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Tuesday, June 15, 2021

The Green Hydrogen Puzzle Is Starting to Fall Into Place

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Replacing fossil fuels with green hydrogen in the economy is a bit like doing a jigsaw puzzle: Once a few early pieces are connected, it will be much easier to fit the others. A plan from one of the world’s top wind-turbine makers can help.

Siemens Gamesa Renewable Energy,

GCTAY -2.94%

in cooperation with its controlling shareholder,

Siemens Energy,

ENR -2.37%

will create wind turbines that also produce hydrogen. They have an onshore demonstration facility in Denmark and offshore projects in the works. Siemens Gamesa published a white paper on Wednesday outlining how its wind-to-hydrogen solution could help reduce costs.

Green hydrogen is a crucial ingredient in policies to cut carbon emissions to the net-zero benchmark by 2050. It has the capacity to decarbonize difficult-to-electrify sectors, such as steel production, while providing long-term storage for renewable energy and making it transportable, similar to oil and gas today.

The big hurdle is that green hydrogen—formed by splitting water in a renewable-powered electrolyzer—currently costs many times more than so-called gray, made from fossil fuels, and even blue, which is gray with its emissions captured. The promise of cost parity would attract not just current buyers of gray hydrogen but also industrial users of fossil fuels. These need a high level of visibility over future costs to convert their facilities.

Siemens Gamesa expects to produce green hydrogen at a cost in line with gray hydrogen by 2030 onshore and 2035 offshore. Producing hydrogen near the power source avoids costs and power losses associated with transmission cables. Instead, hydrogen travels down pipelines which are about one-tenth the cost of power distribution and more scalable.

The technology will enable the development of remote, windy sites which are currently inaccessible because of the expensive grid connections they would require, says Poul Skjaerbaek, head of innovation and products at Siemens Gamesa.

Another way to connect the pieces is by building a hub with a big electrolyzer and storage facility near an industrial cluster. This also cuts transmission and distribution costs, while providing green hydrogen at a site with existing users and potential customers. A handful of such hubs are planned around Europe.

Much else is needed to reach cost parity. Clean power is the biggest cost in green hydrogen production. There is good progress here, given the massive build-out of renewable generation. “I think everyone should be extremely bullish on the price of renewable energy to fall faster than anyone expects,” says Ben Gallagher of energy consulting firm Wood Mackenzie.

Another puzzle piece is the industrialization of electrolyzers. Four big factories have been announced in Europe this year. Specialist producer NEL recently said some of its facilities aim to produce green hydrogen for $1.50 a kilogram by 2025—about the same cost as gray. A network to transport, store and distribute the gas safely is also required. A consortium of European infrastructure companies have planned a dedicated hydrogen pipeline network.

The number of jigsaw pieces that need to come together for green hydrogen to live up to its promise requires coordination. That explains why it is largely a policy-driven market: Government strategies, targets and incentives have built momentum, particularly in Europe and Australasia. But innovative projects at companies like Siemens-Gamesa are now needed to realize the potential. A picture of a low-carbon energy market is just starting to emerge.

In an interview with WSJ’s Timothy Puko, U.S. special climate envoy John Kerry explains the roles he’d like to see the private sector and countries play in fighting climate change. Photo: Rob Alcaraz/The Wall Street Journal

Write to Rochelle Toplensky at rochelle.toplensky@wsj.com

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the June 11, 2021, print edition as ‘Green-Hydrogen Hopes Ride on Wind.’

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