Siemens Energy recently signed a partnership agreement with the International Renewable Energy Agency (Irena) aimed at advancing the global energy transition based on renewable energy.

Here Hydrogen Economist talks to Prof. Armin Schnettler, EVP and head of New Energy Business at Siemens Energy, about how he sees hydrogen’s role in the energy landscape going forward. 

How has the energy transition landscape changed in recent years and does green hydrogen have a role to play in our decarbonised future?

Schnettler: The past decade has seen massive growth in the generation of renewable energy as the world seeks to mitigate the ravages of climate change. The path to a zero-carbon future is the most significant transformation in energy technology that the world will have seen in the last few centuries. It is apparent that, if we are to achieve our overall decarbonisation goals, greater integration is required.

€2/kg – Current cost of grey hydrogen production

One of the most effective strategies is to use renewable electrical energy from the power sector to decarbonise energy across all sectors. Why? Because it will unlock enormous environmental and business benefits. However, if hydrogen is to succeed, there must be support in the areas of finance and regulation to ease it past the early-adopter stage.

As the energy transition moves forward, green hydrogen will eventually be responsible for at least half of global energy consumption. The good news here is that grey hydrogen—derived from natural gas—is already a proven technology. For green hydrogen, currently, production is still from small- scale pilot projects.

The next stage is to scale up green hydrogen production to triple digits. An efficient 100MW class electrolyser has never been built before, either for proton exchange membrane or the traditional alkaline electrolysers. The challenge is similar to the scaling up and cost reduction requirements faced by the wind and solar sectors several decades ago. Siemens Energy was involved in that evolution, and we know how to make it work. The question is, how fast can we make it happen, and how fast can we scale up production into the GW range?

Can government accelerate the development of green hydrogen and stimulate demand?

Schnettler: Yes, the answer definitely lies in the hands of regional and national governments, who must shape the energy landscape in such a way to both create demand while supplying some short-term support to the hydrogen sector as it scales up. The strategic focus of all national plans is undoubtedly moving in the right direction to facilitate the growth of hydrogen. However, many initiatives will be required to make it a reality—not just small-scale projects, but also large-scale applications. The first task for governments and regulators is to set the correct production quotas in order to stimulate market demand.

Germany is one nation that has put a broad-based strategic plan in place, and the government is helping us to develop the technology with research funds and programmes. This will allow us to export the technology and, at the same time, e.g. through the H2 Global Foundation, import green hydrogen and derivatives from other countries into Germany. This foundation will cover the price and time risk in selling green hydrogen. This will help by stimulating the market and developing the technology in parallel.

Public concern about climate change is putting a lot of pressure on politicians, and it is the politicians that will bring regulations into law. We need governments to facilitate the funding for the early-stage development of the technology so that the risk for early-adopter pioneers is removed. It is well known that the technology is always more expensive in the formative years with respect to both reliability and cost. With all innovation, the second or third movers have the advantage of lower costs and higher reliability, so we need the funding for first-of-its-kind applications. The money is there, at least that is what we are told, but now that funding must flow.

Can the cost of green hydrogen ever be competitive?

Schnettler: The current cost of green hydrogen is too high and needs to be reduced. It is significantly more costly compared with the current grey version. Grey hydrogen is already available in large volumes and sells at around €2/kg ($2.4/kg). The target for green hydrogen in countries and regions with optimum conditions such as Chile, the Middle East, or Australia, should be below the €2/kg threshold by the middle of the decade. Green hydrogen will become competitive by that time in those locations, but that will not be the case for production facilities located in Germany or in Central Europe. This is because electricity costs are higher, and the operating hours of these plants are lower.

“As the energy transition moves forward, green hydrogen will eventually be responsible for at least half of global energy consumption”

One of the prime legislative levers is the EU’s Renewable Energy Directive, which is effectively stimulating demand. One way to accelerate that demand is to insist that industry utilises a certain percentage of hydrogen or its derivatives in their fuel mix. This is like the automotive sector with the E10 fuel that mandates 10pc of bioethanol in the mix. In the future, it should be an M5 or M10, which will include up to 10pc of green methanol as a part of the fuel. The German and European governments are already setting quotas for different products for use in ships and aircraft.

A crucial fiscal lever in stimulating the hydrogen economy is the CO₂ tax on fossil energy. This is something that has been discussed and elaborated on at a global level, with everyone recognising its importance. It will ensure that fossil energy is more expensive, which will stimulate the demand for green energy. This increased demand will create an urgency to develop green technologies that will lead to a reduction in costs.

Has the age of green hydrogen finally arrived?

Schnettler: One thing I am certain about is that this will not be another false dawn for hydrogen. We have already experienced several ‘hype’ cycles for hydrogen over the past decades, but the time was not right, and the technology was not sufficiently mature for the potential of the fuel to be realised. What is different now from previous incarnations is that the preconditions are different. First, it is all being driven by public pressure, which is a crucial element in the development of any green technology. Then there is the vast amount of very cheap green electricity available today that is only set to expand. That spare green electricity is the key to the cost-effective production of green hydrogen.

We are certain that the green hydrogen economy will gain momentum, but the question is where it will be. Will it be in Germany? Will it be in Europe? Yes, but on a small scale, probably starting with a few GWs. On a global scale, it will be in areas or in regions where abundant green electricity is at a low level of cost and surplus to the requirements of the electric grid.

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Author: HE staff