The processes to produce e-fuels, especially electrolysis, are very electricity-intensive. In fact, power-to-X facilities connected directly to the transmission grid are likely to become some of the largest power consumers.
Unlike the majority of existing power consumers whose consumption is relatively inelastic, renewable hydrogen and power-to-X is able to deliver demand-side flexibility, ramping power consumption up or down depending on electricity price signals.
As industrialisation and innovation drive down the capital costs of renewable hydrogen production over the next decade, large-scale electrolysis is expected to be able to operate at lower overall capacity factors, while retaining a positive business case.
This allows them to optimise the operation of electrolysers to take advantage of the lowest possible electricity prices. It also enables power-to-X facilities to support grid operations through ramping, idling and sale of flexibility. In time, and with the right incentives, gigawatt-scale electrolysers and power-to-X facilities have the potential to contribute to an optimised operation of the power transmission grid.
These considerations raise questions of where, when and under what conditions to connect power-to-X facilities to the grid. While areas with high penetration of renewables and low cost of consuming power at large scale (such as in North West Europe) are a logical choice, many factors will come into play in decision-making.
Coordinated plans for energy infrastructure development are critical to ensure the best climate- and socio-economic outcomes. Effective market signals can serve the dual purpose of incentivising optimised location and operation of power-to-X infrastructure and realising significant socio-economic savings for transmission infrastructure in connection with the continued build-out of renewables.
Vision for a renewable hydrogen pathway for Europe
Any vision for renewable hydrogen and power-to-X must start with an ambition for deep decarbonisation to drive the demand for climate neutral solutions in industry and transportation. To secure future supply of renewable hydrogen, it is necessary to achieve industrial scale for water electrolysis while driving down costs and, in parallel, incentivising demand for e-fuels. While the timeframe will depend on the growth rate of both supply and demand – and ultimately the political support and regulatory framework – the deployment of power-to-X can be envisaged in three general phases:
2020-2025: Peer-to-peer projects
Develop renewable hydrogen to replace fossil hydrogen
Converting demand for fossil hydrogen into demand for renewable hydrogen is a good point of departure. This enables near term scale and industrialization of renewable hydrogen production, immediately driving down costs. Such facilities are best located close to large scale renewable assets and with strong connection points in the transmission grid, while also close to existing hydrogen demand. For instance, large scale offshore wind energy clusters, multi-connected to two or more markets, hold large potential as they offer high availability of renewable generation and can help to maximise the future role of power-to-X in grid operations and balancing.
Flagship projects, with developers of electrolyser facilities engaging with industrial consumers of hydrogen to realise 'peer-to-peer' hydrogen projects, can help create demand. To ensure adequate supply, actors should take steps to ensure offtake of renewable power
2025-2030: Hydrogen clusters
Optimise use of infrastructure, add storage
As electrolysis scales up, enabling distribution of hydrogen from large electrolysers to one or more designated consumers will become increasingly important. Electrolyser facilities could be sited near renewable power sources, to feed hydrogen into pipelines or co-located with e-fuel production. As larger volumes of renewable hydrogen are produced, infrastructure could include larger storage facilities e.g. in natural underground salt caverns. Such storage will absorb intermittency in production and ensure a steady supply of renewable hydrogen to consumers. Alternatively, hydrogen can be converted to other e-fuels, e.g. e-ammonia, e-methanol or e-kerosene, which can relatively easily be stored and transported using existing infrastructure.
Where feasible, segments of the current gas grid can be converted to dedicated hydrogen infrastructure. This should only be used for hydrogen, however, as blending with natural gas will decimate the value of the hydrogen and lock-in applications that will most likely not be relevant in a fully decarbonised economy
2030-2040: Integrated hydrogen grid
A transnational hydrogen grid and market
In the longer term, further scaling of renewable generation and hydrogen production will transform the energy system and continue to drive down costs. Supplementary to expanded power transmission, a ‘backbone’ hydrogen grid will connect renewable hydrogen production – onshore and offshore – in regions with wind or solar resources to the industrial centres. This might leverage from existing infrastructure, where natural gas pipelines are retrofitted to hydrogen transport, or involve development of new pipelines designated for hydrogen.
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