Expert Interview – "We Have Now Already Achieved Fossil Parity"

Expert Interview – 08, November 2022

Christopher Hebling is division manager for hydrogen technologies at the Fraunhofer Institute for Solar Energy Systems ISE. In an interview with The smarter E, he gives an outlook on a future hydrogen economy and says why a climate-neutral energy supply will not succeed without hydrogen.

Mr. Hebling, hydrogen has been a topic of discussion for quite some time and has been hailed time and again as the savior of our energy supply. What is different now than 10, 20, 30 years ago? Why should it really start now?

Today, we have completely different omens as far as the global energy system is concerned. There are many reasons why it will become very important to have hydrogen as a component in the future energy system. One reason is that 194 countries around the world have committed to emit no more CO2 than they absorb from the middle of the century. Another reason is that energy sovereignty, affordability, and climate and environmental protection will only be possible with hydrogen as an energy carrier.

We have now entered an age in which green electrons will clearly be the backbone of future energy supply, i.e. electricity produced from photovoltaics and wind, which can be used wherever it makes sense and, above all, wherever it is appropriate in terms of time and place. Nevertheless, there are gaps due to the fluctuations in energy production with the seasons. These gaps can be filled by a synthetically and sustainably produced energy carrier. And that will be hydrogen.

One criticism is the efficiency of green hydrogen because it takes a lot of energy to produce hydrogen. And a lot of energy is lost again when it is converted back into electricity. Currently, only about half of our electricity comes from renewable sources. Does it then make any sense at all to talk about producing hydrogen from green electricity right now?

Yes. You have to know that electricity applications account for about 20 percent of primary energy consumption in Germany. By the way, this is also the case in most economies. 80 percent of energy use, i.e. in heating, transportation and industrial applications, is currently covered by molecules such as natural gas, oil or coal. In other words, if we have 100 percent green electricity in the grid, and we can achieve that in Germany, it will take another ten years, maybe a little longer. But then we will still only have fulfilled one fifth of the task. The other 80 percent is currently dominated by oil, gas and coal. And that means we first have to transfer electricity to the sectors that have electrical consumers. Like, for example, the batteries in an electric, road-based mobility in the passenger car sector. In the heat sector, it's the heat pumps. That is achievable. But there is also a lot that is not achievable, such as, from our point of view, very clearly freight road transport, which is the domain of refuelable systems, such as trucks or ships. And air traffic is also clearly part of this.

Until we also cover these applications with electricity from the sun and wind, it will take even longer than just supplying the current electricity sector with green electricity. So generating hydrogen from renewable electricity would not be possible for quite some time.

Today, we cover just over 70 percent of our energy supply with imports. And that is from oil, gas and coal. And we know the current problems around that. This means that it is definitely a goal to expand renewables even more in Germany. Nevertheless, we can roughly say that about half of the energy sources in Germany will continue to be imported in the future, and Europe will also remain an import region for energy sources. These imports can also only take place via hydrogen or hydrogen derivatives. That is, products that result from green hydrogen and another molecule, as in the case of nitrogen, where you get ammonia when you combine it with hydrogen, or a CO2 source, from which you can produce methanol or longer-chain hydrocarbon molecules. In this way, one can also synthesize substitutes for diesel and other energy sources.

Until now, green hydrogen has been much more expensive than hydrogen produced from fossil fuels. That has changed in recent months due to the sometimes extreme rise in the price of fossil energy. So will green hydrogen become competitive in the future?

You have to know, pricing is volatile. We're seeing that at the moment. A megawatt hour of natural gas was $20 at the beginning of last year. In the meantime, it was at $340. Now the price is back at $100. That means we can't actually predict at the moment how the price of natural gas will develop. That also means that the price of hydrogen from steam reforming cannot be predicted at all at the moment. So volatility is one thing. The second is that hydrogen produced from steam reforming, i.e. one ton of hydrogen produced from natural gas, emits ten to twelve tons of CO2 into the atmosphere. If the price of CO2, which is currently around 40 dollars, then rises to 50 or 100 dollars, it will no longer be possible to do this because it is far too expensive to emit ten tons of CO2 if you want to have one ton of hydrogen.

When we reach that point, we'll have what's called fossil parity, that is, the parity of greens versus fossil technologies. And on the electrolysis side, we expect a significant reduction in the cost of electrolysers as a result of economies of scale. Efficiency is already over 70 percent. Incidentally, renewable energies will also continue to become cheaper. In Saudi Arabia, the cost price of green electricity from photovoltaics is now around one cent per kilowatt hour, while onshore wind is around two cents. And it is expected that next year these countries will even fall below the one-cent mark. So if you do your maths, we've already reached this fossil parity point.

Wouldn't now be the ideal time to build up capacities in such countries?

A solar and wind farm of four gigawatts is currently being built in Saudi Arabia. This will be coupled with an electrolyzer of 2.2 gigawatts - by the way, using alkaline electrolysis from ThyssenKrupp in Germany. This will be used to produce hydrogen, which will not be exported as hydrogen. Instead, a subsequent synthesis process will be carried out by taking nitrogen from the air and synthesizing it with hydrogen to produce ammonia. And that, in turn, will be exported to Rotterdam in just over two years, at the end of 2025.

Why can't we in Germany and Europe produce the hydrogen ourselves, here where it is needed? Decentrally, perhaps in smaller portions and with domestic renewable energy?

In Germany, we now have about 50 percent green electricity in the power grid. That is already a great achievement for Germany. But we see that in winter, neither wind nor sun is sufficient for a stable power supply. Even if we had twice as large or three times as large capacities in Germany, it still wouldn't be enough. That means we need storage, seasonal storage, and we need to make sure right now that the sectors that can't be reached by electricity get sustainable molecules for their energy supply. In other words, this is not something that competes, but something that is needed in addition. For that, in any case, we have to ramp up renewables as fast as possible. So we will see much, much more photovoltaics in the next years and decades as well as wind onshore. But that still won't be enough.

However, there are also regions in Germany, especially in rural areas, that are actually already moving towards 100 percent renewables. They have a few wind turbines and large photovoltaic systems on their barns or open spaces. In addition to biomass, such energy communities need an energy source that can be used for refueling, for regional mobility, and as a seasonal storage facility to stabilize the grid. That means we will soon see large electrolysers in such regions, in the 10 to 100 megawatt range, perhaps. But the beauty of PEM electrolysis is that it can be controlled very quickly. That means PEM electrolysers installed at grid nodes can stabilize the grid as a load. On the one hand, you can ramp these electrolysers up from 100 to 200 percent nominal capacity, and on the other hand, you can regulate them down to 10 percent, depending on whether you have too much or too little power in the grid.

Speaking of the United Arab Emirates, it was recently announced that your institute will be working on the hydrogen roadmap there. Can you say more about this already?

The history so far has not been entirely unusual for Arab countries. There are long negotiations and when one has come to a conclusion, the results are expected the next day. We are in this transitional phase. The contract was awarded about mid-October ago. Chancellor Scholz was in the region and was able to announce the cooperation there as well. The results will be ready by the turn of the year.

We keep hearing that Germany is to become the lead market and lead supplier for green hydrogen technologies. What exactly does that mean?

Well, a lead market is first defined by early demand, by a domestic industrial base and also by lead suppliers. These are those who already offer products that will either be imported or exported in large quantities in the future. I believe that we in Germany also have a special position within Europe due to our early energy policy. The energy transition is a bit of a German invention. We can be proud of that, because we really have invested billions in these technologies through the Renewable Energy Sources Act. Around 300 to 400 billion euros in the last 20 years. And Germany is already trying to become the lead market for hydrogen technologies.

What does that look like in concrete terms?

On the one hand, we have a fantastic industry that also pays for all these required technologies. We have excellent conditions for electrolysers, also for fuel cell technologies, but also for the customers, i.e. the entire steel industry, ThyssenKrupp, Salzgitter and others. BASF is also interested in large quantities of hydrogen or needs it to achieve its own CO2 targets. The preconditions for Germany as a lead market are very good, and politicians also have the topic of hydrogen as one of the key technologies for the transformation of the energy system definitely on their radar screen.

A good example of this is the H2Global foundation initiated by the federal government, whose goal is to establish the aforementioned fossil parity. To this end, a double auction system is to be used to bring together supply and demand for green hydrogen by means of a price equalization. A fund with currently four billion euros is available for this purpose. This instrument will probably soon be adopted by the EU Commission for all of Europe to fuel the market.

What is happening at European level? Is a German lead market integrated into the European single market or do Europeans face each other as competitors?

The EU Commission has also just quadrupled its ambitions for green hydrogen through the Repower EU program. That means that by the end of the decade, which is now a good seven years away, the hydrogen market in Europe should rise to 20 million tons, of which 10 million tons will be produced within Europe and 10 million as imports outside Europe. So that's a huge number. And in this respect we are not alone, but really well coordinated, also with our European partners.

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