Hydrogen’s green revolution

The success of Europe’s climate neutral goal for 2050 will depend a lot on hydrogen, particularly its green form when backed by renewables. Large utilities, industrial firms and oil and gas majors are now gearing up to make big investments in green hydrogen.

This week’s episode looks at some of those ambitious plans in the Nordic region. 

Host: 

•  Richard Sverrisson, Editor-in-Chief Europe, Montel

Guests: 

• Martin Pei, Executive Vice President and CTO, SSAB
• Marius Holm Rennesund, Partner, Thema Consulting
• Kathrine Stene Bakke, Head of AFRY Management Consulting Norway
• Olav Botnen, Senior Analyst, Volue Insight

Transcript

Anna Siwecka, freelance journalist/podcaster: 0:01

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Richard Sverrisson, Editor-in-Chief Europe, Montel: 0:29

Hello listeners and welcome to the Montel Weekly podcast. Bring Energy Matters, an informal setting. In a landmark pod, we have reached number a hundred listeners. We will discuss very ambitious plans for the rollouts of hydrogen and ammonia in the Nordic markets in the space of under 12 months. Hydrogen, both green and blue has gone from being niche to mainstream, from being the focus of small research institutes and companies to the involvement of the oil majors. Other parts of Europe, notably in the Netherlands, Germany, as well as Portugal and Spain have ambitious plans for hydrogen, but recent announcements in Norway, Sweden, and Denmark. Indicate that Northern Europe does not want to be left out of the expansion of hydrogen and ammonia. Joining me, Richard Sverrisson, to discuss these issues are several prominent analysts and experts who will share their expertise and knowledge on the implications for the Nordic Power Market, as well as a representative from the exciting pilot project he in Sweden. So a warm welcome to you, Martin Pei hello and welcome back, Marius Home Rennesund of Thema Consulting and hello Kathrine Stene Bakke Of AFRY. And last but not least, we have Olav Botnen of Volue insight. A pleasure to welcome you all. If I could start with you, Martin, could you tell us a little bit about the hybrid project in Sweden and the ambitions you have here? The ambition is here to produce fossil free steel by 2026. Is that right? How do you plan on doing this?

Martin Pei, Executive Vice President and CTO, SSAB: 1:59

Yes, absolutely. That's our plan. The hybrid initiative was started in 2016 by SSAB, teamed up with button file and LKB in Sweden. The reason behind the initiative was that the steel industry, which is extremely important for our modern society. Unfortunately today it meet huge amount of carbon dioxide to the, and the reason for that is that mainly the process that we use to make steel from iron ore currently worldwide, the steel industry, miss. About 7% of global CO2 emission every year. And that depends on the blast furnace process where we take inor and reduce inor with coal, blast furnace process and move on to make the high quality steel products we do. For the industry to really say contribute to the both the developmental society and the cutting emissions, we really need to develop new breakthrough technology to make steel from, and that is where hydrogen comes into the picture. We recognized since a long time back, the hydrogen is a very good reducing agent. To do this work but has never been commercialized to a scale where it can be, say, deployed by the industry as a whole. So in a hybrid initiative, we started in 2016. We created joint venture company. We invested hugely in research development activities. Then we decided in 2018 to build the pilot plant facilities that we are currently running. So we are in a very exciting phase of technical development. Very soon, in a couple months from now on, we will start to test using hydrogen at a larger scale to make steel without using fossil fuel. So that will be the moment of excitement in this technical development. Our plan is to scale this up in 2025. So from 2026 SSAB, together with the partners that we are working together with, will deliver. Fossil free steel on the market at a large scale. So that is our plan to really revolutionize this industry.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 4:31

Very interesting. Martin, could you tell us what are the implications here for the energy markets? How much renewable energy would you require them by 2026 and further on?

Martin Pei, Executive Vice President and CTO, SSAB: 4:40

Yes. Essentially what we really want to do is replace coal that we use in the industry with electricity. So in principle, we will need roughly the same amount of energy from renewable and electricity sources instead of shipping coal around the globe. In that way, we will cut emissions. On the other hand, we will need a lot of green electricity for SSAB to do this in Sweden. We have estimated that if we face out the blood furnace process that we use today. Going through the hybrid route completely, we will need 15 tet hours of electricity annually to do this, and that corresponds to roughly 10% of Sweden's annual electricity consumption. So this will stimulate very much the renewable energy industry in Sweden.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 5:34

This is by 2026 or by, are you talking further down the line that these 15 OTTs

Martin Pei, Executive Vice President and CTO, SSAB: 5:39

further down the line? We, our plan is to phase out. All our blood furnace is processes before 2045. So the first plant is 2026. So then it'll happen gradually.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 5:51

So these obviously has huge implications for the power market in the region, which I'll return to later with our distinguished analysts. But, is this gonna be purely wind or is it gonna be a combination of wind, solar batteries? How do you see the expansion here? What kind of renewables are we talking here, Martin?

Martin Pei, Executive Vice President and CTO, SSAB: 6:07

Yeah. In Sweden we have a quite good starting point, especially in northern part of the country where we have also access to iron mines in nor button where we have quite a good access to hydropower at the moment. But we see very strong development of wind. Coming in the coming years the last few years, wind power has been developing very fast and we see continued growth of wind power, especially in northern part of Sweden, Norway, and Finland. There are many very exciting projects there in the hybrid city. We are also developing a hydrogen underground storage technology. And that we see is going to be an extremely important component to integrate the steel making process with electricity grade, especially with the increasing percentages of wind power. So we will create the buffering capability so will benefit also the wind power investment projects. So we can store energy in form of hydrogen, which then can be used for iron reduction.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 7:19

Just a final question. I know, Martin you have to dash off. There are other plans in Sweden. I know you, your project inspired the H two Green Steel initiative. Is there enough energy to go around or just means that there's gonna be more and more having to be built in that built out in that area of Sweden?

Martin Pei, Executive Vice President and CTO, SSAB: 7:34

Yeah, it is of course very encouraging that others. Companies, especially new startups see the hybrid project, believe in the technology and really want to put big money to invest in this area. It'll create I believe a healthy competition among us. The world need more fossil team, not less. The question is then, of course, how to do it. In the short term, it'll create say, competition of available electricity. But in the long run we believe that this will stimulate more investments.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 8:06

Martin, thanks ever so much for joining the on our weekly podcast and good luck with the project. I think it's something that we all wish success for. Olav, can I turn to you and could you maybe talk us through, so we've heard about the Swedish example. We've also seen a space of announcement recently in Nordics. Could you talk us through what's on the table at the moment and do you see any more coming in the pipeline?

Olav Botnen, Senior Analyst, Volue Insight: 8:26

Yes we have seen a lot of new projects coming into the pipeline during the latest months and just one year ago we didn't have anything of those projects in our pipeline effect. So quite a lot of things have happened recently and I think north of Sweden is probably the most in. 10 price zone when it comes to new hydrogen projects because you have nearly an endless capacity in a new onshore wind parks available there. So I think it's quite easy for bringing even more volumes up in the bay, north end of Sweden, but we also have quite a lot of projects in the rest of Scandinavia. Hybrid is also present in Finland for instance, and we expect also some volumes there. And in Norway we expect this ya to go electric in five, six years from now. And we also see some minor projects up in the very north end of Norway. For producing hydrogen for ferries up there. And we also see quite a lot of projects in Denmark related to offshore wind, farm generation and new energy islands there. It's all over now and I think north of Sweden will be the most intensive part when it comes to hydrogen production because this endless stream of onshore wind. Capacity up there.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 9:46

Thank you all. This is quite a transformation I think, isn't it, Katrina, that we've seen in the space of a year as all I've said, it gone from very little to all these projects. What do you find exciting about this new sort of hydrogen world or these plans for hydrogen?

Kathrine Stene Bakke, Head of AFRY Management Consulting Norway: 9:58

There's a lot of things that's exciting about this. First of all, it's giving hope, in the decarbonization agenda. It is in a way finally. It looks like it's finally happening. It's that being said, there has been hydrogen. Booms, not being realized before. So there is still some way to go, but some of these projects that we are seeing now, they are getting further. They are technically feasible and it still may be some way to go to have them commercially and economically feasible. But still, there is a lot of exciting things happening and there is also a lot of obstacles and things that needs to happen for this to be realized at the large scale. And that creates a lot of. Interesting discussions for people like me and Maria Ola, I guess as well. As for the industry, and I think also we are starting to see some new players coming in like this Age to Green Steel project for instance. Yes, there are some people there who are, familiar with industry, but there are also some very new people that come from different industries and have background, different backgrounds and that is also quite interesting to see.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 11:04

I think, Marius, if I can bring you in here. Kathrine mentioned obstacles. So this sort of brings me on to my next questions is these are all just plans. Will they all be realized or do you expect some of them to fall by the wayside or maybe a second wave of additional plans even?

Marius Holm Rennesund, Partner, Thema Consulting: 11:19

Yeah, I think not all of 'em will definitely not be realized, but looking at it, both in the Nordic level, but also in the European level, there's so many projects now that were on a good way to, to actually reaching some of the European targets on electrolyzer capacity that was set out by the European Union in their hydrogen strategy. We just had a count last week when we were preparing our price forecast. And the EU has a target of electrolytes capacity of about 40 gigawatts in 2030. Looking at the different projects across Europe we see that there's projects worth of 25 gigawatts already. Of course not all of them will be realized, but there will be more coming along. Those 25 gigawatts has basically been announced during the past six months or so. So we're definitely on the way here and I think the combination also with offshore wind and hydrogen, it's necessary as Katrina said, to be able to reach the net zero emission targets from the European Union. Although we've had kind of hydrogen booms in the past, I think what we now see, it's taking it a step further. We have the European or the EU strategy on hydrogen. We see six other European countries already have released their strategies in other nine countries in the pipeline. So everybody's taking this seriously and try to find out how to best position themselves in this new markets.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 12:44

You mentioned the 40 gig or electrolyzer capacity. Most what does that translate to in terms of. In power capacity, what do you need to build out to produce that amount of capacity?

Marius Holm Rennesund, Partner, Thema Consulting: 12:54

That's a significant capacity across Europe. I don't have it on top of my mind, the European total, but it's definitely a lot of extra demand across Europe. And I think when we look at it in the Nordic perspective, we expect, 30 to to 50 T VH of additional capacity or additional power products needed to produce hydrogen towards 2030. It needs to be a significant build out. And that's, one of the challenges there as well, particularly in Norway where we see the opposition towards onshore wind, the regulator now changing the licensing system, that will take some time so it won't get. Capacity over the 6, 7, 8, next years. So for no way offshore wind might be be the joker head that can can create some extra production capacity when we move towards 2030.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 13:46

Absolutely. So Kathrine, you want to make a point here as well?

Kathrine Stene Bakke, Head of AFRY Management Consulting Norway: 13:48

Yes. First of all, I think you touched up on a very important point when it came to what sort of production capacity, in terms of renewable capacity do we really need? One of my colleagues looked at this EU target and the target of 10 million tons of hydrogen in 2030, and it's also important that 10. What is currently the hydrogen demand in Europe being met by gray hydrogen. So it's basically just if you use all to replace gray hydrogen, which is probably the sort of low hanging fruit here. This is what we will be able to do by 2030. In order to do that, as Maria said you would need 40 gigawatt of electrolyzer capacity and actually if you were go going to meet that by. For instance, onshore wind, which is the renewable with the highest load factor, you actually need 120 gigawatts of offshore wind capacity, and that is equivalent to the total, installed renewable. Energy capacity in Germany today. So it is enormous amounts of renew energy that needs to come in, and I think this is going to be one of the limiting factors, actually, not only in Norway as Maori says, but across. Even in Norway, just to replace existing gray hydrogen, we need about 16 terawatt hours of new electricity. And it can't just be connecting to the grid either, because if it's going to be defined as green, they haven't finalized those discussions in, I think around the EU taxonomy. But in order to be green, it needs to be new renewable capacity, demonstrably new, or at least otherwise curtailed. And also it needs to be. On the right side of the bottleneck. So producing a lot of hydrogen in, Northern Sweden isn't going to help you if you're using it elsewhere, for instance. So there's a number of it's not obstacles, but there are a number of interesting aspects here that can, you know. Delay or create, dampen some of these very high ambitions.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 15:49

Yeah, there's certainly many challenges. Olav, if I can bring you in here what's your view here on the expansion here, and then what does it mean in terms of growth, or what kind of numbers do you see by 2030 in terms of actual increased supply or the increased from the power sector?

Olav Botnen, Senior Analyst, Volue Insight: 16:03

Yes. We expect 17 Tet Towers of green hydrogen production by 2030 in the Nordic. But that's, the figures was published before all the new Commerce of Projects was released some days ago. However, we expect that this 17 Tet Towers of new consumption will be replaced or will be fed by a combination of PPAs. New onshore wind, mostly in the north northern part of Sweden, and in combination with eating up some of the recent oversupply, which we have observed during the latest years. So it's a combination and that will bring us up to a more neutral power balance after all in the Nordic area. Some of the old supply will disappear on the way to 30, and then we are. On the margin. On the price margin, we are then left to the European power margin, so to say. So that means the Nordic power prices are then creeping up more and more in line with the rest of Europe. Yeah.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 17:00

So could you just talk us through some of these regulatory obstacles that Katrina mentioned, and also the local opposition, the permitting process. Could we see more offshore wind? Along the coast of Norway meeting this demand.

Olav Botnen, Senior Analyst, Volue Insight: 17:13

In Norway it's difficult to see large volumes of offshore wind before 2030, but after 2030, it's possible when the LCE for offshore wind is going to be lower than we also nowadays. But we will also see some onshore wind development in Norway, but not in the large volumes as we have observed through the latest three years. So that means, we'll obviously lower onshore wind development in Norway going forward. And when we enter 2030, it's will also be some offshore wind going to be developed in Norway. So it's a combination. And there, there will also be some minor solar generation to be developed in the Nordic area, both in Norway and rest of the Nordics too.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 17:53

Marius, what does this mean for prices? What's your view here on, on Nordic power prices? I know we've had. Couple of years at least of very low prices in the Nordic region with the oversupply. That all, I've mentioned mild winters, although we've had some weeks of very cold temperatures here and high spot prices. But we can say to 2030, is this gonna boost demand and prices?

Marius Holm Rennesund, Partner, Thema Consulting: 18:13

Oh, I've also mentioned earlier, today we have a rather large power surplus in the Nordic market. So we will eat of that surplus. So in towards 2030, we don't see a very dramatic changes in the power prices. We've seen extremely low power prices for a while now and then spiking in the beginning of the year. We expect more of a, kind of a normalization of of 40 to 45 euros over the coming decade. So will increase but not to to extreme levels of any kind.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 18:44

So closer to, to the European level as all I've mentioned as well.

Marius Holm Rennesund, Partner, Thema Consulting: 18:47

Yeah. Closer to the European level but still there is a spread towards the German markets. And I think also one thing that we haven't touched upon so far with hydrogen is that the flexibility it can provide particularly in the continental market. And that's gonna be extremely important going forward. Up until today, it's really the production side that has been ramping up and down. And when Europe is going towards more or less a hundred percent renewable power sector, we need new forms of flexibility and hydrogen. Of them, first and foremost, with producing hydrogen when the renewable production is higher than demand. And when we look further out, and then we talk about more the 2040s, also some that can come back to the power sector in our, where there is too little. Production. So it's one of the flexibility measures that, that will be important going forward because you can store also rather large volumes of energy over long, longer time periods than, for example, a battery that will be more used for the shorter swings.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 19:54

I want to return maybe to the other uses of hydrogen towards the end of our discussion. But I think certainly absolutely this sort of flexibility is crucial. How about a three Katrina, what kind of view do you have on prices in the Nordic region with this massive increase in demand coming from the production of hydrogen

Kathrine Stene Bakke, Head of AFRY Management Consulting Norway: 20:10

Mario and all our indicated? I think it has a lot to do with the volumes coming in.'cause if you're looking, over the next decade, it's sort of 10. 20 something Terawatt towers that it needed maybe a bit more. Some of that might be also even be met by blue hydrogen and or other sources. All other equal, it'll push prices up, but pushing prices up, you will also allow for, more wind being developed. So in a way, at the moment, what is limiting wind, especially in Northern Sweden, is very low prices. In the short term, if you increase the prices, this wind will come and the price you will still be, and then at a balanced level. And the price should be more or less the same, basically, but it's maybe more interesting and challenging to start looking. Say, looking beyond 2030, if some of all of these plans come in, we are not talking 20 terawatt hours, we're talking 50, 80, maybe a hundred TT hours of new electricity. Assuming that everything is realized. I know that is maybe a bit to ambitious, but if you add these kind of volumes into the market, that is a revolution and that requires a lot of new grid. The flows will change between the markets. Flexibility. Yes, hydrogen can offer flexibility, but that comes at the cost because you have to then invest in over capacity. If you're running an electrolyzer at less, less than base load, you are. You're actually adding up quite a bit on the CapEx. So that is a very interesting, I think, aspect to look at what's the system going to look like in, in sort of 35, 40. And not to mention when even more base load is going out with nuclear beyond that. So it's, a gradual thing. Everything might develop quite smoothly, but you can also maybe see some really. Big shifts at a point in the future if this really takes on.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 22:03

Absolutely. So Olav, what's your view here and what do you think, like Katrina's saying that an upturn in prices will also, incentivize more build and stimulate more sort of PPAs that you mentioned earlier as well?

Olav Botnen, Senior Analyst, Volue Insight: 22:15

Yes, when the recent oversupply is eaten up by 2030 approximately, then we expect that the new development, the wind farms, will go hand in hand with new hydrogen projects and bring us at a quite neutral power balance going forward. So that means it'll be a quite a balanced thing and prices will then be nearly flat going forward with wind farms being developed hand in hand with new hydrogen projects. So I don't think we will see a major shifts after we have reached 2030 related to the fact that the power balance should be quite flat and neutral going forward then. But however, the first thing first is that the over recent oversupply will be reduced on the way to 2030 with more hydrogen projects coming in than the development of wind farms. Should be.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 23:06

Marius, I can To you, you mentioned flexibility earlier. Are there other ways in which, there's a lot of hydrogen. Green hydrogen being produced, the Nordics, can it be exported to Europe? Could it be used for balancing the grid, as others have mentioned. What other uses can we see for green hydrogen?

Marius Holm Rennesund, Partner, Thema Consulting: 23:23

No, we, I think we will see most of the the hydrogen produced are being used in the industries across Europe and not coming back to the power sector. So we'll definitely see some export. And that's an open question again, how we can transport that. Mean we can use ships. We also saw that the gas infrastructure operators across Europe's released a report sometime back where they wanted to develop almost 7,000 kilometers of pipelines by 2030 to transport hydrogen to, to key consumption centers. We see also in, in Denmark, in the energy islands that they wanna produce hydrogen offshore. So there's a lot of different concepts here, but I think key that we will see. Offshore wind, and we will have to transport that energy either in form of electrons or hydrogen to, to the big consumption centers across Europe.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 24:15

Kathrine, if I'm just, I'd just like to round off the discussion a bit now, but, cost is obviously a key factor here. And the cost of producing hydrogen, it's not in unsubstantial. How do you bring these down and what role does, as the carbon price play here potentially?

Kathrine Stene Bakke, Head of AFRY Management Consulting Norway: 24:29

How to bring it down is clearly technological development. And luckily we've seen that Europe or the world has been able to do that with renewable technologies before. And hopefully that will also be the case going forward. But also it's the fuel cost is a big part. No matter whether you're looking at the SMR sort of blue hydrogen production or you're looking at electrolysis, the fuel cost is a really big part of the whole thing. And that is an advantage of course for the Nordics because we generally have low electricity prices and from a Norwegian perspective, we also have. Access to gas for blue hydrogen, and we haven't talked about that at all, but it is an important aspect of the Norwegian strategy. I think transport is expensive, so there is going to be a lot of, I think, analysis required and optimization processes required. Is it cheaper to transport hydrogen or. Electrons through the grid. Over what distances, how do you store, where do you store storing in South Salt? Co. Caverns, for instance, is much cheaper than any other form of storage. You have them in the Denmark, Southern Sweden, so maybe that is where. Hydrogen can add flexibility or absorb flexibility. While in northern Sweden, I think it's much more difficult to see hydrogen playing a flexibility pot and of course industry is going to be the big consumer, but nobody has mentioned transport sector and transport sector has pockets, where. Which is hard to electrify, like shipping or heavy duty trucks. That is clearly also an area where hydrogen will play a part going forward.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 26:05

Absolutely. Thank you Katrina. And just to round us off Olav what are your views here on, on bringing the cost down for hydrogen green Hydrogen?

Olav Botnen, Senior Analyst, Volue Insight: 26:10

The main thing is, of course, to, to scale up the processes. Nowadays, the, these electrolyzers are. Quite weak in capacity. We are talking about 10 and 20 megawatts. And in the future I think we will see 102 hundred megawatts of units going forward and that will bring the cost down significantly. So I think upscaling is and technology development, of course will be the main parts in bringing down the costs. And another thing when it comes to transportation, I think ammonia will probably. The easiest way to, to transport hydrogen. In the form of ammonia because ammonia can be used in transport sector and also in as fuel in in power plants, thermal power plants, and also for the shipping fuel. So I think ammonia will be probably the key here for transportation sector and even for power production in, when we are entering 2040, for instance, I know in, in, in the Japanese power plants, they're doing some experiments of using ammonia directly into. Coal five knots. So there is hope for ammonia to be a fuel in the power industry. Also,

Richard Sverrisson, Editor-in-Chief Europe, Montel: 27:18

there's several options on the table, wouldn't you agree, Marius?

Marius Holm Rennesund, Partner, Thema Consulting: 27:21

Yes, there's definitely a lot of options there and it's a lot of uncertainty going forward and we'll see which technologies will win here eventually. But it will most likely be a combination of more than one of them as well.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 27:33

Thank you ever so much guys for making this the hundredth Monte weekly podcast success. And then a very stimulating and interesting discussion on the role of primarily green hydrogen, but also obviously blue and and ammonia as well. So thank you very much for joining the Monte Weekly podcast this week. Marius, Katrina, and Olav. Thank you so listeners, you can now follow the podcast on our own Twitter account at ly named the Monte Weekly podcast. Please direct message. Any suggestions, questions, or let us know if you think you have a good idea for a guest on the show, you can also send us an email to podcast@montenews.com. Lastly, remember to keep up to date with all that's happening in energy markets on Montel News. You can subscribe on Apple Podcasts and Spotify or wherever you get your podcasts from. Thank you and goodbye.