Oil major Equinor has joined Europe’s largest green hydrogen project, NortH2, which aims to produce one million tonnes of the zero-carbon gas annually using at least 10GW of dedicated offshore wind power by 2040.

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German power company RWE has also joined the project in the north of the Netherlands, which aims to see 4GW of green-hydrogen producing electrolysers installed by 2030.

The project, pronounced “North H2”, was initiated in February this year by Anglo-Dutch oil giant Shell, local natural-gas distributor Gasunie and ports operator Groningen Seaports with a view to kickstarting Europe’s “green hydrogen economy”.

The 10GW of dedicated power for NortH2 will come from one or more yet-to-be-designed offshore wind projects, rather than any in the existing development pipeline. And the scale of offshore wind required for NortH2 is enormous — the world’s largest offshore wind project at present is the 3.6GW Dogger Bank project.

The importance of NortH2 and other similar-sized projects, such as the RWE-linked 10GW AquaVentus project off Germany, should not be underestimated.

Green hydrogen is seen as a key vector for decarbonising the broad energy sector as it can be used for zero-carbon transport, heating, heavy industry, long-term energy storage and as the basis of carbon-neutral synthetic fuels. But green H2 — produced by splitting water molecules into hydrogen and oxygen inside machines called electrolysers that are powered by renewable energy — is 50-300% more expensive than highly polluting “grey hydrogen” derived from natural gas. This is partly because electrolysers have yet to be industrialised and are still largely produced by hand in relatively small numbers.

Yet policymakers around the world are relying on green hydrogen to reach their net-zero targets, even though the technology has yet to be deployed at scale. For example, the EU's hydrogen strategy calls for the deployment of 40GW of green H2 by 2030, but the world's largest working electrolyser is thought to be a 10MW machine in Japan.

Economies of scale

The sector therefore needs to be ramped up quickly, with economies of scale expected to drive down the costs of electrolysers and green hydrogen this decade by about 50%.

“We look at [NortH2] as a gigascale project that is really about building and unlocking a new hydrogen value chain and kickstarting the hydrogen economy in Europe,” Equinor’s head of energy storage, Ingrid Fossgard-Moser, tells Recharge.

“If you look at the EU 2030 targets, where they’re aiming for 40GW of electrolyser capacity by 2030 and ten million tonnes [of green hydrogen]… there will be a big need there.”

Her colleague Olav Kolbeinstveit, vice-president of power and markets, adds that Equinor’s target of net-zero emissions by 2050 means that NortH2 will be important for Equinor in terms of scaling up both its offshore wind and green hydrogen businesses.

“We consider it a groundbreaking project… it’s an important part of our efforts to build competitive positions in hydrogen and also creating our future business, future value and new industrial opportunities,” he tells Recharge.

Kolbeinstveit — an economist by training — explains that large companies such as Equinor have a potential advantage in this market, as they have the financial muscle and experience to take on massive engineering projects such as the multi-billion-euro NortH2.

“Equinor can contribute with more than deep pockets — we have the legacy and the capability of handling large complex projects,” he says.

“The broad energy companies [ie, transitioning oil companies] really can make a difference in this — how we are able to design and construct and lift highly technical and commercially complex value chains like this. I think this is where we have an edge… I think that’s where single-tech companies or the more narrow companies will struggle.”

Fossgard-Moser adds that the economies of scale from the 4GW initial phase of NortH2 will bring cost advantages “in the range of 20%” compared to smaller green hydrogen projects.

But this alone will not make green hydrogen cost-competitive with grey — and costs need to come down much further to create a market for the green gas.

Bringing down costs

One of the main goals of the NortH2 feasibility study — which is now under way and due to continue until July next year — is to figure out how costs can be reduced throughout the value chain to the point where customers will be able and willing to buy large amounts of the project’s green H2. Clearly, the project will not go ahead if no-one will buy its product.

“The green hydrogen market is still in its infancy and it needs to be unlocked,” Kolbeinstveit points out.

Using offshore wind, rather than onshore wind or solar, to power the electrolysers will bring its own savings — the size of offshore turbines are expected to reach 15MW+ in the second half of this decade, bringing lower costs of energy, while offshore wind’s superior capacity factor also means that electrolysers can be run for more hours per day, reducing the cost per tonne of hydrogen.

The project partners are also in discussions with manufacturers about how to massively ramp up the production of electrolysers, with a view to seeing the kinds of economies of scale seen over the past decade in the wind and solar sectors. Key to this will be building huge new advanced electrolyser factories with high levels of automation. After all, current global electrolyser production capacity would probably not be big enough to meet demand for this single project.

“They [the electrolyser makers] need demand to invest in that factory and that’s what we are providing,” says Kolbeinstveit.

Using existing gas facilities

The NortH2 partners are also planning to reduce the costs of transporting their hydrogen by utilising an existing natural-gas network. Post-2030 plans for the project also include placing electrolysers on offshore platforms and sending the H2 to shore via fossil-gas pipelines.

The project’s location in the Netherlands is significant because of its proximity to the Groningen gas field, which is due to be closed in 2022. The fossil gas from this field is classed as “low-calorific” due to the presence of high amounts of nitrogen, and therefore has a gas network in the Netherlands and Germany, partly owned by Gasunie, that is not connected to the rest of the European gas grid. Talks have been ongoing for years about transforming this “L-gas” network into the world’s first clean-hydrogen grid.

“Gasunie owning the L-gas network [in the Netherlands] is a natural link and it makes the project stronger,” said Kolbeinstveit.

Upgrading the network to handle the smaller hydrogen molecule would be a lot cheaper than building a new H2 pipeline network for scratch, and transporting the gas via pipes will be less expensive than the alternatives.

“Trucking and shipping of hydrogen — if you want to do it at scale — will be a major cost element. Utilising pipelines and infrastructure will be key to get the scale on it,” he explains.

The importance of government support

But perhaps the most significant way to “crack the cost code”, as Kolbeinstveit puts it, is through government support — in the same way that feed-in tariffs and national auctions helped to quickly bring down the costs of wind and solar power.

Such support could come through subsidies, mandates or other incentives, or possibly just increasing the carbon price on emissions from grey hydrogen.

Equinor says it is still too early to say what kind of support the NortH2 partners will seek, but that will be part of their ongoing discussions with potential customers, suppliers and policymakers (at the regional, national and EU levels).

“Customers need to be incentivized to be able to pay [for green hydrogen] one way or another,” says Kolbeinstveit. “So we need dialogue along the value chain to make sure that this makes sense for all partners… no-one should lose money.”

Brussels will have a major role to play, he adds, especially as it currently has the world's most ambitious targets for green hydrogen.

“Having discussions with the EU and having good support there is key to unlocking this,” Kolbeinstveit adds.

Blue hydrogen

Equinor will continue, in parallel, to develop blue-hydrogen projects, in which most of the CO2 produced from methane is captured and stored, says Kolbeinstveit, pointing to the company’s planned H2H Saltend facility in northeast England — part of the under-development Zero Carbon Humber Partnership.

“We think we need both [green and blue hydrogen] on this path of the thinking around decarbonizing the economy,” said Kolbeinstveit. “Also as a company with a natural-gas business, we have a strong industrial driver to decarbonise the gas [via] blue hydrogen,” he explains.

“We also see green hydrogen as a way of expanding the potential for offshore wind [in which Equinor is a major player] and it will all be part of the clean hydrogen value chain downstream, and we need to unlock that with scale.

“Hence, we need both technologies to be able to lift this. So we see them as complementary.”

The long-term potential for green hydrogen, in Europe at least, seems to be much bigger than the blue variety. As the EU’s hydrogen strategy states: “The priority for the EU is to develop renewable hydrogen, produced using mainly wind and solar energy. In the short and medium term, however, other forms of low-carbon hydrogen are needed, primarily to rapidly reduce emissions from existing hydrogen production and support the parallel and future uptake of renewable hydrogen.”