Companies see a big potential in offshore wind development with several large-scale offshore wind farms planned to be completed in the next five years in the North Sea. The area not only has plenty of ageing platforms and pipelines that could host production and transmission of hydrogen cheaply but also salt caverns to store it at low cost.
However, looking at the economics of blending green hydrogen production with offshore wind development, independent energy research and business intelligence company Rystad Energy found that high costs remain a show-stopper, at least for now.
The business case calculations show that a combination of offshore wind and a hydrogen plant is not economically viable at the current cost scheme, as the bulk green hydrogen price will be too high compared with the current price for grey hydrogen.
However, the research points to the fact that the rapid reduction of offshore wind farms’ capital costs due to policies such as auction might accelerate the learning curve for hydrogen production, lowering the cost for electrolysers and potentially for hydrogen storage. With the future cost scheme, the prices at which the power and bulk hydrogen need to be sold are more reasonable, although there is considerable uncertainty surrounding this cost trend prediction.
“Offshore hydrogen production may become more interesting if a higher carbon tax is imposed on grey hydrogen production,” explained Petra Manuel, Energy Research Analyst at Rystad Energy. “This would force existing hydrogen manufacturers to shift more of the production to blue hydrogen (grey hydrogen coupled with carbon capture and storage), which in turn would make green hydrogen projects more cost-competitive.”
Determining the full potential that hydrogen can unlock is challenging, as hydrogen may open opportunities to decarbonise sectors that would otherwise be difficult to electrify, such as industries, building heating, marine shipping and aviation. But, as we have seen for offshore wind, early-phase support and subsidies can create the needed scale, industrialisation and learning needed to tremendously cut costs.
In the CEE region, Poland has the biggest potential to exploit the combination of offshore wind development and green hydrogen production. Climate and Environment Minister, Michal Kurtyka said recently that Poland wants to build a hydrogen highway to transport future offshore wind energy from the Baltic Sea to industrial and consumer centres in the South of the country. Poland also plans to build up 2 gigawatts (GW) in electrolyser capacity to produce green hydrogen from renewable energy and is planning the development of its offshore wind sector in parallel with the creation of a hydrogen economy.