The rapid growth and success of renewables is creating new challenges – green hydrogen may solve one of the biggest
The rapid growth and success of renewables is creating new challenges – green hydrogen may solve one of the biggest
After a strong year of growth, renewables outpaced fossil fuels in EU electricity generation for the first time ever last year, with wind and solar alone accounting for 20% of the electricity mix. As the levelized cost of electricity (LCOE) of renewables becomes more and more competitive, this positive trend is set to continue.
Additionally, climate protection is not only about decarbonizing the electricity sector. Green electricity is also the basis for reducing greenhouse gas (GHG) emissions in all other areas of the economy, which represent around 60% of CO2 emissions in the EU.
Take e-mobility. There are currently four million electric vehicles (EVs) on Europe's roads; by 2030, it is anticipated there will be around 34 million. These EVs are only climate friendly if they are powered by green electricity. In the coming years, gigantic demand for renewable energies will emerge from e-mobility. And that is just one sector. Thus, the pace of expansion of renewable generation needs to accelerate further, otherwise the EU will not be able to meet its recently tightened climate target of reducing GHG emissions by 55% by 2030.
Dynamic growth usually comes with frictions, in this case so-called intermittency in the power sector. Sometimes renewables do not generate at all; sometimes they produce more electricity than can be dispatched. Imbalances between supply and demand are growing as the capacity of renewables increases. One of the consequences of imbalances is that the larger the number of wind farms and solar parks, the more frequently their simultaneous operation puts pressure on spot market prices.
The Transformational Properties of Hydrogen
Green hydrogen produced by electrolysis from renewable energy and water has the potential to mitigate these negative effects. Hydrogen can store large amounts of electricity over long periods of time, a benefit that battery-based storage is unable to provide. Electrolysis can be used to take advantage of periods of high supply/low demand and thus compensate for fluctuations in electricity generation from renewable energies.
The benefits go far beyond the power market, however. Green hydrogen can transform power into other energy vectors including heat, synthetic gas, or ammonia – completely emission free. Only this transformation – known as Power-to-X – enables the decarbonization of sectors such as steel, chemicals, agriculture, heavy transportation, and many more.
It’s a win-win situation. Renewable energy generators can offset price volatility and capacity constraints and benefit from increasing demand, while green electricity will enable electrolysers to drive the GHG emission reduction across the economy in order to achieve global climate goals.
About Michael Ebner
Michael Ebner is a founding member of KGAL’s Infrastructure department, which has been investing in renewable energy projects across Europe since 2003 and has a team of more than 50 professionals. KGAL holds renewable energy assets in 10 European countries with a value of more than €3.2bn on behalf of private and institutional clients.