The energy transition is a herculean challenge that is being thwarted by the world’s addiction to fossil fuels. Fortunately, the IEA had some good news recently when it announced that CO2 emissions in 2019 did not increase compared to 2018 while the world economy grew by 3 percent. The unexpected stabilization is primarily the result of the rapid growth of renewables and the substitution of coal by natural gas. The biggest contributor to the reduction of CO2 emissions is the EU, with a decrease of 5 percent. Germany’s share was the largest of the OECD countries with a decrease of 8 percent.
The political momentum is on the side of Green parties which have seen solid growth over the years in most of the EU but especially in Germany. The energy transition in Europe’s largest economy, therefore, is just getting started. The Ministry of Economy has produced a draft report where the development of a hydrogen economy is essential for a carbon-neutral society by 2050.
The impressive growth of renewables in Germany is a major boon for the fight against climate change. However, the infrastructure is not designed for decentralized energy production which is a significant challenge. Also, intermittency of wind and solar power is a serious obstacle for reliable and continued energy supply.
Hydrogen could be the solution. The German plan is to develop a value chain including production, storage, transportation, and consumption. The potential is there, now sound policies need to maintain the right environment for the private sector to develop the necessary innovations.
The energy transition will be a success by 2050 when Europeans can consume energy from a stable grid without emitting CO2. Two major challenges lay ahead. First, sufficient production capacity needs to be installed to replace the carbon economy. Second, the problem of storage and stabilization of the grid needs to be overcome.
While the former is merely a matter of sufficient investments in alternative production methods, the latter is more difficult. The ability to mass produce electrolyzers, for example, is a necessity to reducing cost. Therefore, innovative solutions are essential for the development of a hydrogen economy. Related: The Metal Trump Wants More Than Gold
The Ministry proposes the production of 5 GW of hydrogen by 2030 for the transportation sector, industry, and heating homes. Also, the network of filling stations needs to be expanded to make fuel cell vehicles more attractive to consumers.
The organization representing Germany’s gas grid operators (FNB Gas) has proposed a hydrogen grid of 5,900 km running along the existing natural gas network for 90 percent. This would allow the reusing of the existing infrastructure once hydrogen consumption and production takes off while natural gas decreases. According to FNB Gas chair Ralph Bahkev, “our aim is to make the existing gas infrastructure usable for the transport of hydrogen.”
Collaboration and alignment
The Dutch economy is strongly dependent on the German ‘hinterland’. The excellent infrastructure connection between the two countries has propelled the Port of Rotterdam's growth where the majority of goods moving through Europe's largest harbor are sent to Germany. Besides logistics, the Netherlands and Germany also share a sophisticated gas infrastructure network. Related: Russia Doubles Down On Its Arctic Ambitions
The discovery of Europe’s largest single gas field in Groningen in 1960 spurred a construction boom that led to one of the world’s most complex pipeline infrastructures’ spanning northwest Europe. The political decision in the Netherlands to halt gas extraction due to tremors in the Groningen area has led to a strong interest for hydrogen initiatives where the soon to be idle gas network can be utilized for.
The Dutch are developing ’Hydrogen Valley’ in Northern Netherlands, which is a public-private initiative that connects 30 individual projects. The goal is to develop a hydrogen economy on a small scale including production, storage, transportation, and consumption. The alignment of interests is also creating a need for collaboration between the European neighbors.
The Dutch and German federal governments and the German state of North Rhine-Westphalia are jointly investigating the integration of the countries’ future hydrogen economies. The Netherlands has an elaborate gas infrastructure that is already connected with Germany. Also, surplus energy from existing and future wind farms in the North Sea could be used to produce hydrogen. The energy could then be transported through the Dutch gas infrastructure to customers. This would save billions of euros
necessary for the extension of the power grid.
The Dutch and German societies share a highly motivated, ‘green’ population that is willing to go the extra mile when it comes to the energy transition. Also, strong economic complementarity and existing assets, such as the shared gas infrastructure, are an opportunity to develop the world's first hydrogen-based economies. Much depends on sustained government support and sound policies to create the right environment for innovation to thrive.
By Vanand Meliksetian for Oilprice.com
More Top Reads From Oilprice.com:
Vanand Meliksetian has extended experience working in the energy sector. His involvement with the fossil fuel industry as well as renewables makes him an allrounder… More
How China Could Spark A Major Reversal For Oil Prices
Analyst Warns Of A Fuel Shortage Crisis In The U.S.
Oil Prices Under Pressure As China Considers Russian Crude
Kazakhstan Cuts Iron Supplies To Russian Steelworks
Why Investors Should Pay Close Attention To The Disappearing WTI-Brent Spread