Hydrogen: New Clean Source of Energy

Updated 1/24/2023 8:00:00 AM

Arab Finance: Since Egypt has signed framework deals to launch the first green hydrogen project at COP27 in Sharm El-Sheikh, there has been a growing interest in hydrogen as a replacement for fossil fuel. Climate changes have directed the whole world to use renewable energy along with political conflict. As a result, hydrogen offers a solution because it provides opportunities for energy independence. By 2030, the European Union (EU) plans to produce 10 million tons of hydrogen annually and import the same amount to stop dependence on Russian fossil fuels. Egypt aims to be the region's largest exporter of green hydrogen by 2040. Consequently, hydrogen is becoming a crucial part of countries' strategies and economies.
That is why Arab Finance sat down with Jorgo Chatzimarkakis, CEO of Hydrogen Europe, to discuss the role of hydrogen in the energy sector and the impact of the recently signed Egyptian frameworks and memoranda of understanding (MoU) to produce hydrogen. Moreover, he talks us through the plans of Hydrogen Europe and the future of the hydrogen industry.

From your point of view, how does hydrogen play a pivotal role in global climate action?

Hydrogen, specifically renewable hydrogen and other forms of low-carbon hydrogen and derivatives, will play a crucial role in the global energy transition for its numerous applications and its ability to replace fossil fuels in hard-to-abate sectors. While we can and should surely use renewable energy sources to decarbonize our power sectors, in addition to some elements of the transportation sector, the power sector represents just 25% of the total energy needs. Even after undertaking tremendous electrification efforts by 2050, most assessments conclude electricity could cover around 50% of the total energy needs. Hydrogen provides a cost-effective opportunity to reach hard-to-abate sectors such as industry (e.g., steel and cement, chemicals) either as direct feedback (replacing the fossil-based hydrogen currently used) or as an energy carrier, allowing renewable and low-carbon sources to heat high-temperature industrial processes. Not to mention the complementarity in the power sector, as hydrogen allows us to store excess renewable electricity for long periods, ensuring the security of supply at all times. Hydrogen is the "missing link" in our mission to achieve net zero.

Can you explain to our readers how the transportation sector benefits from hydrogen?

Hydrogen is an excellent solution for all types of transport, including aviation and maritime, as well as allowing us to offer diverse solutions in areas where electrification may claim supremacy. A combination of fuel cells and lithium batteries, for example, is the future of road transport, since it will reduce dependence on raw materials, reduce stress on an already saturated electrical grid, and allow users to travel longer distances and have faster refueling strategies.

Hydrogen Europe has more than 400 members, including 25 EU regions and 30 national associations. How do you manage the interest of the hydrogen industry for your members?

Indeed, with such a large and diverse membership, managing the interests of everyone and finding suitable compromises is a huge component of our workload and is not easy. However, we believe that the energy transition can only be done if we are all included. We are also confident that all our members are serious about decarbonizing, even if they have their own commercial agendas. Our job is to find the best compromises without diluting the mission and without losing focus on the ultimate goal—to ensure hydrogen is an accessible and affordable carbonization tool for all who wish to use it.

Hydrogen Europe aims at achieving a decarbonized, fully-integrated energy system and delivering net zero by 2050, what are the procedures taken to achieve this aim? And how far are you from this goal?

This is not just Hydrogen Europe’s aim, but the whole of the EU’s. We work towards our common goal through consistent dialogue with policymakers at regional, national, and EU levels to help shape the best and most robust regulatory framework to create a bona fide European hydrogen market that is both simple to understand and clear to follow.

How far away we are is hard to quantify, and we are under no illusions that it is a massive task in front of us. But what drives us is the enthusiasm of our members and the growing consensus among policymakers and the public that hydrogen will make our mission achievable.

Why is green hydrogen very important now? And do you think countries and industries are ready to depend on green hydrogen instead of fossil fuel?

Green hydrogen is important now because we have a ticking clock on how bad the climate crisis could get. We must act now to decarbonize as much as possible, and green hydrogen is an important part of that. Green hydrogen has a very low carbon footprint, and it is made from renewable energy sources, so it is a long-term sustainable solution.
Industries are, for the most part, certainly ready to turn to green hydrogen. Lots of industry already uses (grey) hydrogen, so for them, if green hydrogen is available, it will be a simple choice to switch (especially as green hydrogen becomes cheaper and more competitive than its fossil counterparts). For industries that do not use hydrogen or its derivatives (e.g., the steel and iron sector), there is an appetite to switch, provided the demand can be guaranteed. That is the challenge for producers further down the value chain and for governments that want to stimulate increased production; ensuring we have sufficient renewable energy that can supply the hydrogen production plants.

Most of the hydrogen used in industry is produced through natural gas resulting in a significant amount of CO2 emission; is the alternative cost-efficient, especially for countries that depend on natural gas?

General industry ambitions for renewable hydrogen have continued to increase in 2022. Partially due to the skyrocketing natural gas prices, the average fossil hydrogen production costs for 2021 were estimated at €2.65 per kg and grew as high as €10/kg in August 2022. As a result, renewable hydrogen started becoming cost competitive with fossil hydrogen. The estimated renewable hydrogen production costs in the EU, UK, and Norway in 2021 vary from €3.3/kg to €6.5/kg, while, in limited geographical locations with the best solar irradiation and wind conditions, it is possible to reduce those costs to as low as €2.2-2.9/kg. On top of this, industry consumers can add the savings they make from the avoided CO2 emissions.

With a lack of infrastructure and investment, how can Egypt and Africa benefit from hydrogen as an alternative energy source?

Egypt and many other African countries (South Africa, Namibia, Morocco, etc.) have released (or are in the process of launching) serious hydrogen strategies. Indeed, without infrastructure and investment, it will be challenging to reach these goals. But one purpose of the global hydrogen community is to share the necessary skills, expertise, and capital to ensure developing markets have the required tools. African countries boast an enormous amount of renewable energy potential as well as the critical raw materials needed for their manufacturing. These two are essential ingredients for producing green hydrogen. You can build an electrolyzer and a pipeline, but you cannot build world-leading solar resources.

Egypt has signed an agreement with the EU for cooperation, in addition to 8 framework agreements with international companies, on green hydrogen production and trade. What do you think is the impact of those agreements on the region?

Egypt has signed with the EU a memorandum of understanding (MoU) on renewable H2 that lays out the areas of cooperation for the next few months and the governance structure of this cooperation. Now the difficult challenge of the framework agreements is their rollout, but they should help the Egyptian energy sector to decarbonize as well as other industry sectors, such as the fertilizer industry and mobility. Egypt is looking into all these potentialities as both a user of hydrogen/carriers and an exporter.

Besides channeling state aid for hydrogen projects and research, what other sources of funds do you depend on?

The hydrogen sector needs carbon to be priced appropriately so that the green and low-carbon forms of hydrogen can compete with their fossil alternatives. This is why we support the Emissions Trading System (ETS) in Europe and would like to have more carbon pricing mechanisms globally. The recently approved carbon border adjustment mechanism (CBAM) will also guarantee that we put a carbon price on the products (including hydrogen) that we bring in from outside Europe.

Besides state aid and research money, the hydrogen market will rely on infrastructure that does not yet exist. So, part of the natural gas infrastructure will be repurposed, and other parts will be built from scratch. We do need a clear regulatory framework that defines who can build such projects and how the cost can be financed and then allocated through the current and future users.

In your opinion, how did Europe overcome the past months, and how does it plan to go amid the Russian-Ukrainian crisis affecting the continent’s gas supply? And what is the role Hydrogen Europe can play in this crisis?

Europe was able to weather the storm of reduced Russian gas availability by meeting its gas reserve storage target of 90% in time for winter. Though we must not forget that the year has been challenging for EU citizens, who have had to deal with higher gas and commodity prices and an inflationary crisis. Hydrogen Europe’s role is to encourage the development of a resilient, secure, and independent energy system for Europe that no longer relies on the fossil fuels of Russia.

The EU and the Ukrainian government have agreed that the reconstruction of Ukraine should be based on the principles of the Green New Deal, with Ukraine boasting significant renewable energy resources that can be used to reduce its—and Europe's—dependence on Russian fossil fuels. A memorandum is expected to be signed soon that will reflect these aims.

Together with representatives from Europe’s hydrogen and energy sectors, a proposed 10-point plan, the Timmermans Recovery Plan, has been devised to guide the rebuilding of Ukraine with a focus on its renewables and nuclear potential, as well as its ability to become a major actor in the hydrogen space.