The “Offshore Wind to Green Hydrogen: Insights from Europe” report is authored by Val Stori, Project Director, Clean Energy States Alliance (CESA). The report covers the plans, strategies, proposals, and challenges for the development of green hydrogen from offshore wind generation in Europe and based on these it gives implications for the United States. REGlobal presents an extract from this report.
The Context for Offshore Wind to Hydrogen in Europe
Many countries in Europe have ambitious carbon reduction goals. The ongoing conversion of electricity supply from fossil-fuel-based power plants to renewable generation has been proceeding well, but heating, transportation, and industry have proven harder to decarbonize.
Hydrogen could be a potential solution to decarbonize these sectors. This section addresses how offshore wind in Europe could support hydrogen’s development.
Offshore Wind- Specific Drivers
The amount of renewable electricity required to meet the world’s potential future green hydrogen demand is considerable. Even if only a modest share of the energy demands from heating, transportation, and industrial sectors are met by green hydrogen, a significant increase in renewable electricity generation will be needed.
The installed capacity of offshore wind is expected to quadruple globally over the next decade, growing from a cumulative installed capacity of around 50 GW in 2021 to 225 GW in 2030. Approximately 50 percent of total offshore wind capacity in the world will be in Europe in 2030; Asia will account for roughly 40 percent of global installed capacity, and the US for the remaining 10 percent.
Offshore wind is likely to play an important role in the production of hydrogen in Europe due to the continent’s strong offshore wind resources and established offshore wind market. Offshore wind in Europe is particularly suited to the production for hydrogen for the following reasons:
- Europe installed its first offshore wind turbine in 1991. There are now 25 GW of installed offshore wind capacity off Europe’s coast, and costs have declined dramatically to €40–€50 per megawatt-hour (Mwh). The next phase of offshore wind projects will include 12+ MW turbines and have more capacity than ever before. With limited interconnection points, projected grid constraints, and distance from shore, these projects may be well suited for dedicated hydrogen production or for converting excess capacity to hydrogen.
- A key factor effecting the levelized cost of hydrogen (LCOH) is the capacity factor of the electrolyzer; i.e., what percentage of the electrolyzer’s maximum production capacity is achieved each year. Offshore wind has a higher capacity factor than other renewables, meaning the electrolyzer can operate for a greater proportion of time and produce more hydrogen.
- Economies of scale will be key to reducing LCOH. Compared with other renewable technologies such as onshore wind and solar PV, individual offshore windfarms have much larger capacity, meaning a single project can achieve economies of scale by installing a large GW-scale electrolyzer plant. Additionally, the ability to interconnect multiple projects could enable multi-GW offshore hydrogen production hubs.
- Many of the end uses of hydrogen, such as with refineries, metal industry, marine transport, and export/import facilities are located on the coast, near to offshore wind farm locations.
There are also drawbacks to using offshore wind to produce hydrogen. Offshore wind has a higher levelized cost of electricity (LCoE) than solar PV and onshore wind. Therefore, it is possible that hydrogen could be produced at a lower cost when produced from large solar PV arrays or large onshore windfarms.
There are other drivers that are creating a particular focus on hydrogen produced from offshore wind in Europe. Offshore wind is seen as a natural transition for many oil and gas companies, which have decades of experience in offshore engineering and are now increasingly focused on transitioning their businesses from fossil fuels to renewable energy. Offshore wind can be used to electrify offshore platforms, decarbonize oil and gas production, and produce hydrogen. For example, in 2020, bp, TotalEnergies, Shell, and Eni acquired 5.4 GW of offshore wind capacity; and in 2021, 4.5 GW out of 7.98 GW of capacity auctioned during the uk Crown Estates Round 4 leasing auction was won by consortiums that included either bp or Total Energies.
Hydrogen offers these companies an opportunity to transition their business from producing and trading fossil fuels to producing and trading renewable fuels with similar physical properties. The interests of these large and influential energy majors are a key driver behind the European interest in hydrogen and, in particular, the interest in the combination of offshore wind and hydrogen.
Additionally, there are secondary benefits of hydrogen that address two specific challenges faced by the offshore wind industry: increased offtake risk and insufficient electricity infrastructure.
Increased Offtake Risk
As the LCoE of renewables falls, governments will reduce the quantity and value of government-backed price-support schemes. This reduction in price support will result in increased competition between offshore wind projects and other renewables projects such as solar PV and onshore wind farms. This competition will result in offshore wind projects that have little or no government-backed price support. Such projects will need to rely on private power purchase agreements (PPAs) to achieve price certainty and to limit their exposure to price volatility in electricity day-ahead and spot markets.
If an offshore wind project developer can lock in long-term electricity prices through a PPA with green hydrogen producers, that would guarantee price certainty and reduce exposure for both parties and result in predictable hydrogen production costs.
Alternatively, offshore wind farm developers could produce green hydrogen themselves, adding flexibility over when and where they sell electricity, and reducing exposure to price fluctuations in either market.
In wind Europe’s 2019 report, “Our energy, our future”, the need to develop sufficient electricity infrastructure was specified as a key challenge to the deployment of future offshore wind in Europe. The report estimates that new grid developments would need to begin 10 years prior to the installation of new offshore wind capacity. As the installed capacity of offshore wind has increased, so too has the need to upgrade electricity infrastructure and install energy storage. The network upgrades often required to accommodate new offshore windfarms can be costly, and it can be a lengthy process to secure grid connections, limiting the rate at which new offshore wind farms can be installed.
In addition to long lead times, developing new grid infrastructure can be complicated. In Europe, electricity transmission is highly regulated, and investments in new infrastructure require input from multiple stakeholders and careful consideration of how costs will be distributed among users of the grid. Grid upgrades must also contend with planning processes. In most markets, offshore wind farms are connected to the electricity grid via dedicated connection points. This involves offshore cables landing at a point on shore before being connected to the onshore electricity grid. As the number of windfarms increases, and the size of onshore grid infrastructure associated with these windfarms increases, planning restrictions will become more of a concern for developers.
Producing hydrogen from electrolyzer systems connected directly to an offshore windfarm could reduce the size of the required grid connection or eliminate the need for it entirely. Although hydrogen will not replace electricity as the primary energy transmission method for offshore wind, it could supplement it. The ability to reuse existing gas infrastructure could mitigate planning risks associated with new energy transmission infrastructure, and the ability to trade hydrogen between private parties using private infrastructure could alleviate the cost and time required to upgrade the electrical grid. The overall result would be faster energy transmission capacity, enabling a faster rate of deployment for offshore wind.
Another infrastructure challenge that hydrogen could solve lies in its ability to be produced and exported in areas where the offshore wind resource is good, but the transmission capacity for new generation is low. For example, in the north of Scotland, Ireland, and Norway, hydrogen could be exported, enabling the deployment of much more offshore wind capacity than could otherwise be installed and interconnected.
System stability will also be a key challenge in future electricity grids that will become reliant on converter-based generators such as solar PV and wind turbines, with limited physical inertia on the system. Low system inertia can result in poor power quality and blackouts. Hydrogen generators can be used to provide this physical inertia and stability to the grid.
Offshore Wind to Hydrogen Concepts
There are several different offshore Wind-to-H2 concepts being considered in Europe. These concepts fall into the following categories:
- Offshore windfarm with onshore hydrogen production via direct physical connection: In this concept, the offshore windfarm uses offshore substation(s) and high-voltage export cables to transport power back to shore where it is connected to a substation and electrolyzer. This concept can include a connection to the electricity grid, enabling export of power from the offshore windfarm to the grid, and import of additional power to the electrolyzer facility, although the system can also work islanded from the grid.One benefit of this direct connection is that the system can reduce the size of or remove the need for a grid connection, enabling development of an offshore windfarm where there is good wind resource and hydrogen demand, but insufficient available grid capacity.
- Offshore windfarm with onshore hydrogen production via PPA: This concept uses a conventional electricity export system connecting an offshore wind farm to the onshore electricity grid. Hydrogen is produced at another location onshore using a grid-connected electrolyzer. The offshore windfarm owner has a PPA in place with the hydrogen production facility owner. The benefits are that hydrogen production is located at the point of use, reducing costs of hydrogen transportation. Grid connection enables electrolyzers to be used for grid balancing, providing an additional revenue stream.
- Offshore windfarm with offshore on-turbine hydrogen production: In this concept, each offshore turbine is equipped with an integrated “on-turbine” electrolyzer, and the hydrogen is produced at sea. The turbine platforms would be equipped with desalination technologies to purify the seawater, and the electrolyzers would split the resulting purified water into hydrogen and oxygen. The hydrogen is then transported to shore via pipeline. Depending on the design of the system, one or more hydrogen compression stations may be required to increase the pressure of the hydrogen for transport. On-turbine hydrogen production systems are being developed for both fixed foundation and floating foundation turbines. Cost savings can result from this integrated on-turbine-electrolyzer design. In this design concept, the turbines’ power train is optimized for hydrogen production, resulting in higher efficiency and lower LCoh. In addition, the cost of exporting hydrogen via pipeline is less per kilometer than that of high-voltage export cables; over long distances, this cost difference may result in hydrogen being the preferred energy transportation medium.
- Offshore windfarm with offshore central hydrogen production: The central hydrogen production platform concept uses array cables to collect power from wind turbines and delivers the power to a central platform. Electrolyzers at the central platform produce hydrogen that is then transported back to shore via pipeline. This concept offers cost savings by removing the expense of export cables and onshore substations. This concept is particularly relevant for windfarms further from shore because the cost of hydrogen pipe is lower per kilometer than that of high-voltage export cables.
Offshore Wind to Green Hydrogen for The U.S.
For the United States, it may ultimately make sense to use some offshore wind output for hydrogen production. This will be especially true in situations where excess offshore wind can be transformed into green hydrogen, thereby reducing curtailment and producing green hydrogen when the cost of electricity is cheapest, or where interconnection congestion and limited landing sites delay or prohibit cable landings. in these cases, PtG can offer system integration benefits and can cost-effectively deliver offshore wind energy.
However, it must be recognized that the US offshore wind industry is at a much earlier stage of development than the European industry. The output from the initial US wind farms will be fully needed for electricity production that displaces fossil fuel generation. That electricity will be especially valuable because the wind farms will be in relatively close proximity to major load centers, such as the New York metropolitan area, eastern Massachusetts, and the Baltimore region. Until there has been significant offshore wind development in the US, it will not make sense to divert output to hydrogen production. Europe is, in part, focusing on offshore wind to hydrogen because offshore wind farms are being planned for locations far from major load centers and where there will be difficulty integrating some of the output into the electric grid. Green hydrogen is also a key component of Europe’s deep decarbonization strategy for sectors where electrification is technologically unfeasible.
Despite offshore wind to hydrogen being on a slower trajectory than in Europe, it does not mean that the US federal government and the states should ignore the potential for green hydrogen. Research into hydrogen technologies and applications should continue, especially to ensure that any future expanded hydrogen use does not cause unforeseen environmental or economic problems. For offshore wind in particular, research should identify what needs to be done over the coming decade to prepare for possible use of excess offshore wind output for green hydrogen sometime after 2030.
Furthermore, states could prepare roadmaps for green hydrogen development, including electrolyzer and fuel cell targets. State policies and incentives can support hydrogen and fuel cell deployment and create jobs throughout the supply chain. The northeast has both a strong offshore wind resource and a strong hydrogen fuel cell supply chain, especially in New York and Connecticut.
States could also enter into partnerships with the US Department of Energy or its national labs to study potential hydrogen applications and technologies. Research partnerships that improve electrolyzer efficiencies, safe hydrogen transportation and storage, and explore potential applications across a variety of sectors would help states better understand hydrogen’s applicability in economy-wide decarbonization.
In addition, it will be imperative for states to engage stakeholders, including environmental justice and community-based organizations, in dialogue and discussion on green hydrogen’s potential applications and pathways. Stakeholder engagement should occur prior to any decisions on demonstration projects or publication of roadmaps. This is especially true for any potential combustion of green hydrogen for power generation as fossil fuel power plants are often located in frontline communities. Even with low NOx technologies, the continued existence of power plants in under-resourced communities will impact health, property values, and more.
Separate from offshore wind, some well-chosen, small, green hydrogen pilot projects will make sense. Policies can be assessed and implemented to address some of the technical and cost barriers to hydrogen, and to ensure that green hydrogen will ultimately be used to decarbonize hard-to-electrify sectors rather than to extend the life of fossil fuel power plants. Some fossil fuel companies and utilities are using the long-term vision of a hydrogen future as a rationale for building more natural gas generators and perpetuating existing fossil fuel technologies; states and the federal government should make sure that that does not happen.
In addition, it will be important for policymakers and the energy industry in the US to continue to closely monitor what is going on in Europe with hydrogen.
The complete report can be accessed here