A major Japanese corporation is planning a massive investment in what would be the world’s biggest green hydrogen project. The move is a sign that the industry is persevering and pursuing the construction of clean energy projects even as costs have increased.
Japan’s Mitsubishi Corporation, a giant trading house, plans to invest around $690 million (over 100 billion Japanese yen) in a green hydrogen production plant planned in Rotterdam’s Europoort industrial area, Nikkei Asia reported this week.
World’s Biggest Green Hydrogen Plant
The project, Eneco Electrolyzer, will have a capacity of 800 megawatts (MW) and produce up to 80,000 tons of hydrogen every year. This would be a production capacity almost 30 times higher than any of the currently operational green hydrogen projects anywhere in the world, Nikkei Asia notes.
The Eneco Diamond Hydrogen joint venture of Rotterdam-based energy firm Eneco and Mitsubishi will build and operate the project, which will use renewable energy from solar parks and wind farms to produce clean hydrogen that’s initially aimed towards the industrial sector.
Eneco submitted its planning application in November 2023. The application calls for construction beginning in 2026. The green hydrogen plant is currently scheduled to start operating in 2029. Related: China Awarded Major Contract By Iraq For Supergiant Oil And Gas Field
“Producing green hydrogen is essential for a successful energy transition,” Eneco’s chief executive As Tempelman said two months ago.
“When direct electrification is not possible, green hydrogen is a good and sustainable alternative, both as a raw material and as a fuel.”
Cost Challenges Hamper Deployment
While heavy industry and governments pin their hopes on hydrogen for faster decarbonization, and power-generating companies and oil and gas majors look to diversify into low-carbon hydrogen production, costs are still high for green hydrogen production and hold back massive deployment of projects, analysts say. Forecasters, including the International Energy Agency (IEA)—a staunch supporter of all things green – acknowledge that costs need to be slashed significantly if clean hydrogen is to play a major role in the energy transition.
Green hydrogen—currently costing 3 euros to 8 euros per kg in some regions—is more expensive than ‘grey’ hydrogen, produced from natural gas, PwC said in an analysis last year.
“Low-emission hydrogen production can grow massively by 2030 but cost challenges are hampering deployment,” the IEA said in its Global Hydrogen Review 2023 report in September 2023.
Equipment and financial costs are increasing, putting projects at risk and reducing the impact of government support for deployment, the agency warned, although it noted that interest in low-carbon hydrogen projects remained strong.
China is taking the lead in green hydrogen deployment, while North America and Europe have taken the lead in implementing initiatives to encourage low-emission hydrogen production, the IEA says.
The U.S. and European schemes to fund and support hydrogen production have lengthy time lags between the announcement of the schemes and the moment at which funds are made available to project developers. This is delaying project execution, “and even putting projects at risk,” the agency said.
Despite the momentum in interest in green hydrogen, currently installed capacity and volumes remain low as developers wait for government support before making investments. As such, low-emission hydrogen still accounts for less than 1% of overall hydrogen production and use, according to the IEA’s annual 2023 report.
“Greater progress is needed on technology, regulation and demand creation to ensure low-emissions hydrogen can realise its full potential,” IEA Executive Director Fatih Birol said in a statement.
At the end of last year, President Biden’s plan to extend $7 billion to seven hydrogen hubs across America was described by Wood Mackenzie as “A significant step towards creating a low-carbon hydrogen economy.”
However, real momentum will have to come from private investment because the seven hubs, if fully developed, will have a combined production capacity that will only contribute 30% to the U.S. goal of having 10 Mtpa hydrogen supply capacity by 2030.
WoodMac’s analysis also showed that the goal of reducing the cost of clean hydrogen production to US$1 per kilogram by 2030 “is currently out of reach for green hydrogen.”
“This is primarily due to higher renewable power costs, a slower decline in capital expenditures for electrolytic hydrogen, and lower electrolyzer load factor assumptions,” the energy consultancy noted.
Globally, there is huge interest in hydrogen projects—as of the end of the third quarter of 2023, there were over 100 Mtpa of announced projects, mostly green hydrogen, according to Bridget van Dorsten, Senior Research Analyst, Hydrogen and Emerging Technologies at WoodMac.
“The pipeline shows the appetite, but developers are struggling to get projects to FID,” van Dorsten said last month, noting that high costs, a lack of offtakers, and incomplete policy throughout the value chain are holding back faster progress in green hydrogen projects.
“Policy support has been skewed towards production, but there’s been little to none for transportation, storage and distribution or the broader infrastructure to support market development of hydrogen and derivatives such as ammonia and ethanol,” van Dorsten added.
By Tsvetana Paraskova for Oilprice.com
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