In focus: Gas still runs the show but bets on hydrogen threaten to steal it

The role of gas in the transition to low-carbon and renewable energy sources has often been described as pivotal. However, governments and energy companies are increasingly taking a gamble on hydrogen in hopes that it will play a leading role in lowering greenhouse gas emissions on the road to net-zero.

While hydrogen is not yet close enough to give gas the run for its money, it certainly is edging closer day in, day out. This raises the question of whether hydrogen will dethrone gas as the key player in the energy decarbonisation game, as it is difficult to predict how long gas will continue to act as a bridging ingredient in the hydrogen revolution.

However, with the price cap for seaborne Russian crude oil being imposed this week by the Group of Seven (G7) and Australia while OPEC+ opts to stick to its guns and keep its reduced oil output targets, gas is undoubtedly still the driving force on the global energy scene, especially in Europe. 

In the aftermath of Russia’s attack on Ukraine, the outlook for the energy industry has been shifting constantly, as price volatility and uncertainty over the security of supply continue to wreak havoc on governments’ previously set energy and decarbonisation targets, agendas and strategies. The flames are further added to this fire by the return of the energy trilemma. The world is now once again being haunted by the notion of forging a system that provides sustainable, secure, and affordable energy.

This is best illustrated by the UK, which was one of the first major players to commit to net-zero by 2050 and set up ambitious targets in the medium term, including reducing upstream emissions by 50 per cent, bringing 50 GW of offshore wind and 10 GW of hydrogen online, and capturing 20-30 mt CO₂ per year by 2030.

As the reliance on imports has exposed the UK to a volatile gas market, the government launched a new oil and gas licencing round to plug the import gap with its own oil and gas, which it plans to produce with lower emissions. This would be done by taking advantage of electrification options, like the ones the operators of the West of Shetland assets intend to pursue, contemplating harnessing energy from onshore and offshore wind to power their fields.

Even though the UK’s energy landscape is expected to continue shifting away from fossil fuels, a recent report by DNV has shown that the United Kingdom is not on track to meet its mid-century decarbonisation goals. Instead, the report claims that the government and the industry “must mobilise a clear roadmap” to attain net-zero targets. Substituting natural gas with green hydrogen has been suggested as a way of eliminating emissions from some hard-to-abate sectors.

Hydrogen has certainly found its niche in Europe while green hydrogen is pushing the boundaries even further, edging closer to turning into a mammoth trillion-dollar sector and becoming a sure bet in the energy mix, despite the payoff still being far away. Spain‘s change of plans for the future subsea pipeline between Barcelona and Marseille shows the inroads hydrogen is making. Initially intended as a gas pipeline in its first phase, it is now expected to carry only green hydrogen.

Moreover, the growing investment enthusiasm in the green hydrogen sector has been demonstrated further this week with Germany launching nearly a billion-dollar funding procurement process for the import of hydrogen derivatives, as part of the H2Global programme, the Hamburg-based foundation established in mid-June 2021 with sixteen companies as founders. This procurement process follows the recent establishment of the world’s first financing platform for tailored financing of infrastructure for green hydrogen.

The shipping sector is also burning the candle at both ends to secure the supply of green fuels, including green ammonia and green methanol. This was confirmed earlier this week by the actions of the Danish container shipping major, Maersk, which inked a deal with a two-part feasibility study in the offing on the supply and bunkering of green fuels in Oman’s ports of Duqm and Salalah. Aside from this, the Danish giant is contemplating over 30 projects aimed at developing green fuels with the potential to be matured into fuel supply deals.

Another hydrogen-related quest came from the Netherlands this week, when the Dutch Minister for Climate and Energy Policy, Rob Jetten, disclosed its intention to task Gasunie with the development of an offshore hydrogen network in the North Sea. This comes after the country set a target to achieve 70 GW of offshore wind energy by 2050, planning to put some of the offshore wind capacity to use for large-scale green hydrogen production in the North Sea.

As this is expected to play an important role in the energy transition and contribute to increasing the Netherlands’ energy independence, Gasunie’s CEO Han Fennema revealed that the firm is looking into ways to reuse the existing gas infrastructure in the North Sea for the development of a hydrogen network. If successful, this would pave the way for similar developments elsewhere.

The Netherlands seems to be going all out on achieving its net-zero goals, which was further hammered in by the Dutch Cabinet earlier this week when it expanded its Multi-year Infrastructure Energy and Climate Programme (MIEK) with five energy infrastructure projects, revolving around grid connections for offshore wind farms and further development of the hydrogen infrastructure. This brings the total number of projects marked as being of national importance to 14.

Being a busy bee, the Netherlands did not stop there, instead, the country is cooking up plans for its biggest offshore wind tender, which will offer 4 GW across four IJmuiden Ver offshore wind sites in 2023. If this plan moves forward, it will contain additional requirements, ranging from ecological to responsible business stipulations.

Despite the strong hold hydrogen has on the decarbonisation stage, it is not the only player on the energy transition chessboard, as many others are still in the running. One of these is certainly carbon capture and storage (CCS) as has been proven this week when the Danish Energy Agency awarded the first-ever permit for a CO2 storage project in Denmark to INEOS and Wintershall Dea.

Connected to the Greensand Pilot Injection Project, the permit enables the injection and storage of up to 15,000 tonnes of CO2 in the former Nini West oil field over a four-month period. This announcement was followed by the inking of a Memorandum of Understanding (MoU) between Wintershall Dea and a consortium of companies, planning to develop a CO2 hub called Greenport Scandinavia on the Danish North Sea coast.

Envisioned to serve as a collection point for CO2 generated during the production of biogas in regional plants, the hub would enable the CO2 to be transported by ship to Project Greensand to be permanently stored in a depleted oil reservoir, where approximately 1.5 million tonnes of CO2 will be sequestered each year.

Efforts to add renewables to the energy mix are continuing to surge upward predominantly in Europe, where Spain’s Ministry for the Ecological Transition and the Demographic Challenge (MITECO) set out regulatory bases for the allocation of a €200 million (over $211 million) grant programme a few days ago.

This is expected to be divided into four subprogrammes to support research into marine energy and the development of testing infrastructure, and prototype demonstrations, including tidal energy, wave energy, and floating solar devices, along with fixed and floating offshore wind technology.

In addition, hybrid project demonstrations, combining several offshore renewable energy technologies into a single platform, are also in the offing to get funding thanks to this programme. This is in line with Spain’s roadmap for the development of offshore wind power and marine energy, which aims to reach between 1GW to 3GW of floating offshore wind capacity along with 40MW to 60MW of marine energy power by 2030.

While the green shift is gaining momentum, a global energy crisis is still taking centre stage. As Westwood recently pointed out, the increased spending on oil and gas is certainly putting the brakes on the transition to green energy sources in the short term, with the desire for energy security being an overriding factor as countries struggle to meet the energy demand.

In light of this, the transition is still gaining ground as some governments pivot towards renewables in a bid to reduce their exposure to natural gas and price volatility, but this is not a paradigm shift, on which the world could bank the achievement of net-zero by 2050, as there are more hurdles to cross.