMR-based hydrogen production can help to significantly reduce industrial carbon emissions in a timely and cost-effective manner. Equally important, blue hydrogen helps prepare for a green hydrogen economy. If the transition from gray to blue allows for more hydrogen to be produced and used, then critical infrastructure and supply chains for the industrial hydrogen economy can be established, such as the development of hydrogen transport networks (pipelines, ports, ships, etc.). This is particularly important given the complexity of synergies and symbiotic interconnections between different industrial sectors.
From this point of view, blue hydrogen is not a substitute for green hydrogen, but a necessary technological transition that has additional benefits-if done properly-
Can accelerate the transition of society to green hydrogen. However, in order to make blue hydrogen production realistic, governments must clarify their social acceptability, develop a transport and storage price system, and include it in fiscal plans to support low-carbon technology development when necessary.
4. The government needs to promptly advance the hydrogen energy market and technology
We analyzed the barriers to investment in hydrogen energy (see Chapter 4). The first obstacle is that blue hydrogen and green hydrogen are overpriced compared to most other forms of energy. From an economic perspective, the negative externalities of carbon dioxide are insufficient in terms of energy market prices. The transition to green hydrogen energy and the development of renewable energy is one of the important measures to promote carbon dioxide emission reduction, which will produce significant socio-economic benefits, but this has not been fully monetized in the energy market and socio-economic, resulting in blue And green hydrogen energy market is not enough to pull.
To remove this obstacle, policymakers should ensure that carbon trading prices fully reflect the negative externalities of carbon emissions. The establishment of a stable European emissions trading system (ETS) is essential, and at the same time it should guide the formation of a reasonable price trajectory. Fearing to distort the level playing field in their industrial sectors and avoid sending distorted price signals to international energy markets, governments are hesitant to introduce carbon pricing. In addition, good additional effects of green or renewable hydrogen should be recognized. Policymakers can consider establishing green or renewable hydrogen markets in a similar way to stimulating the green power market.
The second obstacle is that the green hydrogen technology is currently facing the "valley of death" dilemma in the technology curve. We believe that hydrogen applications should ultimately make full use of its advantages and compete with other alternative technology solutions involving molecular energy carriers and pure electricity. However, as many examples in history show, there are good socioeconomic arguments for temporarily assisting a particular technology across the "Valley of Death." On the one hand, learning and innovation have a lot of positive externalities
-The experience of offshore wind power shows that targeted policies aimed at increasing installed capacity and scale can significantly accelerate the pace of cost reduction. Finally, the government's risk of damaging its reputation by choosing a loser is relatively small, as carbon neutral targets are clear by 2050 and there are few alternatives to industrial hydrogen.
In view of these factors, it is obvious that it is necessary to seek public financial support for a period of time, especially for project demonstration with the help of stable financial support. Public institutions can also adopt the method of co-investment entities (such as the PPP model). This will help the authorities fulfill their commitments while sharing risks and returns with social capital.
5. Develop effective action plans to promote collaboration and reduce risk of uncertainty
The third obstacle to industrial hydrogen energy investment is the uncertainty of key drivers in the business case. To a large extent, these uncertainties are related to government intervention. One example is the uncertainty surrounding the regulation and ownership of hydrogen transport. On the whole, there are still uncertainties in terms of achieving the 2050 carbon reduction target and the speed of decarbonization based on molecular energy carriers.
One way to reduce this uncertainty is to draft a hydrogen energy development strategy that specifically studies and articulates clear development goals and action plans for supranational collaboration. This strategy will further clarify the commitments of each country, thereby reducing the risks associated with industrial hydrogen investment. In addition, the strategy should propose regulatory and ownership models. The construction of infrastructure supporting transportation and storage may encounter difficulties in market promotion. The strategy should therefore also include guidelines on how the authorities intend to respond to these issues.
The fourth obstacle is the lack of coordination. Case studies have shown that hydrogen projects often involve multiple stakeholders, sometimes even very different stakeholders, and often involve relatively complex, connected supply chains, which are determined on a case-by-case basis. Governments can help coordinate this, for example in space planning policies. Another area where coordination is needed is between EU member states. Differences in member states' policies related to carbon trading pricing, fiscal policy or infrastructure use may lead to inefficiencies or even inefficiencies, for example, there is a risk that carbon emissions will only be spatially redistributed rather than reduced. This is especially important in the global market represented by Europe and highly competitive industrial activities. Energy and industrial policies should be coordinated to create a level playing field in which the best technologies are selected and applied in the most meaningful areas.
If these conditions are met, the evidence involved in this report suggests that by 2050, a thriving carbon-neutral economy in Northwestern Europe is expected. The energy structure needed to fuel a carbon neutral economy will eventually consist of molecules and electrons. Hydrogen energy will follow the path from gray to blue to green and become the most productive technical solution to play the role of carbon neutral molecules.