Author: Nigar ABBASOVA
Apparently, the European Union decided to finally abandon oil, natural gas and coal by 2050 because of carbon dioxide emissions. To replace fossil fuels, Brussels is now going to use renewable hydrogen, which analysts say will mark a new milestone in the global energy balance.
“All our partners supplying fossil fuels to the EU should keep in mind a strategy aimed at phasing them out of consumption. Our main message to them is that the EU's goal is to become climate neutral by 2050. This means that by that time we will have phased out fossil fuels. As for the gas sector, we will use decarbonated gases,” European Commissioner for Energy Kadri Simson. said
To achieve this goal, the EU will need to change its own energy system, which accounts for 75% of the EU's greenhouse gas emissions.
Abandoning oil and gas strategies
Brussels predicts a decline in natural gas consumption in the EU. However, at the first stage, the import of natural gas will remain stable. Nevertheless, oil and gas suppliers have already been warned, and the countdown has begun. They should seriously think about the future that awaits them in Europe over the next 30 years and, if possible, restructure their policies in order to maintain their positions in this market.
So, Vice President of the European Commission Frans Timmermans and European Commissioner for Energy Kadri Simson presented two EU strategies to achieve "climate neutrality" at a press conference in Brussels on July 8: the integration of the energy systems of the EU countries and the hydrogen strategy.
The integration strategy includes reforms in 38 areas, including changes in energy legislation, financing and introduction of new technologies, fiscal measures, elimination of subsidies for fossil fuels, etc.
The main goal of this strategy is to replace fossil energy sources with electricity. According to the EC plan, in 2050 more than half of all energy consumption should come from electricity - this is at least twice as much as now. It is expected that the implementation of these tasks will allow Europeans not only to drive electric cars, but also partially heat their homes with electricity, 80% of which will be produced from renewable sources and 15% - at nuclear power plants.
The EU's Hydrogen Strategy aims to industrialize green hydrogen and use it as an energy source in sectors where electrification is impossible. This includes a partial replacement of coal with hydrogen in steel production, as well as the transition of passenger and freight road and rail transport to hydrogen. Hydrogen has a number of advantages over traditional fuels, the main advantage being its conversion into harmless water vapor during combustion and its environmental cleanliness.
The priority of the EU strategy is the development of renewable hydrogen produced mainly by using wind and solar energy in electrolyzers that split water into its main components - oxygen and hydrogen.
In 2020-2024, EU plans to build at least 6 GW hydrogen electrolysers for the production of up to 1 million tons of renewable hydrogen. In 2025-2030, these figures will grow to 40 GW of electrolytic capacity and 10 million tons of produced hydrogen.
At the same time, Europe will continue the production of hydrogen from other low-carbon energy sources (low-carbon hydrogen), including from natural gas using the steam reforming method. In fact, the creation of hydrogen generates a large amount of harmful carbon dioxide emissions, but in the short and medium term this product is necessary to quickly reduce emissions and support a parallel transition to hydrogen from renewable energy sources.
Experts estimate the total volume of European investments in renewable hydrogen to be 180-470 billion euros, while investments in low-carbon hydrogen is expected to be 3-18 billion euros.
According to the European Commission, the planned investments could boost economic recovery after the coronavirus crisis. They will create jobs in Europe and enhance the EU's chances of leadership and competitiveness in strategic sectors that are critical to its economic sustainability. Thus, it is expected that the development of the entire chain of the hydrogen sector in Europe will create about 1 million jobs.
Ukraine and the Balkan states, in particular, are considered as potential EU partners in the production of renewable hydrogen.
To support the emerging renewable hydrogen industry in Europe, the European Commission created the European Clean Hydrogen Alliance on July 8, 2020. The new organization will bring together industry leaders, national and regional ministers, as well as the civil society.
Meanwhile, the development of hydrogen energy in European countries inspired a number of European companies to develop their own business strategies in this direction as well.
For example, the German steel company Thyssenkrupp announced plans to expand its own water electrolysis facility to generate green hydrogen on a gigawatt scale. “Many countries around the world are planning to enter the hydrogen economy. Water electrolysis increasingly becomes a key technology for building a sustainable, flexible energy system and a carbon-free industry. This opens up new markets for us,” Sami Pelkonen, CEO of Thyssenkrupp's Chemical Technology Business Unit said.
British manufacturer ITM Power is also preparing to seriously expand its own production in cooperation with the Danish energy company Ørsted.
Spanish oil and gas giant Repsol has said it plans to build one of the world's largest clean, zero-emission fuel plants using carbon dioxide and green hydrogen from renewable energy sources. The initial investment in the project will reach 60 million euros.
Oil and gas concern Shell and the state-run Dutch gas infrastructure company Gasunie disclosed their plans for Europe's largest project to produce clean hydrogen in the country using up to 10 GW of offshore wind farms in the North Sea. The project called NortH2 expects the first hydrogen stream by 2027. It will be provided by 3-4 GW offshore wind farms. The capacity of the wind turbine fleet could grow to 10 GW by 2040. It will be capable of producing 800,000 tons of green hydrogen annually.
Meanwhile, experts are working on the transportation of hydrogen in the future. It is known to be one of the most dangerous goods to transport, as it ignites on any contact with air or oxygen. Due to the explosiveness, the transportation of hydrogen has a number of technical difficulties that make the process very expensive. An alternative is the construction of special pipelines, which also require significant investments. Nevertheless, the EU wants to develop a pipeline system for transporting hydrogen. The cheapest way is to re-equip gas pipelines. The cost of this process is estimated at 10-30% of the cost of laying new pipes.
A group of 11 gas transmission operators from nine EU countries has already presented a plan for the development of a pan-European gas transport infrastructure, most of which is planned to be built on the basis of existing gas pipelines. Ultimately, the existing gas transmission network should turn into two parallel networks: for hydrogen and for methane (including biomethane).
The plan was developed by Enagas, Energinet, Fluxys Belgium, Gasunie, GRTgaz, NET4GAS, OGE, ONTRAS, Snam, Swedegas and Terega with support from Guidehouse.
The companies expect that from the mid-2020s, a network will gradually begin to emerge, which will be fully set by 2030 into an initial system of 6,800 km of gas pipelines connecting the clusters of H2 consumption, the so-called Hydrogen Valleys. By 2040, European gas workers expect the length of the network to grow as long as 23,000 km, of which 75% will be provided thanks to the conversion of methane pipes and 25% will be built from scratch.
In addition, Germany's largest energy company RWE teamed up with oil company BP, chemical company Evonik and national gas network operators to build the 130 km GET H2 Nukleus pipeline. As part of the project, it is planned to re-equip the existing gas pipelines from the operators Nowega and OGE to transport 100% hydrogen. In addition, Evonik will build new pipelines.
According to BP, similar to public electricity and gas networks, the hydrogen network will for the first time be open to all producers, traders and consumers on a non-discriminatory basis, and pricing will be transparent. This will make it possible to quickly and reliably integrate further hydrogen projects.
The EU's abandonment of hydrocarbon energy because of its negative impact on the climate and the environment is a serious threat to the main energy supplier of the European market - Russia. Apparently, Russian authorities began the development of plans for organizing the production and export of hydrogen to remain in line with the new trends and not to give up their position in the energy market.
A roadmap for the development of hydrogen energy in Russia for 2020-2024 has already been developed, according to which Gazprom and Rosatom are identified as the first hydrogen producers. The companies will launch pilot hydrogen plants in 2024 at nuclear power plants, gas production facilities and raw material processing plants.
As early as 2021, the Russian government intends to make the country a hydrogen supplier. The energy strategy of the Russian Federation assumes export of 200,000 tons by 2024, and 2 million tons of hydrogen by 2035.
According to the Russian Ministry of Energy, Russia is expected to have a 16% share in the world hydrogen market.
Given the volume of global hydrogen fuel sales in the long term ($700 billion annually), this will provide the Russian Federation with foreign exchange earnings of $112 billion. The amount is almost equal to the country's revenues from oil exports - $121.4 billion at the end of 2019... One of the most promising hydrogen markets for Russia is the EU ($150-160 billion by 2050).
For a number of countries, hydrogen has become a key element in solving problems of national energy policy, including energy security and economic development. Japan, China, Korea and the US are already implementing ambitious hydrogen programs.
Options for Azerbaijan
It is possible that Azerbaijan joins the process in the future, given that the development of renewable energy sources is one of the priority directions for the government. The EU plans to replace fossil energy with hydrogen by 2050 will affect the interests of all energy suppliers in the region, including Azerbaijan, which is just about to start exporting natural gas to Europe by the end of 2020.
However, the planned export volumes of Azerbaijani gas to the EU (10 billion cubic meters annually) are not that large to create a problem for their reorientation to other markets, if necessary. On the other hand, Azerbaijan will have to look for alternative markets for the sale of its gas. Alternatively, it is possible to actively develop the domestic production of liquefied natural gas (LNG) for export.
On the other hand, Azerbaijan can follow the example of Russia and include the production and export of hydrogen among the priorities in order to maintain the positions that it expects to reach in the next 30 years in the European market. The gas export route from Azerbaijan is considered a priority for Europe, as is the Southern Gas Corridor (SGC) project itself. Given that Europe is planning to use the existing gas lines for the future transportation of hydrogen, then the SGC may also be included in them.
In general, the development of hydrogen energy is at the initial stage because the production of hydrogen, especially the ‘green’ one, will require large-scale investments. This process is very energy-intensive currently, which increases the cost of the final product and raises doubts about the competitiveness of such fuel. Also, it is required to solve a number of issues related to the storage and transportation of hydrogen. In short, decarbonization of the EU is a very long-term plan, but Azerbaijan has enough time to prepare. Someday it will be necessary to start anyway. Attempts to find new sales markets for Azerbaijani natural gas should go in line with attempts to fit the new realities of European energy.