Green Hydrogen Economy — A Solution to the Challenge of Energy Storage and Decarbonisation of the Industry and Traffic?

Authors: Maria Landtman, Klaus Metsä-Simola, Noora Britschgi and Julia Ranta

Power-to-X means electricity conversion, storage, and reconversion where surplus electricity is converted into gas or liquid, and, if needed, back to electricity. Lately, the discussion around green hydrogen economy, where renewably produced electricity is used to produce hydrogen, has been particularly heated. In July 2020, the EU published its Hydrogen Strategy, in which it concluded that promoting a renewable hydrogen economy is part of the European Green Deal and that supporting investment in green hydrogen will form a part of the EU’s recovery package from the COVID-19 crisis. This blog post discusses some basic topics related to the booming hydrogen economy from a Finnish perspective.

Why Hydrogen?

Hydrogen is already produced and used in multiple ways, but the new innovation is to harness the fluctuations in the production of renewable energy, such as wind and solar power, for the purposes of hydrogen production. Producing hydrogen during peak times when there is excess sun or wind power in the market may offer a solution to the overproduction challenge related to these renewables. Green hydrogen may be reconverted back to electricity and thus be used as an energy source in less windy or sunny times or as a fuel in itself or combined with carbon in the traditional production industry, heavy traffic, and maritime transport. Power-to-X and hydrogen economy also offer an alternative for energy storage with batteries.

Producing Hydrogen and Producing Electricity from Hydrogen

Hydrogen can be produced from water through electrolysis. The produced hydrogen can be stored more easily than electricity and taken into use by turbines that turn it into electricity in less windy or sunny times. Producing hydrogen with electrolysis is very energy consuming. Moreover, converting hydrogen back to electricity is not entirely efficient because a large part of the electricity goes to waste as heat. However, by collecting this heat, the efficiency may be improved.

Permitting of Hydrogen Production and Storage

The industrial scale production and storage of hydrogen requires several governmental and municipal authority approvals and processes, such as environmental impact assessment and planning and permits related to building, environmental, chemical, and explosion risks. Moreover, the construction of pipelines for the purposes of hydrogen transfer requires further permits. In general, the permitting regime is fragmented, and the Finnish government could consider facilitating and coordinating the permitting system as part of promoting the transition into carbon neutrality.

Next Steps

The EU aims to further develop EU-wide instruments that would promote carbon neutrality, including an EU-wide certification of green hydrogen and implementing of guarantees of origin for green hydrogen. As part of the European Green Deal, the EU has initiated the review of the Renewable Energy Directive (2018/2001/EU) and the Energy Efficiency Directive (2012/27/EU and 2018/2002/EU) in order for them to comply with the recently adopted initiatives, such as the Climate Target Plan for 2030 and the Hydrogen Strategy. The result of the review and possible proposals are expected to be presented in June 2021. The Finnish Government and Parliament will formulate their official positions with respect to the EU Hydrogen Strategy in the course of this autumn.

Hannes Snellman advises clients on a regular basis with respect to inter alia the permitting, construction, operation and financing of industrial projects. Our Environment and Natural Resources and Projects and Construction teams are closely following the development of the hydrogen economy and Power-to-X and the related legislative regime. Please contact us should you wish to discuss the matter in further detail.