Hydrogen is unavoidable
Energy self-sufficiency and reducing dependence on Russian fossil fuels is currently the number one priority and the topic of hydrogen as one of the possible means to achieve this goal is beginning to resonate more and more on the national level, too. Does it resonate sufficiently, though?
In response to Russian aggression, the European Union has presented the REPowerEU package with updated targets for green hydrogen production and its imports from third countries. In both cases, it sets a target of 10 million tonnes of green hydrogen by the year 2030, significantly increasing the targets set in FitFor55.
The European Hydrogen Backbone, an initiative of 31 gas transmission system operators in Europe, reflects the acceleration of developments, including the REPowerEU targets, in its latest report from this April. The EHB report presents a vision for a pan-European hydrogen backbone infrastructure of 21,000 km by 2030, capable of transporting 20 million tonnes of hydrogen per year. Already in 2021, the Commission introduced the so-called Gas Package, under which the acceptance of natural gas with up to 5% hydrogen will be mandatory at cross-border transmission points from 2025.
In the field of mobility, the development of (not only) hydrogen mobility will be accelerated by the European Directive on the promotion of clean and energy-efficient road vehicles, which requires Member States to take into account the energy and environmental impacts of a vehicle over its lifetime when contracting authorities and sectoral contracting authorities procure certain road vehicles. The Directive defines national targets for Member States as a minimum percentage of clean vehicles in the total public procurement in a given Member State. From the point of view of hydrogen, urban bus transport in particular is crucial, where a minimum share of 41% is set for the Czech Republic by 2025, half of which must be emission-free vehicles. The minimum share must then be at least 60% by 2030. According to the draft regulation on the introduction of infrastructure for alternative fuels, Member States will be obliged to cover at least the trans-European transport corridors with a sufficient number of hydrogen filling stations by 2030, and the Czech Republic, given its geographical location in the centre of Europe and its transit character, cannot afford to ignore this obligation.
It is evident that the importance of hydrogen and the pressure for its development will increase significantly in the coming years, whether in the context of energy security or the Green Deal, and the Czech Republic should therefore be prepared for a more massive uptake of hydrogen. Hydrogen offers a wide range of applications from petrochemicals and chemistry to mobility and industry to storing surplus electricity and is therefore often seen as a universal energy or decarbonisation solution. However, not every application currently makes sense from a technical-economic perspective, and experts’ views on the issues and applications of hydrogen often differ significantly.
Therefore, as part of an internal study, we decided to map the current situation on the hydrogen market in the Czech Republic and try to answer the question of what stage of development the Czech Republic is in and whether we are at the beginning of the next big energy revolution, this time the hydrogen revolution, or whether we are pursuing a technology, the use of which will be limited to a very limited number of applications, where no other alternative will be suitable. Our instrument was an in-depth survey in the form of in-depth interviews, which we conducted across the Czech market in April 2022. In more than two dozen interviews, we focused on gathering relevant information on current hydrogen projects, future plans including a forecast for the next decade, barriers to development and key prerequisites for accelerating development. The selection of respondents reflects the entire hydrogen chain from production, through distribution and end-use to the manufacturers of the technologies themselves.
The technology is ready, so where is the hydrogen?
After several interviews, we already understood that technologically the production, storage and transport of hydrogen are fully functional and there are a number of entities on the Czech market capable of providing this part of the hydrogen chain. The electrolyzers required for the production of green hydrogen are now produced by Linde or Siemens Energy, the latter of which will have a production capacity of up to 1 GW of PEM electrolyzers per year from 2023.
In the distribution sector, the situation is similar and technologies already exist for the storage and transport of both gaseous and liquid hydrogen. In the case of liquids, Chart Ferox with extensive experience in the USA can be mentioned. Among other things, the company is now able to transport liquefied hydrogen using a standardized ISO container that is suitable for transport on a truck, train or ship without the need for pumping. For example, the transport of hydrogen in gaseous form can be provided by the Ostrava-based company Vítkovice Cylinders, specializing in the development and production of cylinders, tanks, fixed and transport containers of all categories. Storage and mobile transport of hydrogen in gaseous and liquid form can also be provided by the aforementioned company Linde. Last but not least, we also ought to mention the company Bonett, which is able to provide comprehensive acquisition of a station, including securing all necessary permits. In the short term, we expect mobile transport to be the dominant mode of hydrogen distribution, but this will be replaced by a large-scale pipeline system as hydrogen volumes increase. It will be used to distribute imported hydrogen from abroad and at the same time allow injection into the transmission system, thus significantly facilitating the transport of hydrogen over long distances.
The readiness of gas turbines to burn hydrogen in a mixture with natural gas is currently being tested by Siemens Energy and the company has committed to have all types of gas turbines ready to burn 100% hydrogen and its mixture with natural gas (in any ratio) by 2030. Viessmann is already talking about the readiness of cogeneration units and conventional combustion boilers to run on a 30% hydrogen/natural gas mixture and is currently testing gas heating systems and fuel cells for burning pure hydrogen. From a technical point of view, the combustion of hydrogen, whether in combustion turbines or in heating plants, will not be a major obstacle to hydrogen development.
The use of hydrogen in transport has been technologically mastered for many years and, for example, Škoda Electric had a working prototype of a hydrogen bus in 2010 already. There are hydrogen-powered vehicles on the market today for the passenger, public and freight transport segments, and with the growing pressure to decarbonise transport and the gradual construction of public refuelling stations, we can expect to see an increase in the number of these vehicles on Czech roads as well.
From the above, one may easily get the impression that almost everything is ready for the arrival of hydrogen in the Czech Republic and that wider adoption of hydrogen is only a matter of time. However, the situation is complicated by one major problem, which is the absence of hydrogen itself, or green hydrogen. In the Czech Republic, the production of grey hydrogen currently prevails, especially in the (petrochemical) chemical industry, be it Orlen Unipetrol in Litvínov or SPOLCHEMIE in Ústí nad Labem. However, last year, the latter entered into a contract with ČEZ ESCO for the supply of emission-free electricity and hydrogen can now be classified as low-emission. The chemical sector is currently the largest consumer of hydrogen and the hydrogen produced is used for internal chemical processes as well as for the production of ammonia or as a supplementary heat source.
Although a number of entities in the Czech Republic – Sev.en Energy, C-Energy Planá, Teplárny Brno, Veolia, Solar Global, FOR H2ENERGY, ČEZ – are planning production of green hydrogen, for the time being, these are rather pilot projects with a production volume of tens, or at most hundreds, of tonnes of green hydrogen per year and an assured off-take in the vicinity of production. There are a number of barriers to green hydrogen production from the perspective of the interviewees, one of the main ones being the absence of a developed market. Hydrogen development faces a classic chicken/egg problem and entities both on production and consumption side are currently waiting to see how the situation develops and preparing through pilot activities, ready to respond flexibly if demand increases.
However, a second major barrier to increase in demand is the high price of (green) hydrogen. The price of green hydrogen reflects both the high cost of the electrolyser and the technology for compression and transport, as well as the variable input of the price of electricity. The price of green hydrogen significantly exceeds the price of fossil fuels today and projects without subsidy support do not make economic sense at present. In the case of subsidy support, another problem is the absence of operational subsidy support, which is now commonly used in the West and most respondents agreed on the need for its introduction. In the passenger transport sector, for example, hydrogen is at a disadvantage even compared to the much-heralded electromobility, the economic justification of which can be justified very well if there is investment support due to its low operating costs.
On the other hand, the use of hydrogen in public transport seems to be the easiest to grasp at the moment and most of the announced projects included the use of hydrogen in this sector. A number of transport companies are planning to deploy hydrogen buses in the coming years. The most dynamic approach can be observed in the Ústí nad Labem Region, where the Ústí nad Labem Region Transport Company has entered into a contract for the delivery of 20 hydrogen buses by 2030, with hydrogen supplies provided by the Ústí nad Labem-based SPOLCHEMIE. A similar project is being developed in Brno, where the Brno Transport Company and Brno Heating Plant Company have signed a Memorandum on the use of hydrogen in transport and the heating plants will supply 2 to 3 public transport buses with green hydrogen. Local partnerships and insularity are a common feature of most of the planned projects. Unfortunately, the lack of an infrastructure of hydrogen filling stations is still a barrier to a greater onset of hydrogen mobility, which will probably begin to change gradually and, for example, Unipetrol plans to put nearly 3 dozen hydrogen filling stations into operation by 2030. Solar Global has taken its own initiative in this regard, with plans to produce green hydrogen on its own premises and build a filling station for a private fleet of hydrogen cars.
Outside the transport sector, the survey identified the gradual replacement of grey hydrogen in the chemical industry with low-carbon hydrogen, but especially the possibility of injecting green hydrogen into the gas pipeline system, as another possible application. This option was of interest to several entities, for which it represents an ideal subscription option under suitably set conditions. Transportation of hydrogen through the pipeline system is more cost-effective compared to mobile distribution and will be a key form of distribution for the Czech Republic in the future, also in view of the European Hydrogen Backbone project. The current geopolitical situation was often mentioned in the interviews, and the interviews very much reflected the unstable situation in relations with Russia and the fear of an end to gas supplies. However, a number of entities have been working with the topic of hydrogen for some time, due to a combination of factors, the main one definitely being the Green Deal. The EU’s ambitious plans to decarbonise the economy are pushing businesses to adopt new low-emission technologies, and they are gradually trying to develop these through pilot projects (and research and development).
Lack of a clear vision, anchoring in legislation and sufficient financial support
One of the important problems for hydrogen development in the Czech Republic that the survey revealed is the lack of a clear vision of what role hydrogen will play in the future (storage, fuel, blending) and how important this role will be. Entities often have different perspectives on the future role of hydrogen and perceive the medium as either a system change or a niche product that will need to be managed effectively. The future role of hydrogen therefore needs to be clarified, clearly communicated and adequately anchored in legislation. Our investigation through in-depth interviews shows that from a technology point of view, there is basically no obstacle to the development of hydrogen in a number of areas, so there will mainly be a challenge in the practical deployment of the technology and cooperation with the state administration.
The next step should be to supplement investment support with operating support, similar to the way it works in the West. Operating support should reflect the economic aspect of the project, which means that it should decrease gradually and have a clear time limit. An interesting idea was the creation of integrated/conceptual subsidy support that would cover the entire hydrogen chain. The subsidy would thus not be provided separately for individual parts of the project (purchase of the electrolyser, compression, transport, construction of a filling station), but would comprehensively cover the entire system of technologies, even between different applicants for support (companies).
Last but not least, according to most respondents, the colours of hydrogen should temporarily be neglected and the focus should be on the spread of hydrogen itself. While electricity does not have any colours (or we do not consider them too much in the context of consumption) and every electric car is thus perceived positively regardless of the origin of the electricity, there is a strict promotion of emission-free green hydrogen. This, too, is currently hindering a more massive development of hydrogen projects. At the same time, a softening of the attitude towards less carbon-neutral forms of hydrogen would lead to the development of the entire market, a decrease in the price of the technology and its validation in practice. Replacing grey hydrogen with emission-free hydrogen could then be a logical second step and the transition to hydrogen could be smoother and easier for all participants in such a scenario.
A practical platform should be created with the aim of massive expansion of hydrogen in the Czech Republic
A fundamental finding from the interviews is the current disconnectedness of the respondents, which hinders both mutual cooperation and knowledge sharing and effective communication towards the state. Entities face the same problems when implementing projects, and a common platform involving stakeholders from both the private and public sectors would allow them to discuss these problems with each other and escalate them to legislators. The creation of a practical platform on the national level, which would be able to exert pressure to resolve the current shortcomings in legislation or subsidy support, is in our view essential for accelerating the development of hydrogen in the Czech Republic.
A good example of functional cooperation is the Ústí nad Labem Region, where the Hydrogen Platform of the Ústí nad Labem Region has been established. It enabled the networking of regional entities (regional governments, companies, research organizations, ...), mutual communication, and above all a strategic approach to the development of the regional hydrogen economy, politically represented at the level of the regional government. Mutual cooperation has resulted in the creation of the Hydrogen Strategy of the Ústí nad Labem Region, a comprehensive document focusing on the development of the regional hydrogen economy. The strategy defines the rationale for hydrogen development, the baseline, the hydrogen potential, the vision and specific targets it sets across the hydrogen chain in different scenarios and identifies key steps to achieve them. The strategy includes, among other things, a list of specific hydrogen projects, their link to individual segments of the hydrogen chain and an overview of subsidy titles for the implementation of the strategy. This is a uniquely comprehensive approach within the Czech Republic and should serve as an example of good practice not only for other regions, but also on the national level.
Disclaimer: The mapping of the current state of hydrogen development in the Czech Republic was prepared for a specific client and the project had a clearly defined task, scope and time capacity. Therefore, these conclusions do not necessarily reflect all areas, participants or hydrogen projects in the Czech Republic.
Author: Jakub Stuchlík