Navigating Hydrogen Challenges and Opportunities in the Mediterranean - ChangeOfDirections Newsletter 29.11.23
How the Mediterranean energy landscape can be revolutionized with hydrogen innovation.
In Mallorca, tourists may now find themselves captivated by a groundbreaking attraction – a miniature economy fueled entirely by "green" hydrogen. At its core, two solar plants drive an electrolyser, splitting water into oxygen and hydrogen, generating carbon-free fuel. This versatile hydrogen can power buses, integrate into the island’s gas grid, and fuel cells at hotels and the port. Belén Linares, Head of Innovation at Acciona Energía, a key investor in the project, asserts, "The project showcases what is possible."
However, a significant hurdle obstructs the realization of this vision: the hydrogen remains elusive. A design flaw in the Cummins-manufactured electrolyser has prompted a recall. Importing green hydrogen, sourced from renewable channels, is deemed impractical. As a result, buses and fuel cells remain dormant, and the newly elected local government appears less enthusiastic, dismissing the previous administration's endeavors as "a lot of hot air," as cited by the new Mayor of Palma, the island’s capital.
The dilemma extends beyond Mallorca, raising questions about the broader green-hydrogen economy European governments aspire to establish in the Mediterranean basin. This ambitious vision aims to transform the region into a sun-driven counterpart to the wind-powered dynamo evolving around the North Sea. The potential rewards are substantial, offering Europe access to abundant, inexpensive renewable energy and the means to decarbonize its heavy industry.
Historically, the Mediterranean has been a conduit for various forms of energy, from Roman-era manpower to 19th-century natural gas. Presently, it predominantly relies on natural gas, with half a dozen pipelines connecting Europe to Africa and the Middle East. In the era of renewable energy, countries bordering the Mediterranean showcase some of the world's most favorable conditions for harnessing natural forces.
The solar capacity of Spain and Morocco, highlighted in the above map, demonstrates vast potential. Spain enjoys a daily average of 4.6 kilowatt-hours (kWh) of sunlight per square meter, while Morocco boasts 5.6 kWh, double that of Germany. With sparse populations, Spain, Portugal, and the deserts of North Africa and the Middle East offer ample land for solar plants. In specific locations, such as parts of Morocco and Mauritania, abundant sun and wind create rare sweet spots where electrolysers can operate nearly non-stop.
While tapping into this renewable energy reservoir is not a novel concept, recent advancements in technology and declining costs have revitalized earlier ideas. The International Renewable Energy Agency reports a significant drop in the average cost of electricity from utility-scale solar plants, from $0.45 per kWh in 2010 to $0.05 last year.
Efficient transportation of this harvested energy to where it is needed is now more feasible. Unlike Desertec's initial plan involving undersea cables, limited in capacity, contemporary electrolysers can convert electricity into hydrogen at the source. This hydrogen, or its derivatives like liquid ammonia, can be transported as a gas. Analysts anticipate that, in the coming years, green hydrogen from North Africa could cost under $1.50 per kilogram, potentially undercutting the cost of "blue" hydrogen derived from natural gas.
Anticipated demand for energy from the south has evolved significantly compared to the earlier days of Desertec. Hydrogen and its derivatives are essential as carbon-free feedstocks for Europe’s steel and chemicals industries. Of the 20 million tonnes targeted by the EU for consumption by 2030, a substantial portion is expected to originate from the southern fringe of Europe and North Africa.
Nevertheless, the designation of the Mediterranean as Europe’s southern powerhouse is not a foregone conclusion. The continent faces the challenge of kickstarting a market for this new energy source in a deregulated arena with numerous competing players. Kirsten Westphal of the German Association of Energy and Water Industries notes the delicate balancing act required to simultaneously increase demand and supply. The unpredictability of future hydrogen availability and pricing discourages companies from committing to long-term offtake agreements, thereby hindering crucial investment decisions. Political instability in North Africa further amplifies risks and raises the cost of capital.
The most significant hurdle, however, lies in connecting both sides of the market, starting with establishing physical connections. Most of the hydrogen will initially be transported by ship, likely in the form of ammonia. Yet, shipping capacity is constrained, with estimates suggesting that repurposing the entire global fleet of vessels capable of transporting liquefied natural gas could only deliver approximately 6.5 million tonnes per year. This limitation leaves a substantial reliance on pipelines.
Experts remain divided on the feasibility of upgrading existing gas networks for hydrogen, while the expense of building new pipelines is a significant consideration. Geopolitical turmoil adds another layer of complexity, potentially deterring investments in both pipelines and hydrogen production. All three identified corridors through which hydrogen could flow in the Mediterranean basin cross challenging territories. The proposed route for hydrogen piped from Mauritania ideally traverses Western Sahara, but Morocco's contested control over the region presents a roadblock. An alternative under consideration involves an offshore route via the Canary Islands.
Political interference also poses a risk to pipelines once built. In November 2021, rocky relations between Algeria and Morocco led to a diplomatic fallout and a disruption of gas flows through the Maghreb-Europe pipeline, connecting Algeria’s gasfields with Spain through its neighbor’s territory.
Closer to home, complexities persist. An agreement for an underwater pipeline connecting Barcelona to Marseille, facilitating the transportation of hydrogen from Spain through existing infrastructure via France to Germany, could be ensnared in a dispute between Germany and France over whether nuclear power qualifies as "green." Additionally, Air Liquide, the world’s largest producer of industrial gases, opposes a project that could devalue its existing network of hydrogen pipelines.
Confronting this myriad of challenges is imperative for Europe to meet its ambitious targets to reduce carbon emissions. Initiatives, including the European Commission's "hydrogen accelerator" and a "European hydrogen bank," have been launched to encourage hydrogen use and stimulate trade. Relaxation of state-aid rules by the commission enables member countries to support firms in their efforts to decarbonize, with funds earmarked for hydrogen pipelines, including a proposed 3,300km link from Algeria and Tunisia to Austria and Germany. Investment from institutions such as the European Bank for Reconstruction and Development is expected to benefit hydrogen projects in North Africa.
While some member states are eager to expedite progress, Spain and Portugal have embarked on ambitious national strategies to transform the Iberian peninsula into a green-hydrogen hub. Germany, anticipating the need to import up to 70% of the hydrogen required to decarbonize its substantial heavy industry, leads the charge with over €8 billion ($8.6 billion) allocated to support green initiatives. In a demonstration of commitment, Germany's foreign office initiated "hydrogen diplomacy" a couple of years ago, establishing "hydrogen embassies" in key countries. Recently, the ministry of economic affairs became the first provider of funds to H2Global, a platform for trading hydrogen.
Crucially, Germany acknowledges the need for reciprocal arrangements. Beyond merely endorsing the installation of solar plants and electrolyser farms in Africa, Germany is poised to contribute to local job creation, grid upgrades, and the construction of desalination plants (essential for electrolysis requiring pure water). There's even a consideration that parts of Germany's heavy industry could relocate to where hydrogen is produced, acknowledging the inherent connection between the energy map and the industrial landscape.
More links:
IRENA: Renewable Capacity Statistics 2023: https://www.irena.org/Publications/2023/Jul/Renewable-energy-statistics-2023
A Hydrogen Economy: Opportunities and Challenges: https://www.elgaronline.com/view/journals/eecj/11/2/article-p60.xml
The Hydrogen Economy: A Game Changer for Energy?: https://www.bbc.co.uk/news/science-environment-63050910
Tackling the Challenges of Hydrogen Transportation: https://www.upstreamonline.com/hydrogen/hydrogen-success-must-overcome-transportation-challenges/2-1-1067911
Hydrogen Infrastructure: Key Considerations for a Sustainable Future: https://www.sae.org/publications/technical-papers/content/2023-01-0064/
European Hydrogen Strategy:
https://energy.ec.europa.eu/topics/energy-systems-integration/hydrogen_en
Hydrogen Accelerator:
https://h2-global.de/post/how-to-deliver-on-the-eu-hydrogen-accelerator
European Hydrogen Bank:
https://energy.ec.europa.eu/news/commission-outlines-european-hydrogen-bank-boost-renewable-hydrogen-2023-03-16_en
Germany Invests €8 Billion in Hydrogen Projects: https://energy.ec.europa.eu/topics/energy-systems-integration/hydrogen_en
