An excellent analysis as another “technical solution myth” is debunked
Stephanie Searle is Program Director at ICCT
Yuanrong Zhou is Researcher at ICCT
Cross-posted from the ICCT website
The term “green hydrogen” involves a bit of green washing. “Green” hydrogen and e-fuels (synthetic fuels made from hydrogen and CO2) are made using electrolysis, which in turn harnesses electricity to split apart water into its elemental components, hydrogen and oxygen. The electricity is hopefully renewable—and it makes a big difference if it’s not. If “green” hydrogen and e-fuels are made using regular grid electricity, they can be no better for the environment than fossil fuels.
The figure below shows our calculation of the GHG intensity of a) hydrogen really made from 100% renewable electricity, b) hydrogen made from EU grid electricity in 2030, c) e-fuels made from EU grid electricity in 2030, and d) natural gas. As shown, hydrogen and e-fuels made from 100% renewable electricity really are zero-carbon, but when made from grid electricity, these fuels are little better— – or worse— – than natural gas. How is this possible when we expect high renewables penetration on the grid by 2030? Because around one-quarter of the energy in the electricity is lost when it’s converted to hydrogen, and around one-half is lost for e-fuels, the GHG emissions from the fossil fuels on the grid are essentially magnified in the GHG intensity of the final fuel.
So what? We just require all incentivized hydrogen and e-fuels to be made from 100% renewable electricity and we’re good. But it’s not that easy. The EU has already added this requirement to the Renewable Energy Directive (REDII), but they didn’t specify how they’re going to make sure the electricity used for hydrogen and e-fuels is really 100% renewable. That decision was left up to a delegated act, due by the end of 2021, which means we should see a draft from the European Commission any day now. There are multiple options being floated for certifying electricity is renewable, but not all of them will ensure it truly is.
One option is to use run-of-the-mill renewable electricity certificates, called Guarantees of Origin (GOs), which track one MWh of electricity from the producer to the consumer. But this doesn’t really guarantee anything. Yes, a real solar or wind plant sold that GO. But just because someone bought it doesn’t mean they are supporting new wind and solar power. More likely, they are diverting it from other uses. If I bid electricity from an existing solar farm away from someone else who had been using it, that person will turn to new grid electricity, including some produced with new fossil fuels, and the climate is no better off. But for a hydrogen or e-fuels plant, we’re not talking about using up one person’s renewable electricity – we’re talking about the amount of electricity used by a small city. That’s a lot of new grid electricity to fill in the gap, and that puts our hydrogen and e-fuels back in the territory of fossil fuels on the chart above.
There is a better option. One part of it is to require hydrogen and e-fuel producers to procure renewable electricity using Power Purchase Agreements (PPAs). This ensures they are providing long-term financial support to a renewable electricity generator, and, at least for some types of PPAs, are more likely to use that renewable electricity in real-time. This matters because putting more variable renewable electricity—that is only generated some of the time, when it’s sunny or windy—on the grid worsens grid balancing problems and results in more use of natural gas plants to fill in the gaps. We don’t want hydrogen and e-fuels to make that problem worse. The other half of the solution is to require those renewable electricity generators on the other side of the PPA to be certified as not receiving any other kind of financial policy support. If they are receiving subsidies, that means they very likely would exist—and be used to meet climate goals for other sectors—in the absence of a hydrogen and e-fuels industry. And if they were going to exist anyway, that means using their electricity for hydrogen and e-fuels is diverting it from other uses. Any renewable electricity generator that is not receiving subsidies probably would not have existed without the hydrogen or e-fuels producer, which means it really is 100% additional renewable electricity.
However, the solution described above isn’t what the industry is asking for. Hydrogen Europe, an industry association, wants to be able to use GOs as well as PPAs to demonstrate renewability, and is asking the European Commission not to impose any other rules until 2025. That’s a long time to allow the hydrogen and e-fuels industry to run on essentially grid electricity! And after 2025, the association is suggesting that EU Member States need to set and meet separate targets for renewable electricity to make sure there is enough available for hydrogen and e-fuels production. However, when a government sets targets, it means it plans to provide the necessary financial or other policy support to achieve them. What this means is that the industry wants governments to pay for their renewable electricity for them. And we know that if governments are subsidizing renewable electricity, it would have been generated anyway for other users. Hydrogen Europe is calling this their framework for additionality, but they are in fact trying to make sure the renewable electricity is not additional at all.
Sometimes there’s a trade-off between easy and clean, and the European Commission needs to pick the right side. It’s critically important to making sure Europe meets its climate goals, and not just on paper. If we want to make sure we’re supporting a truly green hydrogen and e-fuels industry, now is the time for the European Commission to set us on the right path.