Guest article by Karl-Heinz Remmers, PV pioneer

For a long time the public has held a deep fascination for solar power and hydrogen. Around the world, both of these technologies have been described as great opportunities and the solution to our energy problems. Indeed, hydrogen is regarded within the current public debate as a cure for all ills. What’s the latest on these solutions? Where does the green power they need come from? And how can (green) hydrogen and photovoltaics more rapidly leverage their huge shared potential?

When we started designing and building solar power plants in 1992, the fascination with hydrogen and solar energy was already immense. However, photovoltaic or PV plants were extremely expensive. In Germany they were only bought by enthusiasts, and even these purchases were dependent on (massive) grants. These (lost) grants came and went, just as the new pilot schemes and flagship projects did. The only relatively stable markets to be found globally were in space flight (no concern about cost) and off-grid, where suitable. Grid-connected photovoltaics didn’t make much progress in terms of scaling up production, and therefore the plants remained expensive and practically irrelevant for energy supply purposes.

In 2000 (global PV market then: 200 megawatts), photovoltaics started to evolve into a mass-use technology, a development that was largely down to the huge international boost provided by Germany’s renewable energy law EEG. In 2023, the global market is expected to reach 380 gigawatts of new installations. The electricity generated around the world by this newly installed capacity would be enough to cover Germany’s current electricity demand.

PV plants have the lowest power-generating costs of all new facilities. These costs have fallen by 95 percent since 2000. It is anticipated that the global PV market will grow tenfold by 2035 – accompanied by further efficiency increases and cost reductions. All this has been made possible through the creation of a market in the earlier stages that can also now in Germany generate solar power without the need for any subsidies.

In our view, we don’t yet have a comparable approach to confidently realize those same (necessary) scaling effects in the hydrogen sector in a way that provides planning certainty for industry. That said, there are hydrogen regions, pilot projects and initial marketplaces springing up all over the place and there is a great deal of goodwill within politics and the media. But when it comes to the market for new hydrogen, things quickly become difficult or just downright impossible. It’s no wonder that large off-takers (e.g., steelworks that have started the conversion to hydrogen) as well as small- and medium-size enterprises are hesitant about purchasing hydrogen, if they are indeed interested at all.

Some can’t get sufficient quantities; others don’t want to pay today’s high prices. For the expectation is that hydrogen will get cheaper. Plus, virtually every day that passes there are fantasies of some – unrealistic – hydrogen import. Or of a bridging technology: blue hydrogen with carbon capture and storage. But nobody has yet stuck a price tag on these potential sources.

The massive success of photovoltaics was previously in having solved this chicken-and-the-egg problem through the EEG. Each energy producer (regardless of size) had a guaranteed off-take over the required payback period along with a price guarantee. Electricity buyers, on the other hand, paid the relevant market prices. As the support scheme was highly degressive, the desired cost reduction was taken into account or given a huge push.

These days, this form of support is barely needed, if at all, and in many areas and countries it is now being aligned with market conditions through the process of tendering. Similar systems for ramping up hydrogen are under discussion in the European Union or are being announced in the form of EU tenders. Just as in the solar and wind industries, contracts for difference or CFDs could be introduced for hydrogen with the establishment of hydrogen exchange prices as a reference point.

Why is that a key issue?

Whoever invests in an electrolyzer (together with storage etc.) can be certain that much cheaper and more efficient equipment will be available to purchase in three to five years’ time. Reliability will also have improved. It’s thus foreseeable that both CAPEX and OPEX, or put more simply, the price per kilogram of hydrogen, will decrease massively. Unless there is a guaranteed off-take at the price needed today, the project quickly becomes bankrupt.

By contrast, the hydrogen buyer from a steelworks or indeed from a municipal energy supplier, for example, will surely refuse to sign a long-term hydrogen purchasing agreement right now when it’s clear that prices will fall massively in the coming years. If an attempt is made to get around this, e.g., through “lost” subsidies or one-off grants, there is the possible threat that, after these measures have been applied, bankruptcy will occur or the electrolyzer will be shut down since the support is indeed “lost.”

What’s more, this type of approach has in the past proved to be highly difficult to get right in terms of how the support is structured. But more than anything, it has always been dependent on the particular budgetary situation of the funding organization.

A “hydrogen CFD” or a similar instrument can incentivize a diverse range of players and also encourage rapid market expansion as well as a quicker pace of innovation.

Application assumptions

If 15 years ago hydrogen-driven cars were the only promising technology for real distances over 100 kilometers (60 miles), then the technological evolution of battery storage has now already superseded this, i.e., prior to mass use. And this has happened despite the fact that the development of battery-based vehicles and their batteries is in its infancy.

By as early as 2025, Germany, too, is likely to witness the price of battery electric vehicles dropping below that of their combustion engine counterparts. Whether you like this reality or not, that proverbial ship has already sailed. If you also take a look at the trend for trucks, the race here will likewise go in favor of batteries.

How things will pan out for commercial vehicles or rolling stock remains to be seen. However, all these categories have a powerful competitor in the form of hundreds of millions of new batteries that are coming on the market globally every year. That’s because these batteries also cushion the grids and make “mass charging” possible. And railroad electrification using common overhead wires is also another real rival when it comes to purchasing and operational costs, as a battery or hydrogen train is not an end in itself.

In my opinion it’s important not to hold onto applications that simply have no real chance of making it big, since it just frustrates people when these promised technologies don’t then materialize. What’s more, using hydrogen for heating in ancient condensing boilers is so nonsensical and expensive that the hydrogen sector should, as a matter of urgency, distance itself from the natural gas sector, which has been pushing this very agenda, so that it can maintain its own credibility and, above all, control the narrative around its own technology.

Applications such as the production of hydrogen-based aviation gasoline or marine fuels and all the other fuel applications as well as hydrogen storage applications – an aspect that desperately needs redefining – are such an enormous future market that there is no need to lament it.

Why do hydrogen storage applications need to be redefined?

In the various long-term scenarios presented to governments by research institutes, there isn’t a single scenario which reckons on the already burgeoning wave of millions of (bidirectional) energy stores in vehicles and the already highly cost-effective medium and large decentralized energy stores. From 2024, no solar farm will be built in Germany that doesn’t have its own storage facility to allow power to be sold at night – and that’s without the need for any funding.

Millions of smaller energy stores are being set up too and these are all significantly extending the actual grid options on offer locally. International developments are taking place at a much faster pace than they once did for PV. Battery storage is making solar energy available “during the night” and “bringing wind to windless days” – for a few hours, then days, then weeks. And this mass availability costs just a few euro cent per kilowatt-hour. This will considerably change all previous scenarios outlined for hydrogen’s use as an energy store.

Off-grid also an option

Hydrogen can also be produced off-grid on a gigawatt scale, provided it is possible to transport the product (hydrogen or an e-fuel) reliably and at a reasonable cost. This is an extremely interesting aspect that is achievable all over the world, with differing proportions of solar and wind power (or, where feasible, other renewable sources). These forms of renewable generation complement each other locally and can, with back-up storage, enable very high running times for electrolysis without costly and time-consuming connection to the power grid. Since their end product is not electricity but hydrogen-based substances. Projects along these lines are happening in various countries, and this has become a realistic option for Germany as well.

Distancing from costly “bridging technologies”

There is a serious ongoing discussion within associations and the media about carbon capture and storage, otherwise known as CCS, and its use in Germany as a bridging technology to obtain blue hydrogen from natural gas by the start of the 2030s. In this case, a technology that is still at the prototype stage after decades of political discussion is being pushed onto a totally unfeasible timeline. And that’s without any discussion of the overall costs of such an option, assuming that (at some point) it is indeed available for large-scale deployment.

Ultimately, CCS has been repeatedly sold as an option for coal power plants since the 2000s and has never come to fruition – for cost reasons. Plus, with such ideas, all the problems of security of supply, costs and the finiteness of natural gas still remain. CCS is a dangerous, insubstantial distraction from the long-term and quickly scalable technology pathway of renewable electrolysis in the EU.

Underrated opportunities

Hardly a day goes by when there isn’t a public discussion of all manner of ideas for the hydrogen economy. It almost doesn’t matter where the German Chancellor or the minister is traveling, it’s nearly always about importing hydrogen. And of course it’s hydrogen at a “bargain price,” with a total absence of debate about the costs or prices. It’s already the case today that a veil is drawn over the massive existing political tensions and risks of potential supplier countries. In fact it’s terrifying how little discussion there is in political and media environments about the EU’s own potential and, especially, the cost of hydrogen options. That’s why I want to make a simple “back-of-the-envelope” comparison, taking into consideration hydrogen minimum costs:

If I want to produce hydrogen “in the desert,” I have to…

– pay (higher) costs than in the EU for electrolyzers, plant engineering, security etc.

– desalinate seawater (CAPEX costs and electricity consumption).

– use wind and solar power at a minimum cost of 1.5 euro cent/kWh, with battery stabilization for high electrolyzer utilization levels on top, albeit the prices will generally be above the costs.

– calculate the losses due to waste heat (20 percent to 40 percent of the electricity used) since the thermal energy will not be used in the local climate.

– calculate the expense of equipment such as the compressors for transportation.

– assess the costs of the pipeline or tanker and their losses in operation.

– adopt a calculated risk strategy for unstable regions.

– …

If I want to produce hydrogen in Germany or in the EU, I have to…

– pay lower costs than in the desert for electrolyzers, plant engineering, security etc.

– pay for water.

– use wind and solar power at a cost of 4 to 7 euro cent/kWh, plus a bit more for stabilization, whereby avoided curtailments from the power grid can lower the price.

– transfer waste heat for the purposes of district heating or process heat. Then I would have 20 percent to 40 percent lower electricity costs because this can be sold as heat – or equally “written off.”

– calculate the expense of equipment such as the compressors for transportation.

– ensure direct consumption locally or short tanker/pipeline routes (lower losses and costs).

– dispense with the need for a risk strategy for unstable regions.

– …

Finally, I think it would be necessary to refine the above back-of-the-envelope calculation by inserting real figures that take into account the expected massive decline in cost. First and foremost, this would enable realistic assessments to be made (at last) about what green hydrogen can cost in 2030/2040 and which prices are reached based on it – in the EU and beyond – thus staying well clear of outlandish buzz phrases like “hydrogen is the Champagne of the energy transition” or “hydrogen will make heating affordable.”

Author: Karl-Heinz Remmers