From talking to doing?
Watching the news and particularly LinkedIn feeds, it seems that initiatives and pilot projects on hydrogen and CO2 are growing like mushrooms and benefit from the above-mentioned attention and funding schemes. However, looking a bit closer, there are a growing number of items on the slowdown in the hydrogen economy and FID’s for (pilot) projects being postponed. Can we identify some of the hurdles that are causing a slowdown in what, according to recent reports, seems to be a ‘no-brainer’ for the development of these future fuels projects?
Funding and investment decisions
The current push in energy transition investment is significantly fueled by the funding mechanisms on country or regional (e.g., European) level. Although the focus is on the technical feasibility of introducing future fuels, the biggest challenge might be the speed of (local) political decisions and law-making to allow the industry to take the next steps in building the production of renewable power and future fuels. The political environment with short election cycles creates an unpredictable mid to long-term investment outlook. In recent years, we have experienced a slowdown in, for example, hydrogen (pilot) projects reaching FID and a lack of investment in hydrogen production technology. We should also acknowledge that hydrogen alone is not the silver bullet but will play a crucial part in the larger energy puzzle.
Paying for Carbon Capture
Next to that, we currently see a focus shift from hydrogen to CO2 as the missing piece of the hydrogen puzzle and ammonia as an H2 carrier. Since there is not yet enough green electricity to generate “cheap” or affordable green hydrogen, the focus is on producing H2 from hydrocarbons to create a market. This is leading to a need for CCUS, with major European projects underway in the UK (Teesside, Humberside, HyNet), Netherlands (Porthos, Aramis), and Norway (Northern lights), for example. These costly projects will increase the cost of energy supply in the short term, but expanding the supply of potentially renewable and low-carbon fuels in our global energy supply system is essential to deliver a reliable and affordable transition to climate neutrality.
Asset Life Extension
A clear area for savings in terms of affordability is in the transport of hydrogen and the potential of repurposing. One of the leading infographics produced by the European Hydrogen Backbone indicates that more than 50% of hydrogen pipelines in Europe are being repurposed from existing natural gas pipelines, which might even be as high as 80% in some countries such as the UK. Currently, several pilots and tests have already been carried out with gas containing different percentages of hydrogen being moved by pipelines. The savings could be considerable, as the cost to repurpose pipelines is expected to be only 10-35% of new construction costs. (Inter)national energy companies are positioned to pave the way, enabling the distribution of hydrogen and CO2. As well as companies converting their pipelines, there is also a need for companies to advise them and make an impact by de-risking the processes needed to prepare for a low-carbon future.
Asset management knowledge
Traditional oil and gas companies have the opportunity to support the repurposing of existing assets with their oil and gas experience and expertise. While long-term planning is familiar to the industry, with assets built to last 50 years or more, the scale and scope of change needed is enormous. It will therefore be necessary to develop new (experience-based) knowledge about future fuels. At the same time, the energy industry needs to focus on maintaining critical knowledge of the existing infrastructure as it ages. In addition, hard-earned knowledge needs to be transferred to new technologies. For example, cables that lie on the seabed and enter an offshore wind turbine tower will experience some comparable wear and tear phenomenon as subsea systems connected to offshore oil and gas platforms.
Alongside the need to retain knowledge as an important component of assuring a safe transition to a low or zero-carbon energy supply, the efficient use of asset data is an area where gains can be made. The power of data analytics and AI can be used to better predict pipeline conditions and support the selection of suitable routes to transport future fuels. Regarding the repurposing of infrastructure, the quality and availability of data are crucial to the safe and economical reuse of existing assets for a sustainable future.
Public acceptance
As mentioned, accelerating the energy transition incorporating future fuels is only possible if all stakeholders work together. Societal responses to inflation and the cost of living crisis have created a public debate that could delay the energy transition as the focus shifts to short-term priorities. On the other hand, it is possible that public sentiment could favor energy independence through renewables and nuclear and the acceptance of (initially) higher energy prices as a strategic means to secure energy independence. This will certainly play a role in the public acceptance of the transition to more renewable power.
Does this mean that our efforts in future fuels as a means to fight the climate crisis are a losing game? Most probably not, given the sheer investment budgets flying around and the way governments have committed to climate change targets, with resulting energy transition ambitions. The energy transition is anything but an energy revolution, as our global expanding thirst for energy and living standards are outgrowing the availability of renewable energy by far. This evolution needs the “Old” and the “New” to work together, as it needs all stakeholders to work together, from production to consumption. The idea of putting siloed focus on one modality or energy carrier is causing inefficiencies in the energy value chain; we need it all and in a balanced way to get anywhere near the goals we as a society have set ourselves battling climate change.
Enabling technology and innovation across industry sectors will most likely be the problem moving forward. The willingness and readiness to think and act beyond our “own” needs in energy independence and energy sectors will be one of the key pieces of the puzzle to reach the ambitious but needed goals in addressing climate change.