What do wind-to-hydrogen projects mean for investors?

The key to unlock the full potential of offshore wind in the North Sea, and elsewhere, could be linked to the development of power-to-gas technologies. Utilities, manufacturers and developers are now looking at ways to tie up offshore wind power production to hydrogen generation.

Richard Heap
March 7, 2019
What do wind-to-hydrogen projects mean for investors?

The key to unlock the full potential of offshore wind in the North Sea, and elsewhere, could be linked to the development of power-to-gas technologies. Utilities, manufacturers and developers are now looking at ways to tie up offshore wind power production to hydrogen generation.  

Wind-to-hydrogen projects are at a very early stage of development, but the technology has could help to bolster wind generation. This is why hydrogen could become so important for wind investors.

Hydrogen is the most abundant element on Earth and can usually be found in combination with oxygen in water and other compounds, including natural gas and biomass. However, once it is separated from other elements, it becomes an ideal energy carrier.

Renewable energy can be used to power the process of electrolysis that enables hydrogen to be split from these other compounds. By doing this, hydrogen could provide an alternative to batteries to store excess energy from wind, and help to provide greater balance to national transmission networks.

This could become an interesting solution in countries, such as Germany, where electricity grids struggle to cope with the surplus of renewable energy capacity produced. This is where it starts to get interesting for investors.

In addition, hydrogen generated by wind farms could play a key role in decarbonising energy-intensive industries. In a workshop last month, industry body WindEurope said that, as costs for the production of offshore wind in the North Sea keep declining, its surrounding countries have major potential to become hubs for the generation of green hydrogen, which would benefit heavy industry.

In fact, WindEurope has said that the momentum that this technology is picking up is mainly explained by the recent cost reduction of offshore wind in the North Sea.

And the interest of companies is growing too. For example, Colruyt Group’s renewable energy arms Eoly and Parkwind, and transmission operator Fluxys, formed a joint venture last year to collaborate on a 25MW industrial-scale power-to-gas project. This would convert energy from offshore wind farms into so-called 'green hydrogen' that can be transported and stored in the existing natural gas infrastructure.

A consortium including Siemens, Shell and TenneT proposed last December a new tendering model for offshore wind power in Germany, which could be used to produce hydrogen. The new model would make the way to add up to 900MW of offshore wind capacity, which would then be tied up with hydrogen production. Pilot tenders could be possible as early as 2022.

The model would see offshore wind energy be transported onshore by the grid, to then be used on land to generate hydrogen by electrolysis. The hydrogen would then be transported via the gas network and used in other sectors, including energy-intensive industries. This would enable Germany to add more offshore wind capacity, without burdening its grid, as the power produced would be stored by using hydrogen and then used only when needed. Investors in German wind should follow that with interest.

Finally, a consortium including Norwegian utility Varanger Kraft and hydrogen developer Hydrogenics is working on a pilot power-to-gas project in northern Norway, which would add a 2.5MW electrolyser-based energy storage system to a 45MW wind farm.

The main advantage for wind developers and investors in exploring this technology is clear. Wind-to-hydrogen projects would enable additional generation of wind capacity, especially offshore: wind farms would be used to produce hydrogen that can used only when needed by governments and industries. This could support additional wind installations and improve the grid's ability to cope with more wind.

However, it is still very early days for the development of wind-to-hydrogen technology, and so the main challenge for it is the high cost of generation compared with the cost of producing hydrogen by natural gas. That is by no means insurmountable, as we have seen with the falling cost of wind technology as investors have thrown their weight behind the sector, and so we would expect similar dynamics here - as long as the interest from corporates and consumers in renewable energy continues to grow. This is also likely to require government policy measures that could help these projects to become reality.

The race for 'green hydrogen' may be new, but firms are already positioning themselves to benefit.

The key to unlock the full potential of offshore wind in the North Sea, and elsewhere, could be linked to the development of power-to-gas technologies. Utilities, manufacturers and developers are now looking at ways to tie up offshore wind power production to hydrogen generation.  

Wind-to-hydrogen projects are at a very early stage of development, but the technology has could help to bolster wind generation. This is why hydrogen could become so important for wind investors.

Hydrogen is the most abundant element on Earth and can usually be found in combination with oxygen in water and other compounds, including natural gas and biomass. However, once it is separated from other elements, it becomes an ideal energy carrier.

Renewable energy can be used to power the process of electrolysis that enables hydrogen to be split from these other compounds. By doing this, hydrogen could provide an alternative to batteries to store excess energy from wind, and help to provide greater balance to national transmission networks.

This could become an interesting solution in countries, such as Germany, where electricity grids struggle to cope with the surplus of renewable energy capacity produced. This is where it starts to get interesting for investors.

In addition, hydrogen generated by wind farms could play a key role in decarbonising energy-intensive industries. In a workshop last month, industry body WindEurope said that, as costs for the production of offshore wind in the North Sea keep declining, its surrounding countries have major potential to become hubs for the generation of green hydrogen, which would benefit heavy industry.

In fact, WindEurope has said that the momentum that this technology is picking up is mainly explained by the recent cost reduction of offshore wind in the North Sea.

And the interest of companies is growing too. For example, Colruyt Group’s renewable energy arms Eoly and Parkwind, and transmission operator Fluxys, formed a joint venture last year to collaborate on a 25MW industrial-scale power-to-gas project. This would convert energy from offshore wind farms into so-called 'green hydrogen' that can be transported and stored in the existing natural gas infrastructure.

A consortium including Siemens, Shell and TenneT proposed last December a new tendering model for offshore wind power in Germany, which could be used to produce hydrogen. The new model would make the way to add up to 900MW of offshore wind capacity, which would then be tied up with hydrogen production. Pilot tenders could be possible as early as 2022.

The model would see offshore wind energy be transported onshore by the grid, to then be used on land to generate hydrogen by electrolysis. The hydrogen would then be transported via the gas network and used in other sectors, including energy-intensive industries. This would enable Germany to add more offshore wind capacity, without burdening its grid, as the power produced would be stored by using hydrogen and then used only when needed. Investors in German wind should follow that with interest.

Finally, a consortium including Norwegian utility Varanger Kraft and hydrogen developer Hydrogenics is working on a pilot power-to-gas project in northern Norway, which would add a 2.5MW electrolyser-based energy storage system to a 45MW wind farm.

The main advantage for wind developers and investors in exploring this technology is clear. Wind-to-hydrogen projects would enable additional generation of wind capacity, especially offshore: wind farms would be used to produce hydrogen that can used only when needed by governments and industries. This could support additional wind installations and improve the grid's ability to cope with more wind.

However, it is still very early days for the development of wind-to-hydrogen technology, and so the main challenge for it is the high cost of generation compared with the cost of producing hydrogen by natural gas. That is by no means insurmountable, as we have seen with the falling cost of wind technology as investors have thrown their weight behind the sector, and so we would expect similar dynamics here - as long as the interest from corporates and consumers in renewable energy continues to grow. This is also likely to require government policy measures that could help these projects to become reality.

The race for 'green hydrogen' may be new, but firms are already positioning themselves to benefit.

The key to unlock the full potential of offshore wind in the North Sea, and elsewhere, could be linked to the development of power-to-gas technologies. Utilities, manufacturers and developers are now looking at ways to tie up offshore wind power production to hydrogen generation.  

Wind-to-hydrogen projects are at a very early stage of development, but the technology has could help to bolster wind generation. This is why hydrogen could become so important for wind investors.

Hydrogen is the most abundant element on Earth and can usually be found in combination with oxygen in water and other compounds, including natural gas and biomass. However, once it is separated from other elements, it becomes an ideal energy carrier.

Renewable energy can be used to power the process of electrolysis that enables hydrogen to be split from these other compounds. By doing this, hydrogen could provide an alternative to batteries to store excess energy from wind, and help to provide greater balance to national transmission networks.

This could become an interesting solution in countries, such as Germany, where electricity grids struggle to cope with the surplus of renewable energy capacity produced. This is where it starts to get interesting for investors.

In addition, hydrogen generated by wind farms could play a key role in decarbonising energy-intensive industries. In a workshop last month, industry body WindEurope said that, as costs for the production of offshore wind in the North Sea keep declining, its surrounding countries have major potential to become hubs for the generation of green hydrogen, which would benefit heavy industry.

In fact, WindEurope has said that the momentum that this technology is picking up is mainly explained by the recent cost reduction of offshore wind in the North Sea.

And the interest of companies is growing too. For example, Colruyt Group’s renewable energy arms Eoly and Parkwind, and transmission operator Fluxys, formed a joint venture last year to collaborate on a 25MW industrial-scale power-to-gas project. This would convert energy from offshore wind farms into so-called 'green hydrogen' that can be transported and stored in the existing natural gas infrastructure.

A consortium including Siemens, Shell and TenneT proposed last December a new tendering model for offshore wind power in Germany, which could be used to produce hydrogen. The new model would make the way to add up to 900MW of offshore wind capacity, which would then be tied up with hydrogen production. Pilot tenders could be possible as early as 2022.

The model would see offshore wind energy be transported onshore by the grid, to then be used on land to generate hydrogen by electrolysis. The hydrogen would then be transported via the gas network and used in other sectors, including energy-intensive industries. This would enable Germany to add more offshore wind capacity, without burdening its grid, as the power produced would be stored by using hydrogen and then used only when needed. Investors in German wind should follow that with interest.

Finally, a consortium including Norwegian utility Varanger Kraft and hydrogen developer Hydrogenics is working on a pilot power-to-gas project in northern Norway, which would add a 2.5MW electrolyser-based energy storage system to a 45MW wind farm.

The main advantage for wind developers and investors in exploring this technology is clear. Wind-to-hydrogen projects would enable additional generation of wind capacity, especially offshore: wind farms would be used to produce hydrogen that can used only when needed by governments and industries. This could support additional wind installations and improve the grid's ability to cope with more wind.

However, it is still very early days for the development of wind-to-hydrogen technology, and so the main challenge for it is the high cost of generation compared with the cost of producing hydrogen by natural gas. That is by no means insurmountable, as we have seen with the falling cost of wind technology as investors have thrown their weight behind the sector, and so we would expect similar dynamics here - as long as the interest from corporates and consumers in renewable energy continues to grow. This is also likely to require government policy measures that could help these projects to become reality.

The race for 'green hydrogen' may be new, but firms are already positioning themselves to benefit.

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