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The executive who heads Australian billionaire Andrew Forrest's clean energy business says Europe will not meet its ambitious targets for green hydrogen unless it matches the US lead set in a new climate change subsidy package. He said the country would struggle to reduce its dependence on Russian gas.
Mark Hutchinson, recently appointed head of Fortescue Future Industries and former head of GE Europe, says money to fund large-scale green hydrogen projects will be provided in Joe Biden's flagship project. He said it could bypass Europe and flow to the United States to take advantage of tax credits. The climate change, tax, and health care bill known as the Control Inflation Act.
In his first interview since the deal began in July, Hutchinson said incentives needed to be improved if Brussels was serious about replacing Russian gas. “If we don't, what will happen? All the green capital is going to flow into the United States, and we're going to miss out on it,” he said.
Green hydrogen uses renewable energy and uses electrolyzers to separate oxygen and hydrogen atoms from water. It is a key plank of the EU's plan to reduce dependence on Russian gas, but it is not yet produced on a large scale anywhere due to production costs and transportation issues.
In March, Fortescue signed a non-binding agreement to supply Germany with enough green hydrogen to replace about a third of its gas imports from Russia, or 5 million tonnes a year, by 2030. Implementation of the agreement, which includes German energy company E.ON, is a priority. Mr Hutchinson said he had solved the challenge of producing green hydrogen at scale for the first time.
Under a new energy plan called RepowerEU, Brussels plans to use 20 million tonnes of clean-burning fuels by 2030. It is divided into 10 million tons of domestic production and 10 million tons of imports from countries with the potential to produce cheap renewable electricity. Australia, Democratic Republic of Congo, Brazil.
Many large-scale hydrogen projects are planned in Europe, but final investment decisions have been made on only a few. This partly reflects the need for greater clarity on regulations and subsidies to make green hydrogen more cost-competitive, as well as a lack of committed customers.
The EU has announced plans for green hydrogen subsidies based on contracts for difference (a mechanism that has been used to support renewable energy generation by guaranteeing a minimum price), but not all details are yet to be outlined. I haven't done it.
Unlike Washington's concessions to the oil and gas industry that allow hydrogen to be produced using fossil fuel energy sources for hydrolysis, Brussels supports renewable energy.
Under so-called delegated legislation, by 2026 only electricity from new wind and solar farms will be allowed to be used to produce green hydrogen.
U.S. rules are more flexible, using a scale that determines tax credit levels for hydrogen projects based on carbon-equivalent emissions per kilogram produced, with a base tax rate of 60 cents per kilogram.
This scale means clean hydrogen producers can receive tax credits of up to $3 per kilogram. Experts say the move will boost America's nascent green hydrogen industry by making it one of the lowest-cost producers in the world. Earlier this month, the cost of producing hydrogen in the U.S. Gulf Coast was $6.55 per kilogram, according to S&P Global Commodities Insights.
Green hydrogen will also become more competitive with so-called gray hydrogen, the most common form of hydrogen production. The process involves steam methane reforming of natural gas without capturing emissions. S&P says the cost reductions will make the cheapest clean hydrogen production “immediately cost-competitive.”
Over the past year, Fortescue has agreed to multibillion-dollar green hydrogen supply contracts but has yet to begin commercial production of the fuel. “The United States has changed the game,” Hutchinson said. “They created an industry out of nowhere.”
The United States currently produces about 11 million tons of hydrogen annually from natural gas for use in oil refining and chemical manufacturing. “This will replace everything,” Hutchinson said. According to the International Energy Agency, global hydrogen demand in 2021 was 90 million tons.
rainbow colors of hydrogen
green hydrogen It is created by electrolyzing water (H2O) using clean electricity from renewable energy technologies, separating the hydrogen atoms within it from the molecular dioxygen. Currently expensive.
blue hydrogen It is produced using natural gas, but the carbon dioxide emissions are captured and stored or recycled. Production is negligible due to a lack of carbon capture projects.
gray hydrogen This is the most common form of hydrogen production. It is obtained from natural gas by steam methane reforming, but the emissions are not captured.
brown hydrogen Although it is the cheapest way to produce hydrogen, it is also the most environmentally harmful because thermal coal is used in the production process.
pink/purple hydrogen It is made using nuclear energy for electrolysis.
turquoise hydrogen It uses a process called methane pyrolysis to produce hydrogen and solid carbon. Not proven on a large scale. Concerns about methane leaks.
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Letter of reply to this article:
Red tape is holding back Europe's green hydrogen boom / From Oliver Joy, University College London, London WC1, UK Energy Research Institute
