There’s been an increasing buzz around green hydrogen in Europe recently. It’s seen as an exciting opportunity for decarbonisation because there are so many potential applications for it in addition to generating renewable electricity.
Many people often forget that the concept of energy is made of up of electricity, heat and transport. While Ireland has increased its share of renewable electricity (“RES-E”) to 33.2% in 2018, this is still behind its 40% target for 2020. Unfortunately, the position on renewable transport energy (“RES-T”) and renewable heat (“RES-H”) is even worse. Ireland only achieved 7.5% of its 10% target and 6.5% of its 12% target for RES-T and RES-H respectively up to 2018. With the increase in homes being heated by heat-pumps and the increase in electric cars on the road (plus our increasing data centres) demand on the electricity grid is set to rise dramatically. While interconnectors will help with this issue, curtailment, constraint and long-term storage will become important factors in the electricity market.
The case for hydrogen
The pace of electrifying and decarbonising heat and transport continues to be slow. For some end-users electrification just isn’t an option and this is where the real potential of green hydrogen really kicks in. From cement production to transport mobility, power and storage, and agriculture, green hydrogen has the potential to: (i) decarbonise those industries that are tricky to electrify; and (ii) reduce the pressures on the electricity grid. The latter example will be particularly pertinent for countries such as Ireland that can see significant temperature fluctuations from day-to-day, as more pressure will be placed on the grid to provide heat to newly-built and retrofitted homes.
Current hydrogen position
Today, hydrogen is predominantly produced by splitting it from methane gas but this generates high levels of carbon-dioxide as a by-product. As the carbon-capture and storage industry is in its infancy in Ireland, the carbon-dioxide would need to be shipped to another country and this would add to the overall carbon content of the energy.
Conversely, green hydrogen is produced using a renewable powered electrolyser to split hydrogen from water, with a by-product of oxygen and water. The difficulty to date is that this process is expensive and has been difficult to scale up. However, with the REFIT-1 backstop approaching and surplus renewable electricity generation increasing as more renewable assets are constructed, the benefits of this electricity could be maximised for scaled-up hydrogen production.
How can Ireland get on board?
Regulation: the market is developing but it is still too early for extensive market regulation – at the moment, existing gas legislation does cover the hydrogen market but work will likely need to be undertaken for the licensing aspects of any facility;
An outlook for hydrogen: it would be beneficial if the Irish government could prepare a policy on the medium and long-term policy objectives for hydrogen. This would increase investor confidence and support the development of the market;
Scale-up and infrastructure: there are companies examining the potential for large-scale hydrogen in Ireland. However, mobility is key. Gas Networks Ireland are looking into using the existing gas network and Hydrogen Mobility Ireland are examining transportation opportunities. These should be encouraged to quickly establish a mobility network across Ireland;
EU’s Green Deal Recovery: in a leaked draft of the EU’s Green Deal Recovery package, it was revealed that there will be significant support for green hydrogen. The package proposes to introduce carbon contracts for difference (“CCfD”) – a pilot scheme to bridge the cost between conventional and green hydrogen; and
Guarantees of origin: Following RED II, a guarantees-of-origin system must be developed that guarantees and certifies the hydrogen produced. How this will interact with any subsidy that may be made available will need to be determined by the Irish government and we will continue to monitor this.
It’s early stages for hydrogen in Ireland. However, as international targets for decarbonisation are strengthened and the pressure on governments to decarbonise increase we should start to see movement in this area. If the rumours surrounding the EU’s Green Deal Recovery package are true then the CCfD pilot scheme will be a welcome addition for the industry.
We will be following the EU’s Green Deal Recovery package in detail and will issue an update once the final package has been presented (anticipated to be later this week).
In the meantime, if you would like to discuss the hydrogen market in Ireland and the potential regulatory and legal pitfalls, or indeed any other matters, please contact Garret Farrelly.