Germany's Federal Ministry for Economic Affairs and Energy has put out a tender call for the testing and development of offshore wind paired with hydrogen electrolysis.

The tender is part of the country’s existing Wind Energy at Sea Act, which contains provisions to conduct experiments in technologies not part of the energy system in the country’s exclusive economic zone, a broad swathe of offshore real estate in Germany’s north.

While admitting the development timeline for any scalable offshore production of green hydrogen is in the very earliest stages, the ministry envisions such capabilities as being beneficial—if not critical—to the future of German industry.

“If we want to get the same amount of energy, we need two wind turbines on land for every one offshore” Franco, AtlantHy

“When we think about expanding renewable energy capacity, we are starting to find some constraints in onshore capacity,” says Brais Armino Franco of AtlantHy, a Madrid based hydrogen consultancy. “We also need to think about the value an asset provides to a system. So, offshore provides more stability of supply. We can predict it much better.” 

Franco says the main factor in Germany’s exploration of offshore wind-to-hydrogen is the stark difference in capacity factors between onshore and offshore wind. According to his analysis of data from the Global Wind Atlas online platform, Germany’s average onshore capacity factor comes in at roughly 30pc. But its offshore capacity factor is at 60pc. “If we want to get the same amount of energy, we need two wind turbines on land for every one offshore,” says Franco.

In the US, onshore capacity factors are higher by comparison, coming in just below 36pc nationally in 2020, according to the EIA. But in select states such as Texas—a giant of global wind production—the capacity factor is closer to 40pc.

Earlier this year, Berlin awarded funding to German energy company Siemens for the exploration of offshore wind-to-hydrogen feasibility via a project called H2Mare. The current tender will set auctions in early 2022, based on qualitative criteria. Winners will be then granted offshore acreage and become eligible for funding, which the ministry has set at an initial €50mn ($57.8mn).

Payback

While the cost of electrolysis remains high everywhere, it is an axiom within grid economics that the more you can maximise generation or utilisation in any 24-hour period, the more favourable the payback timelines. And high-cost electrolysers are no exception. Run them a full day rather than a half day, and their economic returns will shift dramatically.

Franco is a co-author of a recent white paper that studied the addition of hydrogen pipelines to deliver offshore-produced hydrogen and found costs could be €5.35/kg but as low as €2.17/kg “if EU support reaches its targets”.

The paper, Assessment of offloading pathways for wind-powered offshore hydrogen production, pays special attention to the capacity factor differences of offshore wind, showing that in all modelled scenarios the levelised cost of hydrogen drops meaningfully as one slides up from the mid-40s to the mid-60s in capacity factors. Franco points out that the IEA, in its recent Global Hydrogen Review, forecasts that offshore hydrogen production will eventually be cheaper than onshore.

€50mn – German government’s initial funding

Research firm BloombergNEF also estimates that offshore hydrogen will start at roughly $7/kg in 2025 but drop to $1/kg by 2050. The current high costs, with the potential for dramatic cost declines, have implications for most national initiatives from China to India to the US, which have all recently jumped into the hydrogen game with big aspirational goals.

The US may be a unique case, in this regard. High capacity factors in states such as Texas, and even higher factors in states such as Iowa and Oklahoma, may tempt the US Department of Energy (DOE) to start siting electrolysis in these areas. But the US is also kicking off a new offshore wind industry. And companies such as Avangrid have already responded to a DOE call for projects, noting that new offshore generation could be utilised to run near-onshore electrolysis.

The real test will come when electrolysis starts to emerge from a subsidised domain and has to stand on its own. The sensitivity analysis in the Franco white paper suggests offshore capacity factors will be an immovable structural advantage. If so, offshore wind-to-hydrogen is inevitable. Franco thinks Germany is making the right move. “Germany's choice of offshore is fantastic. There is huge wind capacity there, and much of the territory is only 50m deep, which will allow for rapid deployment.”

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Author: Gregor Macdonald