Incentivising energy change -

Incentivising change

10 Sep 2020

Interview with Emmanouil Kakaras, Senior Vice President for Energy Solution and New Products at Mitsubishi Hitachi Power Systems Europe

With environmental issues at the forefront globally, there is a growing hope that we can answer the main questions surrounding carbon emission reduction through renewable electricity and the use of hydrogen as a new energy carrier.

We believe the most promising energy vectors going forward are biomass, blue hydrogen, and green hydrogen. However, each has its limitations. Biomass, and biofuels in general, are limited resources, and are also in demand by multiple competing sectors. Blue hydrogen, i.e. the hydrogen derived from natural gas or other fossil resources and where CO2 emissions are reduced by Carbon Capture and Storage, also currently faces challenges: storage will be limited to only a few regions in Europe, while infrastructure to transport the captured CO2 needs to be developed.

Green hydrogen, i.e. that from renewable energy sources (RES) and produced by electrolysis, is an ideal solution but supply is only increasing slowly. Moreover, the hydrogen needs to be re-distributed from areas where ideal boundary conditions exist for the RES (such as offshore wind energy in the North Sea, and photovoltaic energy in southern Europe) to the ultimate consumption point.

To be fully functional, more infrastructure must be built to distribute the hydrogen, and also for its seasonal storage. Here in Europe, the EU needs to continue building additional RES electricity capacity to further decarbonise its electricity system.

In the meantime, there is now the potential to generate blue hydrogen at scale, and this will incentivise investment in infrastructure and in numerous applications. Later, these assets will be able to integrate a higher share of green hydrogen, as the latter becomes widely available on a costeffective basis.

There is no doubt, however, that while huge progress has been made, there are still challenges to overcome. These include:

  • Identifying business models and opportunities in order to start deploying available technologies today.
  • Ensuring security of supply and energy affordability. The growth in RES is relatively slow and requires different types of back-up, which inevitably increase cost.
  • Integrating more quickly sustainability into business strategies: industry is progressively learning that redirecting operations towards cleaner solutions can go hand in hand with a good business case.
  • Creating public outreach and education programmes: society has a fundamental role to play, and education campaigns are necessary to teach people about new technologies, their costs and benefits.
  • Ensuring clarity and certainty from policymakers, and the removal of regulatory hurdles that could impede innovation or new and cleaner business models. We can look at sector coupling as an example. Until recently, we looked at systems in silos and therefore this is how those systems have traditionally been regulated, without taking into consideration the overall efficiency that sector coupling technologies bring to electric and gas grids. Meanwhile the myriad taxation systems and levies/feedin tariffs in different EU countries sometimes make electrons too expensive to enable hydrogen production at a competitive cost. The recent EU ETS (Emissions Trading Scheme) reforms are now yielding results but it is paramount that such mechanisms incentivise low-carbon solutions across the different industrial sectors. Another example is the recently adopted Renewable Energy Directive (RED II). This is a first step in providing a reliable framework for synthetic fuels in the transport sector but gaps remain which the European Commission must address in the coming years.

As long as low-carbon hydrogen is not legally recognised in the transport and heat/power sectors in the same way as other alternatives such as biomass and biogas, the respective premium price cannot be realised and projects cannot be launched. Thus, while technological development is essential, regulatory improvement is also necessary.

This latter point also applies to standards. All new energy vectors bring specific challenges, and harmonized standards and regulations would greatly assist their introduction, allowing industry to switch easily to a ‘hydrogen’ or ‘ammonia’ economy. This will of course involve certification bodies.

We already enjoy a good relationship with RINA, which has proved to be an experienced partner in R&D projects. Our project “PUMP-HEAT”, which is funded by the European Union under its framework programme Horizon 2020 and deals with the integration of heat pumps into CCGT power plants, has greatly benefited from RINA’s input on business models, techno-economic requirement, and project management. MHPS is also looking at further collaboration with RINA in its potential involvement in NESOI (New Energy Solutions Optimised for Islands). At MHPS, we want to be at the forefront of development, both locally and globally. Therefore, our global subsidiaries are working in close cooperation to identify the specific needs in each of the regional markets, and also the opportunities.