Poland needs to engage in the discussion on the EU hydrogen economy as soon as possible. Otherwise it may become part of the menu and replace its dependence on Russian gas with reliance on power from Germany. Even though this is a new chapter in Poland’s energy policy, it still has the old trilemma – writes Wojciech Jakóbik, editor in chief at BiznesAlert.pl.
Europe will need imported hydrogen. However, it will be difficult to make sure it will be truly green hydrogen, as some countries may generate GHGs in the process, or exploit their resources in an unsustainable way to produce the gas. Whereas, hydrogen that is not green: purple, blue, turquoise, may cause concerns about the security of supply and diversification. Poland may contribute to the discussion on this topic by cooperating with Germany, and fighting for money for our own projects, such as nuclear power, which will decrease dependence on imports and mitigate the negative impact of the hydrogen economy on the environment in Europe and outside. Poland may use the discussion on the future of hydrogen in Europe to acquire additional subsidies to bankroll nuclear energy, offshore and other huge projects in the new European budget. It should engage in talks on this topic as soon as possible, after the budget deadlock in the EU is over, so as not to replace its dependence on gas from Russia with a dependence on energy from Germany.
New fuel, old trilemma
Europe is not capable of generating enough green hydrogen to run its economy on this fuel only. So, to a large degree the goal is to use hydrogen as a storage mechanism for energy generated from renewable energy sources (RES). This would allow it to become one of the tools for ensuring the security of power supply. However, this means, importing hydrogen from third countries will be inevitable. Germany’s Fraunhofer Institute for Solar Energy Systems (ISE)suggested, without getting into much detail, that out of concern for supply security and diversification, Europe should choose democratic and politically and economically stable partners to avoid the same mistakes it had made with fossil fuels, i.e. gas, oil and coal, on whose import it is now dependant. ISE also explained that the options on the table were the same as with fossil fuels: Australia, North Africa, Norway and Russia. This means, using hydrogen in the power generation sector and outside of it, creates the same old challenges known from the hydrocarbon sector.
First, we should ensure the security and diversification of hydrogen supply. Importing from unstable states is always less safe, than from stable ones. However, the problem is that apart from Norway, the majority of potential hydrogen export states are unstable. Countries such as Libya or Russia are not democratic. This is yet another argument against the Nord Stream 2 project, which is expected to operate for 50 years, provided that after the EU decarbonization, it will replace natural gas with hydrogen, and thus will continue to serve the Kremlin and ensnare Germany. From the point of view of the security of supply, the choice should be Australia and Norway. However, if that happens another problem will appear – how to ensure the supply of green hydrogen, which is deemed by RES supporters “clean”. The solution is a new deal where European states will support stabilizing and democratizing the states from which they will import the green hydrogen. It seems that Germany is already coming up with soft power solutions of this type, by engaging in developing RES and hydrogen in African states. However, this creates new challenges when it comes to sustainable impact on the environment, an issue that the supporters of stricter climate policy fight for. This conclusion leads us to another hypothesis.
Secondly, it should be ensured that the hydrogen supply chain’s impact on the environment is sustainable. It is not enough to analyze whether the hydrogen that reaches Europe is green, i.e. whether it was generated with RES. Producing green hydrogen in African states may, for instance, involve unsustainable water management; or redirecting money from investments that add to the economic growth of a given country, to hydrogen export, which would make it a kind of a “hydrostate”. I introduce this term as an analogy to petrostates that depend on oil exports. Therefore, it may turn out that the chase after a zero-emission hydrogen economy will turn into a never-ending quest, during which a problem will appear at some stage of the supply chain, which will be unsustainable from the point of view of climate protection.
Third, in its pursuit of as much hydrogen as possible, Europe may be at risk of “hydrogen daltonism” as it may lose sight of the source of the hydrogen it imports. Therefore, the EU hydrogen strategy, which currently includes a simplification called by Gazprom a form of “racism” as the fuel is chosen on the basis of color, should be updated with guidelines on which sources of hydrogen are acceptable, and which are not. Still, Gazprom, Rosneft and Rosatom will be on the list of the less desired suppliers, because the EU prioritizes diversification and safety of supply. It is true that the green hydrogen may not be necessarily sustainable from the point of view of the climate. Therefore, this fuel should come from different sources: blue hydrogen produced with the carbon capture and storage technology in Norway; violet hydrogen produced from European nuclear energy, but not from Russia’s due to the lack of political stability and undemocratic character of that state. The cooperation in hydrogen supply should be linked with an agenda on stabilizing a given exporter, and supporting its economic development instead of halting it. This is how the EU can connect importing hydrogen and exporting its soft power. This is probably how Germany sees the future, but it has chosen to focus on green hydrogen only, as it is a leader in that sector. “After 15 years, the subsidies for the first wave of wind turbines in Germany are drawing to an end, so a new source of support has to be found,” a sceptic about this kind of approach from the Polish energy sector told us.
Considering this, the price of hydrogen is only one of the many factors that impacts the choice of the supplier, and it is again becoming part of the energy security triangle, aka the trilemma: affordability, stability of supply, environmental protection. In other words, while hydrogen is a new fuel, it actually poses the same old challenges known from the fossil fuel sector. A hydrogen economy is not an escape from the three aspects of the energy security dilemma.
The never-ending chase after the Holy Grail
Poland should tone down Germany’s optimism and add supply safety and diversification to the discussion. I wrote about this in the past. Warsaw should also remind Berlin about the necessity to take stock of the entire supply chain, which will reveal that internal supply in the EU from local sources of this fuel from RES, nuclear power, gas and oil, do not look as unfavorably. Former employees of the European Commission, scientists and engineers wrote a letter that cooled down the enthusiasm of those who believe green hydrogen is the Holy Grail of the power industry. Argyraki Vicky, Caruso Ettore, Crutzen Serge, De Jesus Ferreira João, De Sá José, de Sampaio Nunes, Pedro, Deffrennes Marc, Demine Olga, Furfari Samuele, Henningsen Jorgen, Neves João, Pauwels Henri, von Scholz Hans-Eike and Woeldgen Jacques argued in the letter that the existing physical and technological barriers constitute an argument against green hydrogen and for conventional energy sources, such as nuclear energy. The signatories reminded that hydrogen generation had appeared in the European Community’s strategic document for the first time in 1969 when the Joint Research Centre started researching the topic. Whereas, during the negotiations of the Kioto protocol, which was the precursor to the Paris Agreement, the EU declared it wanted to cooperate with the U.S. on developing a hydrogen economy. Today hydrogen has yet again resurfaced in the European Green Deal proposed by the Commission. However, the authors of the letter also stressed many issues still persisted, and that they made it impossible to implement this optimistic vision. In their opinion, Germany’s pivot to RES has made little impact. Even though the country has spent EUR 25 bn annually in subsidies for 20 years, which is about EUR 1000 per household annually, the participation of wind and solar in the generation of primary energy in Germany is now only 4.3 percent. During that time, the country decided to shut down its nuclear power plants, which increased its dependence on domestic coal and imported Russian gas. It also generated surpluses from RES, which undermine the profitability of power plants in other states, such as Poland, because the additional power cannot be stored. The signatories of the document also stated that today the efficiency of storing power generated from RES in hydrogen was at 28 percent, which means 70 percent of the energy is wasted. The supply of energy provided by RES is unstable, which lowers the efficiency of electrolyzers, which would be used at only 20 percent of their capability. Therefore, the authors of the letter concluded that this policy was unsustainable and that there was an analogy between the “green revolution” in the power industry and green hydrogen. In theory they are to decrease GHG emissions, but in reality they do not achieve this, because of an approach that is deemed dogmatic by some, and calculating by others, because it promotes renewable technologies from Germany. The signatories argued that the quest for the Holy Grail of the energy sector, i.e. the creation of a power system that runs on RES at 100 percent and is stabilized with hydrogen, could lead to a 10-fold increase in RES capacity in Europe, which would have both positive and negative impacts on the system. The positives include higher energy supply and the consequent drop in prices and imports of both power itself and energy sources. The negatives would involve pushing out of the market conventional energy sources, which during the transition period leading to achieving the 100 percent RES generation, would have to be subsidized by member states, or a new EU mechanism. This means a bigger market for renewable technologies from Germany, but also a dependence of other states on energy from those sources. The authors proposed an alternative in the form of European nuclear power, which would stabilize RES, generate no GHGs, and produce hydrogen, which, even though it would not cause any emissions, would not be green, but purple, which is a less desirable variant, because of dogmatic or calculating reasons – depending on the interpretation.
“Without a technological breakthrough in energy storage, a stable functioning of a power system with a very high participation of RES is impossible. This will not change before 2030,” Eryk Kłossowski, CEO of PSE, stated in a presentation. He also commented on the potential of hydrogen in this context. “The flexibility of the system is a very precious resource, but it is not a source of power,” he warned. Earlier he also reminded about the phenomenon mentioned in the letter I summarized above. In his opinion, an uncontrolled development of RES will lead to a situation in 2030, where there will be “a lot of hours during which the demand for energy other than the one from RES (off/onshore, PV) will decrease below the level of safety for the national power system”.The CEO also stated that “a system that will function in such circumstances, will create a situation where low energy prices (negative) will be present during a large number of hours, and will push unsubsidized facilities from the market. But without these plants it will be impossible to ensure the security of the national power system,” Kłossowski explained. Therefore, maybe it would be advisable to not be dogmatic about the sources of hydrogen and stop promoting only its green incarnation. Italy’s Saipem, which wants to cooperate with Poland in the energy sector, pointed out that at this point only four percent of world’s hydrogen was generated through hydrolysis, and 18 percent was produced in the oil sector, 30 in the coal sector and 48 in the gas sector. These figures will change, as they will increase in the low- and zero-emission sectors. The end goal of the energy sector transition is RES technology, by analogy the end goal of the hydrogen sector is electrolysis, but the process of achieving this goal should be sustainable and it should consider all of the issues enumerated above. It is worth investing in lowering the costs of electrolysis, which at this point is the most expensive way of generating hydrogen. However, one should not go all the way to the other side of the spectrum and ban all the other methods, as it would undermine supply security.
Poland has to act
Poland may use the above arguments when talking about the EU hydrogen strategy to acquire support for domestic projects that develop the hydrogen economy, as a tool that strengthens the security of hydrogen supply to Europe understood as a whole. Poland should be active in its discussions with Germany and other member states on adding the mentioned components to the hydrogen strategy, as they will improve the security of hydrogen supply and its sustainable production. At the same time, it will also allow for the new subsidies to bankroll projects important for Poland’s and other member states’ climate and energy policy. This is how Poland could use the new, large EU funds necessary to rebuild the economy and pay for the energy transition. It could sponsor its offshore wind farms, which would ensure diversification opposite the same energy sources in Denmark, Germany and the Baltic States. It could pay for its Polish Nuclear Power Programme, which while it could be sponsored by the state budget and the project’s technological partner (probably the US) as part of the financing model that is in the works, could be cheaper thanks to EU support, especially considering the numerous infrastructural projects that would accompany the development of nuclear energy in Poland, which could also contribute to economic development. Poland’s offshore and nuclear energy are interconnected as they make it possible to avoid dependence on energy from Germany and gas from Russia. They may also help to ensure that the European hydrogen economy will be safe and sustainable. Poland should take a noticeable part in the discussions on this topic.