Hydrogen for heating - champagne or basic commodity?

Hydrogen for heating - champagne or basic commodity?

Getting ready for tomorrow

After Germany’s September general election and the prospect of a three-party-coalition in the Reichstag, one thing is for sure: energy, climate and environmental policy are high on the political agenda. Now is the time to act. 

Energy suppliers in Germany need to know how gas-based technologies, which can contribute significantly to reducing CO2 emissions, will be politically accepted and promoted. Hydrogen will also be part of the technology mix required to reduce greenhouse gas (GHG) emissions in all sectors. And for our drinking water? The question arises: how can utilities ensure the quality and availability of our drinking water in times of climate change, and how is the industry preparing for tomorrow?

Approaching the ‘heating turnaround’

At this year's gat|wat event in Cologne on 24 & 25 November, experts from the energy and water industry discuss approaches to solving all these issues. In his presentation, Dr Christoph Gatzen, associate director in the Energy practice and electricity expert at Frontier Economics, will address the question: Is hydrogen in the heating sector the champagne of energy supply or simply a basic commodity?

Germany aims to reduce its CO2 emissions in the heating market by about 40 percent until 2030. Today, a quarter of direct and indirect CO2 emissions in Germany occur in the heating sector. Reaching a heating turnaround will only succeed if all options are used. Hydrogen will also be one part of the necessary technology mix to help with this transition.

Not overburdening the electricity system

Speaking to the conference, Dr Christoph Gatzen remarked that ‘The electricity system is not all powerful - it will not be able to simultaneously phase out nuclear energy, lignite and hard coal and then almost solely manage industry decarbonisation, transport turnaround and the transformation of the heating industry. In Germany, we will not be able to build renewable energy plants, storage facilities or electricity grids quickly enough. We will still need green energy imports and gas infrastructures. The good news is that if we ramp up or rebuild the infrastructure(s) and regulatory framework for green gases at a fast enough pace, sufficient supplies of these climate-neutral gases will be available in the medium and long term.’

Ready for the future

The challenge of putting an entire national economy on climate-neutral feet within 25 years is immense. For buildings, emissions must be reduced by the level of the last 30 years within only 10 years.

The apparent difference of standards in applications is also very challenging. For example, three quarters of buildings are currently still heated with oil or gas and only 1 in eight buildings is of new-build standard. Since heating applications account for almost half of the total energy demand in Germany, readiness is important to avoid fossil lock-in effects, where existing systems prevent or delay the transition to low-carbon alternatives.

Nuclear energy and coal phase-out – but ensuring supply security

Germany intends to phase out all coal power and nuclear power generation technologies by 2045. By 2030, guaranteed capacities of about 36GW will leave the electricity grid, this corresponds to about a third of today’s guaranteed capacity.

At the same time, the electrification of the heating market will further increase the demand for electricity. Reliable and controllable back-up power plant capacities will be needed, for example in the form of flexible RE-gas CHP power plants or hydrogen turbines. And even if the existing gas infrastructure could be converted to hydrogen, a reliable power grid infrastructure will be essential to avoid overburdening the power system. The need for power grid expansion and carbon neutral back up capacities in coming years is of great demand.

In the medium term, blue hydrogen, which is produced through steam reduction of natural, as well as biomethane will be available as CO2-neutral bridging technologies. Meanwhile, turquoise hydrogen, made through pyrolysis or thermal decomposition, will be available soon. The decisive factor will be the political will to accept these technologies. In the long term, larger quantities of green hydrogen will be available at low prices, and blue hydrogen can provide extra support.

Good news ahead

If we ramp up the infrastructure fast enough while also position the regulatory framework, hydrogen need not, and should not, be a medium term “champagne” fuel, where it becomes incredibly expensive and so hardly ever used. We absolutely need green molecules in addition to green electrons and biomass to power the energy transition that is so very much desired.

Frontier Economics regularly advises on climate change and the energy and heat transition. For more information, visit media@frontier-economics.com or call +44 (0) 20 7031 7000.