Hydrogen is enjoying an unprecedented momentum on policy makers’ and industries’ agendas. The international community is also demonstrating a solid commitment to tackle climate change, putting in place various solutions to achieve an energy strategy that aims for climate neutrality. In this context the European Union leads the way.

The long-term strategy for a carbon neutral economy to 2050 and the European Green New Deal have been developed in accordance to the Paris Agreement objective to limit the rise of global temperature to well below 2 °C and pursue efforts to keep it to 1,5 °C^[1]. In the National Energy Plans presented by Member States on how to achieve these targets, hydrogen has emerged as a relevant option to deliver a clean energy transition.

In line with these trends, in 2019 the International Energy Agency was asked by the G20 Japan Presidency to produce a report to assess the current status of hydrogen at international level and to suggest ways to further foster its deployment. Meanwhile, hydrogen-based initiatives have been flourishing in numerous international forums, including the World Economic Forum (WEF), the International Renewable Energy Agency (IRENA) amongst others ^[2].

Despite being the most abundant element in the universe, hydrogen is not present in nature in its essential form. When it is produced through water electrolysis, a chemical process powered by renewable energy sources, which splits H2O into hydrogen and oxygen, and which generates zero carbon emission, the final product is labelled as “green hydrogen”. However, nowadays only “approximately 4 to 5% of global hydrogen is obtained in this way” ^[3], and this production process remains more expensive when compared with the more commonly used extraction process, which involves fossil fuels ^[4].

Yet recent trends in energy production, most importantly the decreasing cost of renewable electricity, offer a unique window of opportunity to scale up the production of all the necessary technologies (such as fuel cells, refuelling equipment and electrolysers) to bring down costs and accelerate a wider utilise of green hydrogen.

In a 95% decarbonisation scenario ^[5] the cost reduction trends open to a wider use of hydrogen in many sectors. Thanks to a higher energy density, hydrogen may provide a solution to many of the electrification’s challenges, playing a key role in reducing carbon emissions even in “hard-to-abate” sectors ^[6].

These include: heavy and long-range transport ^[7], heating, and high-temperature industrial manufacturing. Applying hydrogen to these sectors would also contribute to making the green gas competitive with fossil fuels and to double “its final energy demand by 2030, compared to today, reaching about 23% of total final energy consumption by 2050” ^[8]. 

Another key feature of hydrogen is its flexibility. This means that Hydrogen can be directly blended with natural gas (up to ~10% mix) in the existing high-pressure pipeline or be stored in the depleted gas fields and injected into the grid to respond to peaks in winter energy demand. Acting as an energy carrier hydrogen can dispatch power where it is needed, contributing to the stability and security of the entire power system.

 

Italy as a hydrogen hub

The potential to transport hydrogen for long distances would link neighbouring countries, encouraging them cooperate in a global decarbonisation effort. Interdependence is a key feature of energy market and, in an interconnected power system, resources should be allocated where they can have the highest impact on efficiency ^[9].

From a Mediterranean regional perspective, the energy transition toward a higher share of renewables generation, accompanied by a decreasing demand of fossil fuel in the European Union, in the long term would influence the stability of North African countries. The loss of rents from fossil fuel export weakens governments’ capacity to stabilise a low resilience economic system ^[10] and internal turmoil would then spill across national borders and affect the Mediterranean basin and therefore European stability. Here too, Hydrogen could represent a solution for both shores of the Mediterranean, stabilising the imbalances that can emerge from the shift to a decarbonised economy.

Investing in photovoltaic electricity generation in North Africa would allow to exploit the higher amount of sunshine hours of the region (80% more than in Germany, for example) and to generate up to an additional 50% of energy in comparison with Central Europe, for the same amount of investments. Such a strategy would later open up the possibility of adding electrolysers nearby, to produce green hydrogen and gear up the power to gas generation in the region.

In this context, a comprehensive approach is needed to maximise the effectiveness of energy investments, while coordinating the flow of funds from Europe with the energy plans of North African countries. These efforts would not only result in the strengthening of the local economic systems but could also have a positive impact on wider dynamics such as political instability and migratory pressure ^[11].

Within the network that would emerge, thanks to its geographical position and its infrastructure assets, Italy has the potential to become a key hydrogen hub. As in the case of the North Sea region, where a consortium of transmission system operators (TSO) has proposed to implement projects to convert the offshore wind into gas power ^[12], hydrogen generated in North Africa could be imported to Italy, at a cost of 14% below domestic production, and then injected in the European grid via the existing infrastructure.

To date, gas pipelines connecting the two regions have a spare capacity of ~30/33bcm/year and could be used without significant additional investments. In this scenario, Italy would therefore become the cornerstone of an inclusive dialogue, which would involve all the relevant actors, governments, private companies, TSO and national regulatory authorities from both sides of the Mediterranean Sea.

In the European energy transition scenarios, blending hydrogen into gas pipelines can allow the European Union to cope with its energy demand while decarbonising the energy mix. Furthermore, the establishment of a stable import route from Northern Africa would contribute to the diversification of the energy supply routes, significantly improving the energy security and resilience of the European energy strategy.

 

Unlocking hydrogen’s potential

The challenges faced for unlocking hydrogen’s potential are cross-sectoral and, to overcome, require close cooperation between policy makers and relevant private stakeholders.

Although the cost of technologies necessary for the production of green hydrogen have declined significantly ^[13], but there is still the need to ramp up electrolysers and fuel cells industries. Early measures are being adopted, including incentives to stimulate commercial demand for clean hydrogen as well as guarantees to limit the risks for first movers; but these dedicated policy mechanisms should be extended to support private sector investments.

European countries and main international stakeholders should also align together and support national champions in the creation of a “Hydrogen Alliance”, a single group of like-minded actors at an international level which can foster capacity building and attract manufacturing capacities around a single hub. This would result in decreasing decrease in the cost of equipment and would represent a pivotal step in implementing the vision of making green hydrogen competitive with fossil fuels in some applications already by 2030.

Furthermore, a supportive legislative and regulatory framework, and uniform technical standards, will be necessary to ensure the achievement of the carbon neutrality targets and to advance the development of the entire hydrogen value chain at European level.

Finally, at a global level, the development of an integrated international hydrogen market will need to involve not only producer and consumer countries, but also international organisations such as OPEC, IEA and IRENA. From this perspective, a higher degree of interdependence could foster cooperation and contribute to strengthening the global effort against climate change ^[14].

 

NOTES

[1] Cfr. EU, 2050 long-term strategy | Climate Action – European Commission

[2] Cfr. IEA, The Future of Hydrogen (June 2019), Snam, The hydrogen challenge (October 2019) and IRENA, Hydrogen: A renewable energy perspective (September 2019).

[3] Cfr. Snam, Hydrogen for the energy transition

[4] Currently the largest part of hydrogen is produced through chemical and physical processes from natural gas for industrial use generating significant carbon emission. This kind of hydrogen is labelled as “grey hydrogen” while “blue hydrogen” is produced via steam reforming through application of CO2 Carbon capture and storage (CSS) technologies.

[5] Needed to reach the 1.5 °C degree threshold.

[6] Snam, The Hydrogen Challenge: the potential of hydrogen in Italy (October 2019).

[7] By 2030 hydrogen-based mobility solution for heavy transport can become cost competitive with alternative technology (diesel, electric, LNG) while Hydrogen-based fuels (ammonia) are expected to become cost competitive in 2040-50 with alternative fuels. Cfr Snam, The Hydrogen Challenge: the potential of hydrogen in Italy (October 2019).

[8] Snam, The Hydrogen Challenge: the potential of hydrogen in Italy (October 2019).

[9] Marco Alverà Generation H - Healing the climate with hydrogen, Milano, Mondadori, 2019, p. 57

[10] Cfr. IRENA, A New World – The Geopolitics of the Energy Transformation (January 2019).

[11] Marco Alverà, Generation H - Healing the climate with hydrogen, Milano, Mondadori, 2019, p. 56

[12] “The project named Element One will entail the conversion into gas of offshore wind power mostly from the North Sea and is planned to be gradually connected to the network from 2022”; Marco Alverà, Generation H - Healing the climate with hydrogen, Milano, Mondadori, 2019, p. 61

[13] Bloomberg Surveillance, How Snam Is Transitioning to Green Energy, Sustainability (January 2020)

[14] Marco Alverà, Generation H - Healing the climate with hydrogen, Milano, Mondadori, 2019, p. 65