Climate consciousness is rightly growing as the EU’s plan to introduce a sustainable finance taxonomy in the latest stride towards a clean-energy future. The goal is to make the Europe’s climate targets more practical and attainable, helping to steer private capital towards activities that provide long term environmental benefit.
But in a recent letter sent to EU climate chief Frans Timmermans, a coalition of electricity firms and industrialists expressed their concerns about the specific level at which the emission threshold may be set.
As it stands, the draft threshold would deem hydrogen produced from grid electricity not to be classed as ‘green’, even in countries which have a low carbon-intensive electricity. Yet, the goal of taxonomy is to channel private capital investment towards environmentally sustainable activities.
The global growth of sustainable investing and of funds with an environmental, social and governance (ESG) mandate means there is an ever-increasing pool of finances available for investment targets that meet sustainability criteria. In early 2020, the International Institute for Sustainable Development (IISD) predicted that by 2025 there would be over $80trn of global assets with an ESG mandate, up from $30trn in 2018.
Technologies and projects which can clearly show they meet its criteria will be more easily able to attract financing. Some projects which are currently labelled as sustainable will be shown to not meet the criteria, and funds may shift across to other projects which do fit under the threshold.
The draft legislation sets out a lifecycle greenhouse gas savings reduction of 80% relative to a fossil fuel comparator of 338g of CO2e/kWh. With plant efficiency of 75%, the carbon intensity of the electricity produced and used for hydrogen manufacturing needs to be under 50.8g CO2e/kWh – a level not normally achievable if grid electricity is used.
Wave power might be a central part of the solution here. A renewable energy source that has vast and permanent potential and technologies proven at prototype scale, wave energy is a market with immense opportunity and compelling credentials. The UK government estimates that ocean energy has the potential to cater to 20% of the country’s entire electricity requirements, equating to an installed capacity of between 30-50GW.
Recent reseacher out of Portugal assessed the life cycle of a wave energy converter at 33.8g CO2e/kWh. Even when combined with other forms of intermittent renewable generation to supply green hydrogen, the lifecycle GHG emissions fall within the requirement of 2.256t CO2e/tH2 as set out in the EU draft legislation.
The UK estimates ocean energy has the potential to cater to 20% of the country’s entire electricity requirements, equating to an installed capacity of between 30-50GW
The International Renewable Energy Agency’s latest renewable power generation costs study indicates its global weighted average levellised cost of electricity is at $0.047/kWh – comfortably below the $0.17/kWh of the current cheapest fossil fuel-fired source of new electricity generation.
While wave energy converters (WECs) such as WaveRoller, which we are testing in the Portuguese Atlantic, transform wave-swell into electricity, by our calculations if integrated with a solar-powered green hydrogen plant the technology could provide power for an electrolyser capacity factor of 60%, a halving of total product costs, and just a third of the land area for the same production.
WEC arrays will also generate through night, happily balanced against the solar power produced during the day, avoiding process shutdowns, and supplements seasonal changes and smooths sudden swings in output. In arid regions, the renewable power not harnessed by the electrolysers could also be used to produce fresh water for irrigation and supporting climate resilience and sustainability goals of local communities.
Wave energy has had its ups and downs over the past decade and remains a fledgling power generation source. Yet it could well be that it is an ideal candidate and enabling technology which ensures hydrogen manufacturers meet the criteria outlined by the EU’s sustainable finance taxonomy – and this could provide a potentially transformative role for the sector as the energy transition gathers momentum.
· Matthew Pech is finance and control director at wave power developer AW-Energy