Is power-to-X now vital for wind investors?

Looking at the role that emerging technologies such as green hydrogen and green ammonia will play in the strategies of wind investors over the next decade.

Richard Heap
May 21, 2021
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This content is from our archive. Some formatting or links may be broken.
Is power-to-X now vital for wind investors?

“There’s no doubt that power-to-X is getting more attention and traction. There are some good reasons for that. The increasing share of renewable power generation calls for a shift in our focus from green electrons to green molecules, and from an electricity system to a comprehensive energy system.”

It is with these words that Philippe Kavafyan, ex-CEO of MHI Vestas, started the last discussion panel at our Financing Wind Europe virtual event yesterday.

The session was called ‘The Power-to-X Revolution’ and looked at the role that emerging technologies such as green hydrogen and green ammonia will play in the strategies of wind investors over the next decade.

While ‘power-to-X’ can refer to a range of processes that convert electricity into other forms – mainly fuel, gas or heat – our speakers devoted most attention to green hydrogen and ammonia; and a bit of storage too.

Our panel said that momentum is growing to develop projects that use these technologies. This is due to factors including the falling cost of renewables and electrolysers, and pressure on grid operators to manage higher penetrations of renewables including wind on electricity grids.

But there is still reticence from banks to back these projects.

Unified energy grid

The session started with insights from Stine Grenaa Jensen, senior director at Danish electricity and gas operator Energinet. She is responsible for developing the country’s electricity and gas grids.

She said that power-to-X will play a crucial role in uniting the two to help Denmark achieve long-term emissions reduction targets, and cope with high penetrations of onshore wind, offshore wind and solar power.

She said there has been a big shift in companies’ mindsets since 2019: “When we published the first reports on this two years ago, I had people contact me and say: ‘This is way out in the future to think too much about this.’ But, in the last year, we’ve seen the pace of these projects growing very fast.”

This growing appetite for power-to-X was shared by developers on our panel.

Sarah Pirie, head of commercial at Red Rock Power, said that technologies such as green hydrogen and storage feature in its plans in the short- to mid-term as research and development projects. She said Red Rock is also looking to invest in standalone hydrogen projects, as well as those co-located with wind farms.

Pirie said it was possible to see European countries as behind US and Asia-Pacific countries when it comes to the deployment of energy storage.

But she added that European Union policies in 2020, on both hydrogen and storage, demonstrated there is the drive and ambition to grow this; and she expected activity to step up until 2023.

“From our perspective, we see the potential and aren’t discouraged by the current performance of Europe. There is a step change coming,” she said.

Karsten Uhd Plauborg, partner at Copenhagen Infrastructure Partners, said power-to-X projects will play crucial roles in the investment strategy of its energy transition fund. He said they would support flexible generation from wind and solar, to enable those industries to keep growing; and enable the decarbonisation of industries where it is more difficult to reduce emissions.

He explained: “That is a massive challenge but, from an investor side, that is also a significant opportunity to deploy capital in a way that is both good for society and can hopefully bring decent returns.”

Plauborg said CIP distinguished between two types of power-to-X projects: ‘export’ projects, where renewable electricity is used to create fuels that are transported to be used elsewhere; and ‘integrated’ projects, which are linked to the electricity grid so can support grid stability.

“We believe there is a need for both types of projects.”

Boosting the bankers

The growing enthusiasm for power-to-X projects has made it to banks too – but Andrew Doyle, executive director at MUFG, still sees some reticence.

He said banks would take confidence from increased levels of government support for developers, but still wanted to see where demand for hydrogen would come from. This means banks will scrutinise the business case, business model and the cost of hydrogen production to mitigate the risk of being left lending to a “stranded asset”.

But he added that the 40% reduction in electrolyser costs over the last six years would give lenders and investors confidence that green hydrogen can achieve similar cost reductions as offshore wind and solar have.

“We still haven’t lent to a project in the hydrogen space but, in my own personal opinion, I think the technology is developed enough that it would support a non- or limited-recourse financing,” he said. “I would expect that banks would be able to get comfortable in due course.”

Doyle concluded by saying that power-to-X projects “should be on everyone’s radar”. Judging by the interest we’ve seen in this panel, they already are.

“There’s no doubt that power-to-X is getting more attention and traction. There are some good reasons for that. The increasing share of renewable power generation calls for a shift in our focus from green electrons to green molecules, and from an electricity system to a comprehensive energy system.”

It is with these words that Philippe Kavafyan, ex-CEO of MHI Vestas, started the last discussion panel at our Financing Wind Europe virtual event yesterday.

The session was called ‘The Power-to-X Revolution’ and looked at the role that emerging technologies such as green hydrogen and green ammonia will play in the strategies of wind investors over the next decade.

While ‘power-to-X’ can refer to a range of processes that convert electricity into other forms – mainly fuel, gas or heat – our speakers devoted most attention to green hydrogen and ammonia; and a bit of storage too.

Our panel said that momentum is growing to develop projects that use these technologies. This is due to factors including the falling cost of renewables and electrolysers, and pressure on grid operators to manage higher penetrations of renewables including wind on electricity grids.

But there is still reticence from banks to back these projects.

Unified energy grid

The session started with insights from Stine Grenaa Jensen, senior director at Danish electricity and gas operator Energinet. She is responsible for developing the country’s electricity and gas grids.

She said that power-to-X will play a crucial role in uniting the two to help Denmark achieve long-term emissions reduction targets, and cope with high penetrations of onshore wind, offshore wind and solar power.

She said there has been a big shift in companies’ mindsets since 2019: “When we published the first reports on this two years ago, I had people contact me and say: ‘This is way out in the future to think too much about this.’ But, in the last year, we’ve seen the pace of these projects growing very fast.”

This growing appetite for power-to-X was shared by developers on our panel.

Sarah Pirie, head of commercial at Red Rock Power, said that technologies such as green hydrogen and storage feature in its plans in the short- to mid-term as research and development projects. She said Red Rock is also looking to invest in standalone hydrogen projects, as well as those co-located with wind farms.

Pirie said it was possible to see European countries as behind US and Asia-Pacific countries when it comes to the deployment of energy storage.

But she added that European Union policies in 2020, on both hydrogen and storage, demonstrated there is the drive and ambition to grow this; and she expected activity to step up until 2023.

“From our perspective, we see the potential and aren’t discouraged by the current performance of Europe. There is a step change coming,” she said.

Karsten Uhd Plauborg, partner at Copenhagen Infrastructure Partners, said power-to-X projects will play crucial roles in the investment strategy of its energy transition fund. He said they would support flexible generation from wind and solar, to enable those industries to keep growing; and enable the decarbonisation of industries where it is more difficult to reduce emissions.

He explained: “That is a massive challenge but, from an investor side, that is also a significant opportunity to deploy capital in a way that is both good for society and can hopefully bring decent returns.”

Plauborg said CIP distinguished between two types of power-to-X projects: ‘export’ projects, where renewable electricity is used to create fuels that are transported to be used elsewhere; and ‘integrated’ projects, which are linked to the electricity grid so can support grid stability.

“We believe there is a need for both types of projects.”

Boosting the bankers

The growing enthusiasm for power-to-X projects has made it to banks too – but Andrew Doyle, executive director at MUFG, still sees some reticence.

He said banks would take confidence from increased levels of government support for developers, but still wanted to see where demand for hydrogen would come from. This means banks will scrutinise the business case, business model and the cost of hydrogen production to mitigate the risk of being left lending to a “stranded asset”.

But he added that the 40% reduction in electrolyser costs over the last six years would give lenders and investors confidence that green hydrogen can achieve similar cost reductions as offshore wind and solar have.

“We still haven’t lent to a project in the hydrogen space but, in my own personal opinion, I think the technology is developed enough that it would support a non- or limited-recourse financing,” he said. “I would expect that banks would be able to get comfortable in due course.”

Doyle concluded by saying that power-to-X projects “should be on everyone’s radar”. Judging by the interest we’ve seen in this panel, they already are.

“There’s no doubt that power-to-X is getting more attention and traction. There are some good reasons for that. The increasing share of renewable power generation calls for a shift in our focus from green electrons to green molecules, and from an electricity system to a comprehensive energy system.”

It is with these words that Philippe Kavafyan, ex-CEO of MHI Vestas, started the last discussion panel at our Financing Wind Europe virtual event yesterday.

The session was called ‘The Power-to-X Revolution’ and looked at the role that emerging technologies such as green hydrogen and green ammonia will play in the strategies of wind investors over the next decade.

While ‘power-to-X’ can refer to a range of processes that convert electricity into other forms – mainly fuel, gas or heat – our speakers devoted most attention to green hydrogen and ammonia; and a bit of storage too.

Our panel said that momentum is growing to develop projects that use these technologies. This is due to factors including the falling cost of renewables and electrolysers, and pressure on grid operators to manage higher penetrations of renewables including wind on electricity grids.

But there is still reticence from banks to back these projects.

Unified energy grid

The session started with insights from Stine Grenaa Jensen, senior director at Danish electricity and gas operator Energinet. She is responsible for developing the country’s electricity and gas grids.

She said that power-to-X will play a crucial role in uniting the two to help Denmark achieve long-term emissions reduction targets, and cope with high penetrations of onshore wind, offshore wind and solar power.

She said there has been a big shift in companies’ mindsets since 2019: “When we published the first reports on this two years ago, I had people contact me and say: ‘This is way out in the future to think too much about this.’ But, in the last year, we’ve seen the pace of these projects growing very fast.”

This growing appetite for power-to-X was shared by developers on our panel.

Sarah Pirie, head of commercial at Red Rock Power, said that technologies such as green hydrogen and storage feature in its plans in the short- to mid-term as research and development projects. She said Red Rock is also looking to invest in standalone hydrogen projects, as well as those co-located with wind farms.

Pirie said it was possible to see European countries as behind US and Asia-Pacific countries when it comes to the deployment of energy storage.

But she added that European Union policies in 2020, on both hydrogen and storage, demonstrated there is the drive and ambition to grow this; and she expected activity to step up until 2023.

“From our perspective, we see the potential and aren’t discouraged by the current performance of Europe. There is a step change coming,” she said.

Karsten Uhd Plauborg, partner at Copenhagen Infrastructure Partners, said power-to-X projects will play crucial roles in the investment strategy of its energy transition fund. He said they would support flexible generation from wind and solar, to enable those industries to keep growing; and enable the decarbonisation of industries where it is more difficult to reduce emissions.

He explained: “That is a massive challenge but, from an investor side, that is also a significant opportunity to deploy capital in a way that is both good for society and can hopefully bring decent returns.”

Plauborg said CIP distinguished between two types of power-to-X projects: ‘export’ projects, where renewable electricity is used to create fuels that are transported to be used elsewhere; and ‘integrated’ projects, which are linked to the electricity grid so can support grid stability.

“We believe there is a need for both types of projects.”

Boosting the bankers

The growing enthusiasm for power-to-X projects has made it to banks too – but Andrew Doyle, executive director at MUFG, still sees some reticence.

He said banks would take confidence from increased levels of government support for developers, but still wanted to see where demand for hydrogen would come from. This means banks will scrutinise the business case, business model and the cost of hydrogen production to mitigate the risk of being left lending to a “stranded asset”.

But he added that the 40% reduction in electrolyser costs over the last six years would give lenders and investors confidence that green hydrogen can achieve similar cost reductions as offshore wind and solar have.

“We still haven’t lent to a project in the hydrogen space but, in my own personal opinion, I think the technology is developed enough that it would support a non- or limited-recourse financing,” he said. “I would expect that banks would be able to get comfortable in due course.”

Doyle concluded by saying that power-to-X projects “should be on everyone’s radar”. Judging by the interest we’ve seen in this panel, they already are.

“There’s no doubt that power-to-X is getting more attention and traction. There are some good reasons for that. The increasing share of renewable power generation calls for a shift in our focus from green electrons to green molecules, and from an electricity system to a comprehensive energy system.”

It is with these words that Philippe Kavafyan, ex-CEO of MHI Vestas, started the last discussion panel at our Financing Wind Europe virtual event yesterday.

The session was called ‘The Power-to-X Revolution’ and looked at the role that emerging technologies such as green hydrogen and green ammonia will play in the strategies of wind investors over the next decade.

While ‘power-to-X’ can refer to a range of processes that convert electricity into other forms – mainly fuel, gas or heat – our speakers devoted most attention to green hydrogen and ammonia; and a bit of storage too.

Our panel said that momentum is growing to develop projects that use these technologies. This is due to factors including the falling cost of renewables and electrolysers, and pressure on grid operators to manage higher penetrations of renewables including wind on electricity grids.

But there is still reticence from banks to back these projects.

Unified energy grid

The session started with insights from Stine Grenaa Jensen, senior director at Danish electricity and gas operator Energinet. She is responsible for developing the country’s electricity and gas grids.

She said that power-to-X will play a crucial role in uniting the two to help Denmark achieve long-term emissions reduction targets, and cope with high penetrations of onshore wind, offshore wind and solar power.

She said there has been a big shift in companies’ mindsets since 2019: “When we published the first reports on this two years ago, I had people contact me and say: ‘This is way out in the future to think too much about this.’ But, in the last year, we’ve seen the pace of these projects growing very fast.”

This growing appetite for power-to-X was shared by developers on our panel.

Sarah Pirie, head of commercial at Red Rock Power, said that technologies such as green hydrogen and storage feature in its plans in the short- to mid-term as research and development projects. She said Red Rock is also looking to invest in standalone hydrogen projects, as well as those co-located with wind farms.

Pirie said it was possible to see European countries as behind US and Asia-Pacific countries when it comes to the deployment of energy storage.

But she added that European Union policies in 2020, on both hydrogen and storage, demonstrated there is the drive and ambition to grow this; and she expected activity to step up until 2023.

“From our perspective, we see the potential and aren’t discouraged by the current performance of Europe. There is a step change coming,” she said.

Karsten Uhd Plauborg, partner at Copenhagen Infrastructure Partners, said power-to-X projects will play crucial roles in the investment strategy of its energy transition fund. He said they would support flexible generation from wind and solar, to enable those industries to keep growing; and enable the decarbonisation of industries where it is more difficult to reduce emissions.

He explained: “That is a massive challenge but, from an investor side, that is also a significant opportunity to deploy capital in a way that is both good for society and can hopefully bring decent returns.”

Plauborg said CIP distinguished between two types of power-to-X projects: ‘export’ projects, where renewable electricity is used to create fuels that are transported to be used elsewhere; and ‘integrated’ projects, which are linked to the electricity grid so can support grid stability.

“We believe there is a need for both types of projects.”

Boosting the bankers

The growing enthusiasm for power-to-X projects has made it to banks too – but Andrew Doyle, executive director at MUFG, still sees some reticence.

He said banks would take confidence from increased levels of government support for developers, but still wanted to see where demand for hydrogen would come from. This means banks will scrutinise the business case, business model and the cost of hydrogen production to mitigate the risk of being left lending to a “stranded asset”.

But he added that the 40% reduction in electrolyser costs over the last six years would give lenders and investors confidence that green hydrogen can achieve similar cost reductions as offshore wind and solar have.

“We still haven’t lent to a project in the hydrogen space but, in my own personal opinion, I think the technology is developed enough that it would support a non- or limited-recourse financing,” he said. “I would expect that banks would be able to get comfortable in due course.”

Doyle concluded by saying that power-to-X projects “should be on everyone’s radar”. Judging by the interest we’ve seen in this panel, they already are.

“There’s no doubt that power-to-X is getting more attention and traction. There are some good reasons for that. The increasing share of renewable power generation calls for a shift in our focus from green electrons to green molecules, and from an electricity system to a comprehensive energy system.”

It is with these words that Philippe Kavafyan, ex-CEO of MHI Vestas, started the last discussion panel at our Financing Wind Europe virtual event yesterday.

The session was called ‘The Power-to-X Revolution’ and looked at the role that emerging technologies such as green hydrogen and green ammonia will play in the strategies of wind investors over the next decade.

While ‘power-to-X’ can refer to a range of processes that convert electricity into other forms – mainly fuel, gas or heat – our speakers devoted most attention to green hydrogen and ammonia; and a bit of storage too.

Our panel said that momentum is growing to develop projects that use these technologies. This is due to factors including the falling cost of renewables and electrolysers, and pressure on grid operators to manage higher penetrations of renewables including wind on electricity grids.

But there is still reticence from banks to back these projects.

Unified energy grid

The session started with insights from Stine Grenaa Jensen, senior director at Danish electricity and gas operator Energinet. She is responsible for developing the country’s electricity and gas grids.

She said that power-to-X will play a crucial role in uniting the two to help Denmark achieve long-term emissions reduction targets, and cope with high penetrations of onshore wind, offshore wind and solar power.

She said there has been a big shift in companies’ mindsets since 2019: “When we published the first reports on this two years ago, I had people contact me and say: ‘This is way out in the future to think too much about this.’ But, in the last year, we’ve seen the pace of these projects growing very fast.”

This growing appetite for power-to-X was shared by developers on our panel.

Sarah Pirie, head of commercial at Red Rock Power, said that technologies such as green hydrogen and storage feature in its plans in the short- to mid-term as research and development projects. She said Red Rock is also looking to invest in standalone hydrogen projects, as well as those co-located with wind farms.

Pirie said it was possible to see European countries as behind US and Asia-Pacific countries when it comes to the deployment of energy storage.

But she added that European Union policies in 2020, on both hydrogen and storage, demonstrated there is the drive and ambition to grow this; and she expected activity to step up until 2023.

“From our perspective, we see the potential and aren’t discouraged by the current performance of Europe. There is a step change coming,” she said.

Karsten Uhd Plauborg, partner at Copenhagen Infrastructure Partners, said power-to-X projects will play crucial roles in the investment strategy of its energy transition fund. He said they would support flexible generation from wind and solar, to enable those industries to keep growing; and enable the decarbonisation of industries where it is more difficult to reduce emissions.

He explained: “That is a massive challenge but, from an investor side, that is also a significant opportunity to deploy capital in a way that is both good for society and can hopefully bring decent returns.”

Plauborg said CIP distinguished between two types of power-to-X projects: ‘export’ projects, where renewable electricity is used to create fuels that are transported to be used elsewhere; and ‘integrated’ projects, which are linked to the electricity grid so can support grid stability.

“We believe there is a need for both types of projects.”

Boosting the bankers

The growing enthusiasm for power-to-X projects has made it to banks too – but Andrew Doyle, executive director at MUFG, still sees some reticence.

He said banks would take confidence from increased levels of government support for developers, but still wanted to see where demand for hydrogen would come from. This means banks will scrutinise the business case, business model and the cost of hydrogen production to mitigate the risk of being left lending to a “stranded asset”.

But he added that the 40% reduction in electrolyser costs over the last six years would give lenders and investors confidence that green hydrogen can achieve similar cost reductions as offshore wind and solar have.

“We still haven’t lent to a project in the hydrogen space but, in my own personal opinion, I think the technology is developed enough that it would support a non- or limited-recourse financing,” he said. “I would expect that banks would be able to get comfortable in due course.”

Doyle concluded by saying that power-to-X projects “should be on everyone’s radar”. Judging by the interest we’ve seen in this panel, they already are.

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Not a member yet?

Become a member of the 6,500-strong A Word About Wind community today, and gain access to our premium content, exclusive lead generation and investment opportunities.