Energy, Politics & Money - 04 December 2022
Independent, objective, and politically neutral analysis of interconnected global developments in the world of energy, geopolitics, and money curated to help you thrive or survive these chaotic times.
Reuters reports on the very ambitious hydrogen plans of the Netherlands and itsplans to add more than 1 Gigawatt (GW) of offshore wind capacity until it achieves 20GW by 2030. Not all of the power that will be generated can be used and the government is exploring alternative ways for storing the surplus electricity. Interestingly, a significant share of energy from these wind parks will be transformed into hydrogen and brought to shore with pipelines because the Dutch government believes that, “over these long distances transport of hydrogen is more efficient than transporting electricity”.
Although we covered hydrogen extensively last week here at EPM, and sincerely intended to focus on other things this week, the Dutch government’s contention that over medium-distances transporting hydrogen via pipelines is more efficient than transmitting electrons via cables, forced us to respond.
Current demand for hydrogen in the Antwerp Rotterdam Area (ARA) is significant because of the size of the refining and petrochemical industry. Many of those operators will be interested in green hydrogen to de-carbonize their operations, and as such, the Dutch could well establish for themselves a first mover advantage by leveraging its offshore wind potential in relatively close proximity to this industrial demand, as well as its existing pipeline infrastructure, to supply this very likely future green hydrogen demand.
The size of demand from this ARA area should not be overestimated. The laws of physics, and resulting economics, we believe make it unlikely to be much more than current hydrogen demand; as for all other potential uses of hydrogen (e.g. for heating) there better alternatives exist (e.g. cheaper).
And this brings us to our third point, the contention that piping hydrogen is cheaper than transmitting electrons, because that seems to indicate the Dutch government is planning on the basis of a view that at the point of use, green hydrogen will be cheaper than the electricity it is made from. For this to be correct, the cost of electricity transmission must be massively higher than the cost of piping hydrogen.
We at EPM call upon our readers to let us know of ANY 3rd party analysis that can assert this claim based on data.
To our knowledge, a gas pipeline infrastructure needs extensive investment to make it capable of piping hydrogen. And, to our knowledge, this has not been done at scale anywhere in the world yet. Therefore, whatever cost estimates do exist in this regard - they are theoretical - and very likely to understate actual expense as the devil is usually in the detail and becomes apparent when you actually start to do it.
EPM notes that electron transmission is an established process, even over long distances through Ultra High Voltage technology (China) on land and below water.
In conclusion, it seems to us the Dutch government is comparing a speculative estimate of what hydrogen piping could potentially eventually cost against proven cost estimates of what electron transmission actually costs to support a political plan around hydrogen. The plan is based on a demand outlook for hydrogen straight out of a strategy consultant’s “hydrogen economy” playbook, pushed by vested interests, to lock in massive government support for a hydrogen infrastructure that once built with government financing will then be used.
According to the report the Dutch government is already preparing around $1.5 billion for this. Tax payers beware …