Strategy & Management

The Role of Clean Hydrogen for a Climate Neutral Industry

On the Emergence of New Supply and Value Chains

04.05.2021 - Europe wants to become the world’s first climate-neutral continent by 2050 and decouple its economic growth from the consumption of natural resources – this is what the members of the European Union committed to in the so-called Green Deal in December 2019.



The public debate mainly focuses on replacing fossil fuels with electricity from renewable sources. This ignores the fact that today electricity accounts only for a fraction of the energy consumption.

In Germany, about a quarter of the final energy consumption comes from electricity – and less than half of it from renewable sources. On the other hand, three quarters of the consumed energy are obtained from molecules, mostly hydrocarbons from fossil oil and gas. And, if the production of steel and petrochemicals is to be made carbon neutral as well, this would require an additional amount of energy that is comparable to the energy produced by renewables today.

To a large extend, many areas of energy consumption can be made carbon-neutral by electricity from renewable sources, e.g. individual mobility by electric cars and home heating by heat pumps. The prerequisite, however, is that electricity can be produced in sufficient quantities from renewable sources and transported to the demand centers.

For other, more industrialized applications, fossil hydrocarbons are difficult to replace by electricity on a direct way. Heavy-duty transport and aviation need a high-density energy carrier for long-distance hauling. The steel industry needs an alternative to coke as a reducing agent in the production process. Furthermore, an alternative to fossil oil as a raw material is required for hydrocarbon products of the petrochemical industry.

Climate-neutral hydrogen plays an important role to meet these requirements. It not only serves as a substitute for fossil energy but also as a raw material for industrial processes and products.

But where should the large quantities of climate-neutral hydrogen come from? Green hydrogen produced locally by electrolysis of water using purely renewable energies, e.g. from wind power cannot meet the demand. There is far too little renewable energy close to the industrial clusters in Germany. How industry can obtain large quantities of climate-neutral hydrogen is the subject of various approaches and some pioneering projects.

Not all hydrogen can be called climate neutral. As with electricity, it depends on the source and production method. Today, industry almost exclusively uses grey hydrogen. It is obtained from natural gas, mostly via the steam reforming process. During this process, CO2 is released into the atmosphere. In the case of clean, blue hydrogen, the CO2 formed from the carbon-component in the natural gas is separated from the hydrogen component during the steam reforming process. It is stored underground where the fossil fuel was previously extracted. Besides that, so called turquoise hydrogen is produced by thermal cracking of natural gas with a separation of carbon in solid form. This process can be considered carbon-neutral under two conditions: The process works with electricity from renewable sources and permanently binds the carbon, e.g. as an industrial raw material.

Despite increasing CO2 prices, grey hydrogen is currently cheaper than green hydrogen. In the long term, however, companies will have to adapt. The regulatory pressure is growing – and with it the risk of further or higher levies. Therefore, companies must take care of H2 sources and production routes themselves.

One possibility is the participation in a hydrogen ecosystem, which consists of energy suppliers, converters and consumers. It combines economic and ecological interests.

One of the first ecosystems of this kind is the project "Reallabor Westküste 100" on the North Sea coast of Schleswig-Holstein – a region with high wind levels. Here, electricity producers, technology providers, a refinery, a cement plant, and the regional government have joined forces. The alliance uses electricity from wind farms to produce hydrogen via electrolysis of water. The refinery processes the green hydrogen to reduce the carbon footprint of its products. In the future, the cement plant could use the by-product oxygen to reduce its nitrogen oxide emissions. The CO2 from cement fabrication could then be captured and further processed by the refinery into aviation fuel for the Hamburg Airport using the green hydrogen.

Ecosystems like "Westküste 100" are still at the project stage. Currently and in the foreseeable future, green hydrogen cannot be produced competitively in Germany – at least not at the scale that local industry needs. The availability of electricity from renewable sources is too low. Therefore, the import of hydrogen must be considered, not only of green hydrogen, but also of alternative forms.

One option is the import of hydrogen produced with electricity from photovoltaic plants in southern Europe and North Africa. In January, the "HyDeal" project was launched. The aim is to build 67 GW of electrolysis capacity for green hydrogen in Spain by 2030. The hydrogen is to be transported to Germany through repurposed long-distance pipelines for natural gas.

In North Africa, the Middle East and South America, green hydrogen can be produced with solar power at low cost. This hydrogen could be processed on site into ammonia, methanol or fuels. The high energy density of the hydrogen products compared to the gaseous hydrogen and the simpler handling enables an economic transport by ship. Hence, regions further away from Germany can also become suppliers of climate-neutral energy and raw material.

Realizing the Potential of Climate Neutral Hydrogen

To realize the potential of climate-neutral hydrogen for the decarbonization of industry in Germany, stable, transnational partnerships and a strong hydrogen infrastructure are needed. Companies should urge policymakers to build this up. Only then the transition in energy-intensive companies, such as the chemical industry, will be implemented.

Companies along the value chain of climate neutral hydrogen can take advantage of funding pots. The trick is to be aware of the national and international programmes, to combine them and to draw up convincing concepts needed for a successful transformation.



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