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Yahoo
7 days ago
- Business
- Yahoo
Green hydrogen retreat poses threat to emissions targets
By Pietro Lombardi, Nina Chestney and Riham Alkousaa MADRID/LONDON/BERLIN (Reuters) -Green hydrogen developers are cancelling projects and trimming investments around the world, raising the prospect of longer than targeted reliance on fossil fuels. The challenges facing the sector have exposed its initial ambitions as unrealistic. Hard-to-electrify industries that were seen as ideal candidates for green hydrogen, such as steelmaking and long-distance transportation, have found that transition to the low-carbon fuel looks prohibitively expensive. The gap between ambition and reality in Europe shows the extent of the reset happening within the industry, said Jun Sasamura, hydrogen manager at research company Westwood Global Energy. Only about a fifth of planned hydrogen projects across the European Union are likely to come online by the end of the decade, he said. That equates to roughly 12 GW of production capacity against an EU target of 40 GW, Westwood Global Energy data shows. "In the current state, I really don't see the EU 2030 (hydrogen production) target being reached," he added. INFLATED EXPECTATIONS Companies say that high costs and a lack of demand for green hydrogen have rendered many plans unprofitable. "Green hydrogen was an inflated expectation that has turned into a valley of disillusionment," said Miguel Stilwell d'Andrade, chief executive of Portuguese power company EDP. "What's missing is the demand. There are 400 million euros ($464.2 million) of subsidies for hydrogen in Spain and Portugal, but we need someone to buy the hydrogen." The company has several projects in advanced stages but cannot move forward because of a lack of buyers, said Ana Quelhas, EDP's hydrogen chief and co-chair of the European Renewable Hydrogen Coalition. Across the border, Spain's Iberdrola has shelved plans to increase capacity at a green hydrogen plant with electrolyser capacity of 20 MW until it finds buyers for additional output, company executive Iban Molina said at an energy event in Madrid. They are among more than a dozen large companies that have trimmed spending or shelved projects across Europe, Asia, Australia and elsewhere in recent years. Companies had scrapped or delayed more than a fifth of all European projects by the end of last year, Westwood Global Energy says. At Aurora Energy Research, Emma Woodward said: "In 2020-2021 we had this view of hydrogen and the fact it was going to be used in almost every sector that hadn't been electrified. "I think we've realised now that there are other, probably more commercially viable, alternatives for lots of sectors. Maybe we don't need as much hydrogen as initially expected." TOO EXPENSIVE Many governments have long supported development of green hydrogen - produced through electrolysis that splits water into hydrogen and oxygen using electricity from renewables - to help to decarbonise energy, transport and industry. Countries including Australia, Britain, Germany and Japan announced ambitious investment strategies they hoped would bring down costs and eventually create a profitable green hydrogen sector that would no longer need support. Production, however, remains more expensive than for natural gas and other fossil fuel-based alternatives, said Minh Khoi Le, Rystad Energy's head of hydrogen research. It is at least three times more expensive than natural gas as a fuel for power generation, for example, and twice as expensive as grey hydrogen. The latter is produced from natural gas and coal and is already used in industries such as oil refining and production of ammonia and methanol. Costs could fall by 30-40% in 10-15 years if equipment prices decline and the broader supply chain scales up, he added, while Aurora's Woodward and Westwood Global Energy's Sasamura said that green hydrogen is unlikely to become competitive before then. Only 6 million metric tons per annum (mtpa) of low-carbon hydrogen capacity - including green and blue hydrogen, which is made from gas - is either operational or under construction globally, consultancy Wood Mackenzie says. This is well below the 450 mtpa the consultancy says is needed as part of the global push for net zero greenhouse gas emissions by 2050. The EU has committed to reducing emissions by 55% from 1990 levels by 2030, en route to the 2050 target. BUYERS PRICED OUT THE MARKET The industry had counted on sectors such as steel, oil refining, cement and transport to be among the first buyers, but the expected demand has failed to materialise. German die forging company Dirostahl, which makes components for wind turbines, ships and oil and gas drill pipes, is dependent on furnaces fired by natural gas and is looking for a replacement. However, green hydrogen is still too expensive. Offers for the fuel do not come below 150 euros per megawatt hour (MWh) while natural gas can be bought for 30-35 euros/MWh, said Chief Executive Roman Diederichs. "It simply doesn't work. You might not want to call it economic suicide, but in practice it would be just that. We'd be completely uncompetitive," he said. Prices remain elevated because of the high cost of electrolysers needed for large-scale production, infrastructure bottlenecks and increased energy costs resulting from rules on what constitutes green hydrogen. Some European countries have scaled back their ambitions. Italy has recently shifted more than 600 million euros in post-pandemic funds from hydrogen to biomethane. France lowered its 2030 hydrogen electrolysis capacity target by more than 30% in April and Portugal has cut its electrolysis capacity ambitions by 45%. The Dutch government last year made sharp cuts to funds it had originally reserved for green hydrogen projects and battery development, shifting the focus of its climate fund toward the planned construction of two new nuclear plants. Several players in Australia, meanwhile, have scaled back or withdrawn from projects despite more than A$8 billion ($5.2 billion) of pledged government support. Projects that are going ahead also face delays. Rystad Energy analysts estimate that 99% of A$100 billion of projects announced for the next five years have failed to progress beyond the concept or approval stage. INFRASTRUCTURE DIFFICULTIES Another problem is that hydrogen is difficult to store because it requires high-pressure tanks, extremely low temperatures and tends to leak, making for risky transportation through old gas pipelines while awaiting new infrastructure. Spain hopes to build a 2,600 km (1,615 mile) hydrogen network and connect it to another project - the trans-European H2Med link - from the Iberian region to northwest Europe. The Spanish network should be operational around 2030, but delays of two or three years are likely for broader European infrastructure, said Arturo Gonzalo, CEO of Spanish gas grid operator Enagas. "Infrastructure is not something that happens when the market has already taken off; it is something that has to happen for the market to take off," he said. ($1 = 0.8617 euros) ($1 = 1.5340 Australian dollars)
Yahoo
7 days ago
- Business
- Yahoo
Green hydrogen retreat poses threat to emissions targets
By Pietro Lombardi, Nina Chestney and Riham Alkousaa MADRID/LONDON/BERLIN (Reuters) -Green hydrogen developers are cancelling projects and trimming investments around the world, raising the prospect of longer than targeted reliance on fossil fuels. The challenges facing the sector have exposed its initial ambitions as unrealistic. Hard-to-electrify industries that were seen as ideal candidates for green hydrogen, such as steelmaking and long-distance transportation, have found that transition to the low-carbon fuel looks prohibitively expensive. The gap between ambition and reality in Europe shows the extent of the reset happening within the industry, said Jun Sasamura, hydrogen manager at research company Westwood Global Energy. Only about a fifth of planned hydrogen projects across the European Union are likely to come online by the end of the decade, he said. That equates to roughly 12 GW of production capacity against an EU target of 40 GW, Westwood Global Energy data shows. "In the current state, I really don't see the EU 2030 (hydrogen production) target being reached," he added. INFLATED EXPECTATIONS Companies say that high costs and a lack of demand for green hydrogen have rendered many plans unprofitable. "Green hydrogen was an inflated expectation that has turned into a valley of disillusionment," said Miguel Stilwell d'Andrade, chief executive of Portuguese power company EDP. "What's missing is the demand. There are 400 million euros ($464.2 million) of subsidies for hydrogen in Spain and Portugal, but we need someone to buy the hydrogen." The company has several projects in advanced stages but cannot move forward because of a lack of buyers, said Ana Quelhas, EDP's hydrogen chief and co-chair of the European Renewable Hydrogen Coalition. Across the border, Spain's Iberdrola has shelved plans to increase capacity at a green hydrogen plant with electrolyser capacity of 20 MW until it finds buyers for additional output, company executive Iban Molina said at an energy event in Madrid. They are among more than a dozen large companies that have trimmed spending or shelved projects across Europe, Asia, Australia and elsewhere in recent years. Companies had scrapped or delayed more than a fifth of all European projects by the end of last year, Westwood Global Energy says. At Aurora Energy Research, Emma Woodward said: "In 2020-2021 we had this view of hydrogen and the fact it was going to be used in almost every sector that hadn't been electrified. "I think we've realised now that there are other, probably more commercially viable, alternatives for lots of sectors. Maybe we don't need as much hydrogen as initially expected." TOO EXPENSIVE Many governments have long supported development of green hydrogen - produced through electrolysis that splits water into hydrogen and oxygen using electricity from renewables - to help to decarbonise energy, transport and industry. Countries including Australia, Britain, Germany and Japan announced ambitious investment strategies they hoped would bring down costs and eventually create a profitable green hydrogen sector that would no longer need support. Production, however, remains more expensive than for natural gas and other fossil fuel-based alternatives, said Minh Khoi Le, Rystad Energy's head of hydrogen research. It is at least three times more expensive than natural gas as a fuel for power generation, for example, and twice as expensive as grey hydrogen. The latter is produced from natural gas and coal and is already used in industries such as oil refining and production of ammonia and methanol. Costs could fall by 30-40% in 10-15 years if equipment prices decline and the broader supply chain scales up, he added, while Aurora's Woodward and Westwood Global Energy's Sasamura said that green hydrogen is unlikely to become competitive before then. Only 6 million metric tons per annum (mtpa) of low-carbon hydrogen capacity - including green and blue hydrogen, which is made from gas - is either operational or under construction globally, consultancy Wood Mackenzie says. This is well below the 450 mtpa the consultancy says is needed as part of the global push for net zero greenhouse gas emissions by 2050. The EU has committed to reducing emissions by 55% from 1990 levels by 2030, en route to the 2050 target. BUYERS PRICED OUT THE MARKET The industry had counted on sectors such as steel, oil refining, cement and transport to be among the first buyers, but the expected demand has failed to materialise. German die forging company Dirostahl, which makes components for wind turbines, ships and oil and gas drill pipes, is dependent on furnaces fired by natural gas and is looking for a replacement. However, green hydrogen is still too expensive. Offers for the fuel do not come below 150 euros per megawatt hour (MWh) while natural gas can be bought for 30-35 euros/MWh, said Chief Executive Roman Diederichs. "It simply doesn't work. You might not want to call it economic suicide, but in practice it would be just that. We'd be completely uncompetitive," he said. Prices remain elevated because of the high cost of electrolysers needed for large-scale production, infrastructure bottlenecks and increased energy costs resulting from rules on what constitutes green hydrogen. Some European countries have scaled back their ambitions. Italy has recently shifted more than 600 million euros in post-pandemic funds from hydrogen to biomethane. France lowered its 2030 hydrogen electrolysis capacity target by more than 30% in April and Portugal has cut its electrolysis capacity ambitions by 45%. The Dutch government last year made sharp cuts to funds it had originally reserved for green hydrogen projects and battery development, shifting the focus of its climate fund toward the planned construction of two new nuclear plants. Several players in Australia, meanwhile, have scaled back or withdrawn from projects despite more than A$8 billion ($5.2 billion) of pledged government support. Projects that are going ahead also face delays. Rystad Energy analysts estimate that 99% of A$100 billion of projects announced for the next five years have failed to progress beyond the concept or approval stage. INFRASTRUCTURE DIFFICULTIES Another problem is that hydrogen is difficult to store because it requires high-pressure tanks, extremely low temperatures and tends to leak, making for risky transportation through old gas pipelines while awaiting new infrastructure. Spain hopes to build a 2,600 km (1,615 mile) hydrogen network and connect it to another project - the trans-European H2Med link - from the Iberian region to northwest Europe. The Spanish network should be operational around 2030, but delays of two or three years are likely for broader European infrastructure, said Arturo Gonzalo, CEO of Spanish gas grid operator Enagas. "Infrastructure is not something that happens when the market has already taken off; it is something that has to happen for the market to take off," he said. ($1 = 0.8617 euros) ($1 = 1.5340 Australian dollars)
Yahoo
05-05-2025
- Business
- Yahoo
Analysis-EU power grid needs trillion-dollar upgrade to avert Spain-style blackouts
By Nina Chestney LONDON (Reuters) -Europe's ageing power grid and lack of energy storage capacity will require trillions of dollars in investments to cope with rising green energy output, increasing electricity demand and to avoid blackouts. A week ago, Spain and Portugal lost power in their worst blackout. Authorities are investigating the cause, but whatever the findings, analysts and industry representatives say infrastructure investment is essential. "The blackout was a wake-up call. It showed that the need to modernise and reinforce Europe's electricity grid is urgent and unavoidable," Kristina Ruby, secretary general at Eurelectric, Europe's electricity industry association, said. The European Union's power grid mostly dates back to the last century and half the lines are over 40 years old. Rising low-carbon energy production and booming demand from data centres and electric vehicles require an overhaul of the grids that also need digital protection to withstand cyber attacks. While global investment in renewables has nearly doubled since 2010, investment in grids has barely changed at around $300 billion a year. The amount needs to double by 2030 to over $600 billion a year to cover the necessary overhauls, according to the International Energy Agency. Spain has asked its own investigators and European Union regulators to investigate last Monday's outage. While the underlying issues have yet to become clear, grid operator Red Electrica said two separate incidents had triggered the massive power loss. It follows an acceleration in renewable energy use, especially in Spain, after Russia's invasion invasion of Ukraine in February 2022 and the resulting disruption of oil and gas supplies focused EU efforts on reducing dependence on fossil fuel. The share of renewables rose to 47% in the EU's power mix last year from 34% in 2019, while fossil fuels dropped to 29% from 39%, data from think tank Ember showed. Spain plans to phase out coal and nuclear power. Renewable generation hit a record high at 56% of Spain's power mix in 2024. Wind and solar projects are relatively quick to build compared with grids, which can take more than a decade. Part of the problem is the huge sums and complexity of improving a grid over a large distance. The European Commission has estimated Europe needs to invest $2.0-2.3 trillion in grids by 2050. Last year, European firms invested 80 billion euros ($90.5 billion) in grids, up from 50-70 billion in previous years, analysts at Bruegel said while adding investments may need to rise to 100 billion. INTER-STATE CONNECTIONS Spain and Portugal's power systems are among those in Europe that lack connections to other grids that can provide back up. Spain needs more links to France and Morocco, said José Luis Domínguez-García from Spain's energy research centre IREC in Catalunya. Spain has only 5% of connections outside the Iberian Peninsula, he added. As some other countries also lag, the European Commission has a target to increase interconnection to 15% by 2030, from a previous goal of 10%, meaning each EU member country should be able to import at least 15% of its power production capacity from neighbouring countries. Spain will reinforce connections with France, including a new link via the Bay of Biscay that will double the interconnection capacity between the two countries, Spain's grid Red Electrica said on Tuesday. NEED FOR BACK UP As solar and wind generation grows, the challenges go beyond upgrading grids to the need for back-up generation. Solar and wind farms generate direct current power, while traditional gas or nuclear plants generate alternating current. DC power is converted to AC in inverters to standard 50 Hertz frequency for European grids and use in homes and businesses. If power generation drops, the grid requires back-up AC power to prevent the frequency from dropping. In the event frequency drops, automatic safety mechanisms disconnect some generation to prevent overheating, damage to transformers or transmission lines. If too many plants drop off at the same time, the system can experience a blackout. Before last week's outage, Spain had suffered power glitches and industry officials had repeatedly warned of grid instability. Spain's energy officials have also said the country's plans to shut down all seven of its nuclear reactors by 2035 could put power supply at risk. Portugal has only two back-up plants - a gas and a hydro plant - able to quickly respond if the grid needs more power, Portugal's Prime Minister Luis Montenegro said on Tuesday, adding the country wants more. In Britain, a blackout in 2019 cut power to a million customers, when a lightning strike and a second, unrelated incident lowered the frequency of the grid. Since then, the country has invested to expand battery storage and had around 5 gigawatts of capacity installed at the end of last year, according to industry association RenewableUK. It can help balance the grid in the same way as power plants. Europe has 10.8 gigawatts of battery storage and it will grow to 50 GW by 2030 - much less than the required 200 GW, according to the European Association for Storage of Energy. In Ireland, Siemens Energy has built the world's largest flywheel, which can also operate as power storage and help to stabilise the grid. Sign in to access your portfolio
Yahoo
21-03-2025
- Business
- Yahoo
Explainer-How Ukraine's gas infrastructure could be of interest to Trump
By Nina Chestney LONDON (Reuters) - The U.S. administration suggested this week the United States could help run and possibly own Ukraine's power plants and energy infrastructure as part of a ceasefire deal with Russia. Although Ukrainian President Volodymyr Zelenskiy said he and Trump discussed only the vast Russian-occupied Zaporizhzhia nuclear power plant, the country has also started importing U.S. gas to cover its domestic needs. Kyiv also offers to store gas in its large underground storage to help supply Europe. U.S. IMPORTS Since taking office for his first term in 2017, U.S. President Donald Trump has been pushing Europe to replace Russian gas with U.S. liquefied natural gas (LNG) supplies. At first, the idea looked far-fetched as Russia was supplying Europe with around 40% of its gas needs under long-term contracts at relatively cheap prices, ensuring the competitiveness of economies such as Germany and Austria. But Russia's invasion of Ukraine in 2022 changed it all. In the three years since the war started, Russia's gas export pipeline monopoly Gazprom lost almost all of its EU customers, who switched to buying LNG, largely from the United States, and increased pipeline gas imports via other routes. Since taking office for the second time this year, Trump has pushed Europe to buy even more U.S. gas to help address what he sees as the EU's unfair trade surplus. For decades, Ukraine relied on imports of Russian gas, and even in recent years some Russian gas volumes have reached Ukraine via reversed flows from Europe. All Russian gas flows via Ukraine stopped in 2025. Ukraine this week agreed a second deal to buy U.S. LNG and Kyiv says it aims to expand purchases. U.S. exports of gas into Ukraine have the potential to strengthen an economic partnership with Washington and its presence in Ukraine's storage facilities could deter Russian attacks and encourage more gas to be stored. HUGE STORAGE Ukraine cannot import U.S. LNG directly as it is lacking regasification facilities on the Black Sea. Those could be built fairly quickly although the first project to build an LNG terminal in Odesa never took off. Ukraine's current U.S. gas imports can come either via pipelines from regasification terminals in Poland or Germany, or from further south from regasification terminals in Greece. "The U.S. has a significant amount of LNG capacity set to start up between now and the end of the decade. Export capacity is set to grow by 65%. A large part of this capacity is being built on the back of expectations that Europe will be there as a buyer," said analysts at ING. Ukraine has the largest underground gas storage in Europe and the third largest in the world, capable of holding more than 30 billion cubic metres of gas. In comparison, the whole of Europe has a maximum capacity of around 100 bcm to serve gas demand of around 450 bcm a year. Ukraine's storage is well connected with Europe's gas network, offering traders space to store surplus gas in summer when demand is usually lower. VAST PIPELINES In 2020, Ukraine harmonised its regulatory framework with that of the EU and cut shipping fees and duties. EU companies and traders stored gas in Ukraine in the 2022/23 and 2023/24 seasons but suspended those activities over the past year as Russian attacks on Ukraine's infrastructure intensified, damaging compressor stations at storage facilities. Ukraine's ability to fill storage with gas - including U.S. LNG - is limited by the capacity of pipelines which connect to neighbouring Slovakia, Hungary, Poland and Romania. Analysts at Bruegel estimate this capacity at 1.5-1.8 bcm a month or up to 22 bcm a year. The capacity for shipping gas from Ukraine to Europe is much bigger because its pipelines have been designed to ship Russian gas to the continent. Pipelines crossing Ukraine cam pump more than 60 bcm a year or some 13% of Europe's gas needs. They can supply buyers in Hungary, Slovakia, Poland and Romania and customers further away in Austria, Italy, Germany, France and Greece. That means direct imports of U.S. LNG into Ukraine by sea - were they ever to happen - could result in large flows reaching Europe via a vast pipeline network, which was once used by Moscow to dominate EU's gas markets.
Yahoo
19-02-2025
- Business
- Yahoo
Lightsource bp secured 10 power purchase deals totalling 1.3 GW last year
By Nina Chestney LONDON (Reuters) - Renewable energy developer Lightsource bp, a unit of British oil company BP, secured 10 power purchase agreements (PPAs) last year totalling 1.3 gigawatts (GW) of renewable energy capacity globally, the firm said on Wednesday. Lightsource bp said the PPAs were contracted across Europe, the Americas and Asia Pacific regions for mainly solar power. Lightsource bp includes companies such as Microsoft, Google, chemicals company LyondellBasell and fashion retailer H&M as customers. The average duration of agreements is 12 years. Some of the 10 deals were publicly disclosed last year but not all of them, the firm said. The value of the deals was not disclosed. PPAs are long-term contracts between an electricity generator and a customer such as a government or company during which time the buyer buys energy at a fixed price. Renewable power project developers are increasingly tying their electricity output to long-term PPAs to provide revenue security, while corporate buyers are keen to lock in supply and ensure they meet targets for sourcing clean power. "Buyers are becoming increasingly sophisticated. They are looking for partners who can offer a portfolio of projects across borders. This flexibility allows buyers to diversify their energy sources and mitigate risks, which is something Lightsource bp is well-positioned to provide as we are active across 20 markets globally," Zosia Riesner, global chief commercial officer at Lightsource bp, told Reuters. A report by Pexapark released in early February said Amazon was the top buyer of PPAs in Europe last year, while it ranked Spain's Iberdrola as the top seller, with around 1.25 GW in deals, 38% more in volume terms than the year before. Lightsource bp also said it is making a 500-megawatt utility-scale solar and energy storage portfolio available for PPAs this year across Iberia, a region which benefits from high solar radiation and where solar power remains competitively priced. Other attractive regions for PPAs include Asia Pacific, particularly Australia, while Portugal, Greece and Poland will also be growing markets, the firm said. Last year, BP completed the acquisition of its remaining 50.03% interest in Lightsource bp. Sign in to access your portfolio
