‘Hydrogen can play a crucial role in the energy transition’

What is imperative to enable hydrogen trade between countries and more use of hydrogen in various economic sectors? In this interview series, we talk to experts about how the market is developing and the hurdles that need to be overcome to speed up the transition. Hans Anton Tvete is director for the maritime research programme at DNV and a member of the German-Norwegian Working Group on Ocean Technologies.

What do the analyses of DNV say about the future of hydrogen?

Our annual Energy Transition Outlook forecasts that hydrogen will grow strongly over the last decade of our forecast, reaching 5.5 percent of global energy demand in 2050, but with large regional variations. However, the pace of development is currently slow. The reasons for the projected slow pace of uptake are several. Hydrogen is currently expensive, due to the CAPEX cost needed to scale renewable power generation and electrolysis, as well as the conversion losses incurred over the value chain. There are also concerns with the safe handling and use of hydrogen. As a result, there is uncertainty for which sectors hydrogen will be a good choice, and where the hydrogen will be purchased and used in a competitive market.

However, it is becoming increasingly clear that hydrogen can play a crucial role in the energy transition. Even though there is agreement that  several sectors don’t need hydrogen because they can be electrified, there is also agreement that harder-to-abate sectors e.g. heavy industry and shipping, would need hydrogen to decarbonize. In addition, hydrogen emerges as a key enabler to store surplus renewable energy, couple the renewable power sector with other more power-dense sectors, and together with CCS aid in decarbonizing the oil and gas industry.

Which kind of applications can we expect and what are the technological hurdles?

One harder-to-abate sector, where the energy transition and decarbonization is at the very top of the agenda, is shipping. Energy efficiency measures and operational improvements may significantly reduce GHG emissions, but in order to reach the ambitious targets set by the IMO to cut GHG emissions by half within 2050, wide adoption of zero- and net-zero carbon fuels must take place. Shipping is a sector that is not easily electrified and would require more energy-dense solutions. Especially for the deep-sea segment where 80 percent of GHG emissions take place. Shipping is therefore uniquely positioned to benefit from the increased potential value creation of hydrogen.

Although hydrogen can be used directly in maritime propulsion systems, with ongoing plans for application in short sea shipping within the ferry segment, the use of hydrogen as a marine fuel is not straightforward. Being the lightest of all atoms, hydrogen is difficult to store. That will lead to higher demands being put on the containment system, the fuel supply systems, and the energy converter – be it a fuel cell or an internal combustion engine. Secondly, although being light, hydrogen has very poor properties when it comes to volumetric energy density. With heavy containment systems needed, the gravimetric energy density is also significantly below current fossil options. This will lead to reduced payload capacity as well, especially if hydrogen is to be stored onboard in a gaseous state. As a consequence of the two beforementioned challenges, the CAPEX and OPEX of running on hydrogen become limiting factors for an industry that will first and foremost look for solutions that are both compliant and cost-effective.

Other technology challenges, which DNV has a particular focus on as a classification society, are the safety aspects. As we see it, hydrogen has some challenges. Embrittlement in steel or so-called hydrogen-induced cracking that creates integrity challenges in the infrastructure and containment systems; Hydrogen diffusion and potential underground accumulation, where small hydrogen molecules diffuse through other structures, accumulate and pose a risk; Potential self-ignition if hydrogen leaks under certain conditions. DNV has built a “hydrogen street” at our test site at Spadeadam to investigate how one can make hydrogen reliable and safe for heating and cooking in homes.

From this, we believe that direct use of hydrogen is currently not likely to see a high uptake in shipping beyond that of niche segments such as ferries or cruise vessels, where local and regional incentives and regulations play a decisive part. Then why did I state above that hydrogen can play an important role in decarbonizing shipping? The answer is synthetic fuels. Fuels enabled by hydrogen. One such synthetic fuel is ammonia, which has been gaining a lot of attention in the maritime industry lately. In addition to being fuel with no carbon in the stack, ammonia has more favorable properties in terms of energy density and storage. There is already a developed infrastructure in place, and ammonia is traded globally. As a result, we believe that ammonia will play an important role in decarbonizing shipping and find that there are substantial but not unsurmountable technical and safety barriers for its adoption. The barriers more lie with the source of ammonia and the future cost of blue and green ammonia.

Based on your research, what kind of policy is needed to fasten the transition?

Developments on both technological and market- and policy levels are needed to push down the cost curve. So, both governmental and industry stakeholders can affect the uptake by leveraging technology developments, market mechanisms and regulatory frameworks.  In our Energy Transition Outlook, we highlight three policy options that affect both the energy demand and the supply side.

Firstly, a technology support policy that fosters innovation through funding of research and development of technology alternatives, hence stimulating the interaction between R&D, production, and learning-by-doing. Investment support stimulates technological advances, in particular immature technologies far from commercialization and with high unit costs. Funding for initial projects, nascent industries, and industrial-scale demonstration helps to prove performance, trigger cost-learning rates, and generate stakeholder alignment. Systems design thinking and a more flexible approach will be required to support trial-and-error experimentation and to ensure that regulated entities recover some of their spending.

Secondly, a market activation policy that promotes market deployment of solutions and accelerates uptake to help viable technologies achieve a decline in unit costs. This happens through learning-by-using and feedback for further technology development, industrial efficiencies, ongoing market-focused R&D, and economies of scale. Lower costs have a self-reinforcing effect ensuring more sales, which, in turn, trigger lower costs and more buildout, etc. As an example, Norwegian electric vehicle purchase incentives have resulted in high sale numbers, which, in turn, helped to push down global battery prices to a lower level than they would have been otherwise, thus increasing global battery-electric vehicle uptake and reducing carbon emissions.

Thirdly, economic signals to fix market distortions. The pace of the energy transition will be influenced by the political feasibility of dealing with barriers to the uptake of clean technologies. Inadequate carbon pricing and persistent fossil fuel subsidies, as well as the lack of internalization of negative externalities, are market distortions that delay the energy transition. In some countries, carbon prices are, in fact, negative, owing to high financial support for hydrocarbons. Fossil-fuel subsidies drain public budgets and are distortive, in that they lower the cost of production and/or the price paid by energy consumers. Fixing these market distortions has cross-sector relevance for creating a global level playing field for products and industries, and for closing the cost differential between ‘black and green’ technologies. In sectors less prone to electrification, where emissions are harder to abate and technologies are less mature, in the absence of robust carbon pricing, it will be especially difficult to see rapid technology uptakes, such as CCS and lower-carbon fuels in shipping and aviation.

German-Norwegian Energy Dialogue 2021

The discussion on developing a hydrogen value chain continues at the German-Norwegian Energy Dialogue 2021, which takes place as a webinar series in May and June. Further perspectives from DNV will be given by Remi Eriksen, Group President and CEO, at the first webinar on May 19 titled What next for German-Norwegian energy cooperation?

The Working Group on Ocean Technology works to unlock potential for bilateral cooperation between Germany and Norway on ocean technology, ranging from digitalization of marine industries to energy production and shipping.