Spain is risking billions to export green hydrogen Ship’s crew

By Thomas Gualtieri (Bloomberg) —

In a port across from Gibraltar in June, two European monarchs made a rare joint appearance to lend their imprimatur to a bold and risky endeavour.

King Felipe VI of Spain and King Willem-Alexander of the Netherlands stood alongside cargo ships in Algeciras and opened a new sea corridor. The key cargo that caught the attention of modern kings was green ammonia – a way of transporting hydrogen and a key part of Spain’s plans to become the continent’s clean energy hub.

The rest of Europe may not be ready.

Spain is investing well over 18 billion euros ($19.5 billion) in the production and distribution of hydrogen from renewable sources. This represents Europe’s most ambitious effort yet to implement technologies critical to becoming the world’s first carbon-neutral continent.

The Field of Dreams approach assumes that once supply is built, demand will come. But countries like France and Germany have started scrapping parts of the European Union’s so-called Green Deal – which aims to produce 10 million tonnes of clean hydrogen by 2030 – while the ambitious plan is being dragged out.culture wars” over concerns about the political and financial costs.

Adding to the uncertainties, a July 23 snap election could usher in a new government less willing to spend on the sector. That could repeat history with Spain tear a 2007 program to subsidize photovoltaic panels after liabilities spiraled out of control.

Spain’s projects stretch from the north to the south coast and include Europe’s largest green hydrogen plant in Puertollano. Calvera Hydrogen SA in Zaragoza is planning to build facilities to generate and store the fuel, including at gas stations for cars, buses and trains. All in all, Spain is home to almost one in five strategic hydrogen projects worldwide, behind only the US.

“Spain is in a unique, privileged position to become a sort of Saudi Arabia of green hydrogen,” said Carlos Barrasa, vice president of clean energy at local refiner Cepsa SA, which is investing €3 billion in projects dubbed the Andalusian Green Hydrogen Valley be designated.

Green hydrogen is produced using renewable energy that breaks down water molecules and is considered critical to moving away from fossil fuels. It is effectively a means of storing energy from the sun, wind and water in a way that can be transported via pipelines and ships. To prevent the worst effects of global warming, the International Renewable Energy Agency estimates that green hydrogen needs to increase from less than 1 million tonnes today to over 500 million tonnes by 2050.

Blessed with the best conditions for solar energy in Europe, Spain wants to play a leading role. The risk is going too far and too fast.

“There is a sequence of what is logical to do,” said Martin Lambert, director of hydrogen research at the Oxford Institute for Energy Studies. “The first step is to do as much as possible to decarbonize the power system locally, then produce hydrogen from excess renewable electricity to use locally, and then move on to export.”

As the royal appearance in Algeciras shows, Spain is already pushing ahead with its transit plans.

Ammonia is easier to transport because the gas is easy to liquefy. The compound, made up of nitrogen and hydrogen molecules, is said to be “green” when made with renewable energy.

Cepsa wants to invest 1 billion euros in the production in San Roque, which should be completed by 2027. The new trade route – like a similar project in nearby Huelva by Iberdrola SA, Europe’s leading clean energy developer, plans to ship the chemical to the Dutch port of Rotterdam.

But ammonia is highly toxic, flammable and corrosive. Strict safety standards are required due to health and environmental risks, according to the non-profit organization Global Maritime Forum. This limits the number of vessels that can be used.

However, the backbone of Spain’s export ambitions is H2Med. The EUR 2.5 billion pipeline could transport 2 million tons of hydrogen per year. The underwater link that is set receive EU funded, will run from Barcelona to Marseille and could eventually connect to Germany.

While Spain’s supply and transport links are taking shape, other countries are still lagging far behind. According to the Hydrogen Council, an industry group, less than 10% of the hundreds of projects announced around the world are actually backed by committed capital. Analytical firm Aurora Energy Research estimates that only 1% of the world’s pipeline is currently under construction.

Germany is also one of the laggards in Europe come up short The goal is to reach a hydrogen capacity of 10 terawatts by the end of the decade.

Green hydrogen can be more than twice as expensive to produce as the “grey” variant made from fossil fuels. While the US is promoting the clean option with tax credits to close this gap, the political framework in Europe is still in disarray and nerves are beginning to tremble in Spain.

“We already have many green hydrogen projects in Spain and other countries, but we still don’t know what the support for these projects will be,” Ignacio Galan, chairman of Bilbao-based Iberdrola, said in a phone call after reporting with Analysts first quarter results. “We have to accelerate.”

The first of the EU pilot auctions The promotion of producers through fixed prices per kilogram will not be introduced before autumn of this year, full regulation will not take place until 2028.

With its cheap wind and solar power, Spain is on the rise in places like Puertollano. About 240 kilometers (150 miles) south of Madrid, Iberdrola has built Europe’s largest industrial electrolyser – the expensive equipment needed to split water into hydrogen and oxygen.

In the modest boxy structure, 16 cells contain a polymer electrolyte membrane – or PEM, as the technology is called. According to Maria Retuerto, a scientist at Spain’s National Research Council, the emerging technique is more energy efficient than alkaline versions that produce hydrogen using potassium hydroxide, commonly known as caustic potash.

The power comes from a nearby field of 246,000 solar panels where sheep graze, to keep the grass short enough not to catch fire and to prevent the solar panels from becoming blocked.

The 150 million euro plant can supply 3,000 tons of hydrogen per year. While that’s only about 9% of the volume required by an on-site plant producing ammonia for fertilizer, it’s an important test case for the technology. Iberdrola wants to increase its capacity tenfold and invest 3 billion euros in its green hydrogen business by 2030.

“Our idea is that the end consumer can buy bread that is produced in a fully eco-friendly production chain,” said Javier Plaza, the facility’s director.

But Spain needs about 300 plants like the one in Puertollano to meet its own green hydrogen needs before it can start shipping beyond its borders, according to Javier Revuelta, senior principal at Afry Management Consulting.

Other countries are also targeting this segment, and solar power has disadvantages compared to offshore wind power, which offers higher production potential. To this end, the US company Plug Power Inc set up a hydrogen plant operated in Finland, which has the added advantage of being closer to production centers in Northern Europe.

“It remains to be seen whether exporting from Spain is the best option,” Revuelta said.

–With the support of Akshat Rathi.

© 2023 Bloomberg LP

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