Portuguese energy company Galp is targeting a final investment decision on its planned 100-MW Sines hydrogen production plant in the first quarter of 2023.
Brown said Galp was also "just about" to take FID on a first stage 2-MW electrolyzer pilot project at Sines. "In Europe, there isn't a 100-MW plant yet, so for us – a small company like Galp – that's quite an aggressive footprint," he said. The largest electrolyzer in operation in Europe is Shell and ITM Power's 10-MW Refhyne plant in Germany, though several projects of 100 MW and above are targeting start dates of 2025 or before, according to data from S&P Global Platts Analytics Hydrogen Production Assets Database.
The company is working on another 100-MW electrolyzer project in Sines in partnership with EDP and Engie, the Green H2 Atlantic project, with a target start-up date of 2025.
Galp's own 100-MW Sines electrolyzer project will focus on its refinery there, with a target to replace existing conventional hydrogen production. "The refinery is this unique strategic control point for hydrogen," Brown said. "We can go to 600 MW to actually replace all our grey [hydrogen] with green." With the possibility of converting the renewable hydrogen to ammonia, "it becomes a complete system," he said. "You start to make sustainable aviation fuels, you can put the hydrogen into the gas main, you can deliver hydrogen to [heavy-duty] transport. So you create then from that base an amazing ecosystem of hydrogen opportunities." Brown said with gas and carbon prices where they are, plus EU incentive mechanisms and government support on-grid tariffs, "you get to an economic position on hydrogen." S&P Global Platts assessed day-ahead Dutch TTF gas prices at Eur117.60/MWh ($131.50/MWh) on Feb. 24, up by over 30% on the day following Russia's military invasion of Ukraine, while EU ETS carbon allowances settled at Eur87.03/mt, down from around Eur95/mt the previous day.
Refiners such as Galp were well placed on developing renewable hydrogen infrastructure, Brown said and had an advantage over utility companies. "Our ability to use the refinery as an immediate short for hydrogen is crucial," he said. "If you look at a utility, it doesn't have that. It just has renewable energy. They don't have a control point." Galp was able to "build that scale on an economic basis before you have any hydrogen customers in," Brown said and would be ready to supply the heavy transport and aviation sectors once that demand developed.
Barriers to hydrogen, renewables
One barrier to the rollout of green hydrogen was the cost of electrolyzers, and though costs were falling rapidly, Brown said they would have to fall by two to three times to get to the $2/kg production cost level. S&P Global Platts assessed the cost of producing renewable hydrogen via alkaline electrolysis in Europe at Eur14.96/kg ($16.73/kg) on Feb. 24 (the Netherlands, including capex), based on month-ahead power prices that rose sharply following Russia's military attack on Ukraine. Power costs make up typically 70%-80% of electrolysis production costs. Brown noted further barriers to developing renewables, particularly around permitting. "One of our biggest problems in renewable energy is getting approvals, in Spain in particular," he said. "We have some 200 MW ready to start up, but we just can't get the certificate from the government to start it. And why? Because there's such a big backlog." He said the lack of regulatory pace was a limiting factor for the energy transition in Europe, and also emphasized the importance of engaging with and compensating communities affected, emphasizing a role for governments and society in understanding and accepting some impact from the buildout of renewables." "Without this, we're not going to make a change," he said.
Source: CCIPV / Aicep / S&P Global