StartGreen helps make hydrogen projects 'bankable'

Expertblog – 17 February 2023

Hydrogen seems to be the magic word in the energy transition. But what exactly can we do with it? What are the opportunities and what are the caveats? Michiel Hickey, hydrogen expert at StartGreen, talks in this blog about the current state of research and application of hydrogen.

Battery in gaseous form

‘Hydrogen is not the silver bullet of the energy transition. It is ‘a’ puzzle piece in the complete energy transition puzzle that we must put together. Many people see hydrogen as the ideal replacement for fossil fuels, but it's not that simple. Hydrogen is not a fuel in itself; it is an energy carrier, a sort of battery in gaseous form.

Significant energy loss conversions

Let's start at the beginning: how is hydrogen produced? The most sustainable way to produce hydrogen is with green electricity and water. Through electrolysis, water is split into hydrogen and oxygen. Unfortunately, a significant amount of energy is lost during the production process: the amount of energy stored in the hydrogen molecules is 25 percent less than the energy put into the production. If you then convert the hydrogen back into water, energy is released. But you also lose energy in that process. Ultimately, 1 joule of energy yields – after these two conversions – 0.37 joules. Nevertheless, the application of hydrogen is interesting enough to investigate, for example, to balance supply and demand in the electricity grid.

Major benefits

In itself, it's logical that many people see hydrogen as the magic bullet for the climate crisis. Hydrogen can be widely applied: for heating, for storing electricity, but also as a sustainable alternative in chemical processes, without CO2 emissions. Furthermore, it has a much higher energy density (joules per kg) than batteries: a whopping factor 236 higher. Moreover, there are theoretically unlimited raw materials for producing hydrogen: you only need water and electricity.

Compression necessary

What makes its application difficult is that although hydrogen has the highest energy density per kilogram of all the elements in the universe, it also has one of the lowest energy densities per cubic metre. Hydrogen is a gas with very few molecules in a given volume. You can remedy this problem by A) compressing it: this stuffs more molecules into the same volume, B) cooling it significantly, which makes the molecules take up less space and gives you more molecules in the same volume, or C) both.

Apply critically

Hydrogen is currently produced on a limited scale. This is mainly because it is still very expensive to produce hydrogen; green hydrogen in particular is expensive. At present, more than 90 percent of all hydrogen produced globally is fossil-based. Furthermore, there is still no infrastructure for storage and transport.

We must continually ask ourselves with every application whether there isn't a logically more sustainable alternative and if it is the most energy-efficient solution. After all, it makes little sense to use a huge capacity of renewable energy to produce hydrogen when we can use it directly. We should therefore only use hydrogen where decarbonisation is very difficult, such as in the steel industry. The Nature & Environment foundation helps to make these choices with a ‘hydrogen ladder’: a ranking of sensible applications for green hydrogen.

Hydrogen as a buffer

Balancing the electricity grid, so using hydrogen as a buffer for electricity supply, is second on the ladder. We want to generate more and more electricity sustainably, but these renewable generation methods depend on sun and wind. As a result, generation fluctuates greatly, while matching supply and demand becomes increasingly difficult. Grid congestion also plays an important role in this. We are looking for smart ways to reduce the differences between supply and demand. Hydrogen can offer a solution.

Not for passenger cars, but for freight traffic

Cars can now run on batteries even better than on hydrogen. To run on hydrogen, it needs to be cooled to very low temperatures and/or brought under high pressure. To extract electricity from hydrogen, cars must be equipped with a fuel cell. Whereas driving electrically works brilliantly. With increasingly better batteries, the driving range is constantly increasing and is now already between three and four hundred kilometres. The development of charging infrastructure is also well advanced in the Netherlands.

Trucks that have to cover long distances cannot yet run on batteries. Other heavy transport, such as excavators and ships, is also difficult to electrify. That is why it is a good solution for freight transport and heavy transport.

In the table below you can see approximately how many kilograms of fuel are needed to drive from Amsterdam to Eindhoven in an average passenger car, and how many litres that would cost in uncompressed form. As you can see, you need very little hydrogen (in kilograms), but uncompressed hydrogen takes up a much larger volume than the other fuels.

Table: Estimated fuel consumption of passenger cars from Amsterdam to Eindhoven by fuel type.

Not yet for aeroplanes.

Hydrogen will also be a good solution for aeroplanes in the future. Flying on batteries is not an option for the time being, and hydrogen is a viable alternative. Aircraft manufacturers are currently working hard to make aeroplanes suitable for hydrogen. This will still take some time: we can expect to fly on larger aeroplanes using hydrogen around 2050. It is currently easier to use more environmentally friendly alternatives to kerosene, such as synthetic kerosene based on used cooking oil and other waste oils.

Accelerate transition

The hydrogen ladder is a good instrument, but primarily for later, when there is sufficient supply. At this moment in the hydrogen transition, in my opinion, we should focus mainly on 1) making the technology mature and therefore cheaper, 2) getting the hydrogen infrastructure underway and most importantly: 3) stimulating both demand and supply, as there is no supply without demand and vice versa. StartGreen can play a role in accelerating this transition by providing appropriate funding to various initiatives.

StartGreen invests in hydrogen

At StartGreen, therefore, a team of three of us is investigating promising hydrogen projects. In addition, we are looking at synergies within local hubs, where a renewable energy source such as wind turbines or a solar farm is linked to both a hydrogen production and a hydrogen offtake facility.

Energiefonds Overijssel is exploring, for example, the financing options for a smart energy hub, which consists of an electrolyser – powered by renewable electricity – and a hydrogen refueling station. Another hub comprises wind turbines, an electrolyser, and guaranteed off-take by an inland waterway vessel. For another project that is still in its very early stages, we are handling the business development.

Increase supply

Fortunately, a larger supply is also being worked on hard at the moment. To achieve this, a lot of research is being carried out, especially into storage and conversion. The Netherlands wants to play a leading role in this and has a Hydrogen Roadmap. Participants are currently mainly large projects of hundreds of megawatts. The government and the EU are making serious subsidy amounts available, also for smaller projects. The latter is interesting for us. StartGreen, together with regional development companies, can help kick-start decentralised, small-scale energy generation of up to approximately 10 megawatts with financing.

No chicken without an egg

My personal fascination with hydrogen goes back to secondary school, where I did my profile paper on hydrogen. Yet here we are in 2023, still really at the beginning of technological development. It will take a while before we can apply it widely. At the moment, both demand and supply are still very limited, but without demand, there is no production. Therefore, every initiative at this stage is welcome. It's a catch-22 situation: you have to create both demand and supply to get the infrastructure going.

We as StartGreen can play a significant role in this by making hydrogen more bankable to be made. Banks and other institutional investors still find it too risky to invest in hydrogen innovations. StartGreen's funds can take more risk and invest earlier, allowing the technology the opportunity to mature and thus become more accessible to institutional investors.’