European Investors in Renewable Energy Expect 500 Times Growth in the Hydrogen Market by 2050
On 21 August 2020, Swedbank and the Norwegian Energy Solar Cluster co-hosted the Digital Investor Forum for Solar Energy and Batteries. The promising future of clean hydrogen was widely discussed by the sector experts leveraging new investment opportunities across the European energy markets.
The speakers at the event were members of the management teams of the largest Norwegian companies engaged in renewable energy, such as Scatec Solar, Norsk Solar, Statkraft, Norsun, Equinor, Nel and Infranode. Tetiana Mylenka, LL.M, Counsel at Hillmont Partners and Head of the Energy Practice, alongside Bohdan Novyk, Associate at Hillmont Partners, joined the online discussion.
The following topics were discussed during the event:
- Developments in technology and business models for large scale solar power projects;
- Financing corporate PPAs;
- The use of renewables in hydrogen production;
- Worldwide trends in the solar energy sector; and
- Development trends in the renewable energy sector at present and in the near future.
According to Norsk Solar, in 2019, the global solar power market reached an annual increase in capacity of 115 GW for the third year in a row. This is more than the total installed capacity of all solar power projects before 2012. The market reached a new record high in 2019, growing 12% compared to the previous record set in 2018. The size of the solar power market in 2019 is fifteen times larger than in 2010.
Norsk Solar expects the capacity of the solar power market to be 1 TW by 2022, and for solar power plants to generate 22% of the world’s electricity by 2050. In 2019, 19.5 GW of clean energy contracts were signed by more than 100 corporations. This is approximately 20% of all the total solar power capacity installed that year. The amount of clean energy contracted in 2019 surpasses the previous record set in 2018 by 40%. The corporate clean energy market in 2019 is 195 times larger than it was in 2010.
According to the speakers, renewables are already the cheapest source of electricity. However, tariffs for both wind and solar are expected to continue to drop. The next goal of renewable energy is therefore to combine renewables with storage to replace conventional baseload capacity. Battery costs are expected to be reduced almost 60% by 2030. Delivering predictable and reliable production is crucial to further increase renewable penetration. Power off-takers in the market are increasingly requiring suppliers to provide a stable load curve:
- Grid operators to stabilize and smooth system;
- Off-grid mining applications (Release);
- Corporate off-takers to reflect their actual demand.
With reduced storage costs, cheap wind & solar hybrids will replace more thermal baseload generation from coal and diesel/HFO. The first large scale 24/7 renewable PPA combining wind, solar and storage has already been awarded in India.
Technical and commercial optimization are key value drivers in delivering stable and reliable 100% renewable energy.
The challenges of corporate PPAs are:
- Bankability of off-takers;
- Legal framework;
Statkraft, along with Norwegian OceanSun, are currently building a 2 MWp floating solar park in Albania, to be located on the reservoir of the newly built Banja hydropower plant. It will have four units of floating solar panels with a total capacity of 2 MWp. Each float is comprised of 1864 modules, and has a diameter of 72m. The four floats cover an area of 16,000 square meters. The project utilizes the free space on top of the reservoir and the infrastructure of the hydroelectric plant.
Hydrogen is an energy carrier, or process gas. It has several unique characteristics:
- Lighter than air, non-toxic and odourless.
- Easy to store in large amounts.
- Can be used for multiple applications:
- Energy storage;
- Industrial processes (Ammonia, Oil & Fats, Steel, Chemicals, etc.).
- Can be produced 100% emission-free.
- Energy density: 1 kg H2 = 39.4 kWh (1 kg gasoline = 13.9 kWh HHV).
- Needs to be isolated (and eventually compressed if stored in compact storage).
Overall hydrogen demand is set to grow tenfold by 2050. The H2 market continues to develop in the industrial, transportation, and power-to-gas sectors. Development over the last few years points to substantial H2 growth in the near future.
Growth in the H2 market will primarily be driven by:
- Regulations to lower sulphur demands for fuel.
- Decreased crude quality, requiring more hydrogen for processing.
- Electrification of the transport sector.
- A move from coal to hydrogen for various industries (e.g. steel manufacturing).
Depending on the cost, development and penetration of renewable energy, the electrolysis market can potentially grow to over 500 times its current size by 2050. The transport sector is expected to dominate as of 2050, accounting for nearly 29% of the H2 demand.
Renewable hydrogen competes with diesel in the EU. In Europe, unsubsidized renewable hydrogen bought at scale has a pump price of less than €6/kg, which works out as a similar cost to diesel for buses and trucks. Centralized production can use low cost renewables and achieve high scale, while onsite production eliminates costs for distribution.
Global initiatives (hydrogen)
- EUR 9 billion plan in Germany for H2;
- European Clean Hydrogen Alliance;
- Innovation Fund (around EUR 18 billion per year over 10 years financed by carbon pricing system);
- Every country has a developed H2
- ARENA funding for industrial scale H2 projects;
- Willingness to become a global exporter of green H2 thanks to cheap and smooth renewable energy.
China, Japan and South Korea:
- Comprehensive strategies for green mobility and industries.
The Middle East has high interest in H2 due to the potential of cheap electricity.