The upcoming EU Hydrogen Bank pilot auction and trilogue discussions are focussing minds on the future of hydrogen. Jonas Lotze and Massimo Moser at TransnetBW and Janina Erb, Roman Flatau, Felix Greven and Max Labmayr at d-fine present the results of their modelling of two hydrogen sourcing scenarios: “Global Market” (GM) where the import of hydrogen into Europe is unrestricted, and “Energy Resilient Europe” (ERE) where almost all hydrogen is produced within Europe. With cost optimisation being the goal, the study shows how much capacity is needed, which nations are best placed to deliver it, where it will be consumed, what hard-to-abate sectors will use it, and what transmission and storage will look like. Compared to the GM scenario, the ERE will consume less hydrogen but produce significantly more within Europe – delivering energy security and greater flexibility – and also require a significant ramp up of renewable electricity generation to make the hydrogen. Either way, by 2050 oil demand will reduce by 72% (in both scenarios) and gas demand by 63% (GM) or 83% (ERE). Overall, the study shows how major decisions on Europe’s sourcing strategy will shape the regional hydrogen economy.

PREVIEW

1. Integrated optimisation of the European energy system using an intersectoral energy system model with two scenarios analysing different hydrogen sourcing strategies: one with an unrestricted global hydrogen market and the other with improved European energy resilience where pipeline imports of hydrogen from non-European countries are not permitted.
2. Our analysis shows that a resilient European energy system will consume less hydrogen but produce significantly more within Europe. The ramp-up of hydrogen production is strongly correlated with the expansion of renewable electricity generation and shows significant regional differences due to different potentials in European countries.
3. Electrolysis as a technology and hydrogen as an energy carrier provide considerable flexibility for the electricity sector through storage or direct utilisation, especially in a resilient energy system. The controllability of electrolysis allows a higher utilisation of installed power generation capacity.

“Global Market” vs “Energy Resilient Europe” scenarios

The decarbonisation of our energy systems is one of the most important measures to successfully counter global warming. A cost-effective transition towards climate neutrality, efficient infrastructure development and minimised resource consumption requires integrated planning of the entire energy system, including sector coupling. TransnetBW, supported by d-fine, has analysed a European energy system with net zero CO₂ emissions in 2050 in its study “Energy System 2050”.

The study uses a European energy system model, which was developed based on the open-source model “PyPSA-Eur-Sec” to meet the requirements of the study. It covers the demand, generation, import and conversion of energy in households, services, industry, and transport sectors in all European countries. Taking into account the pre-defined scenarios, both the capacity expansion and the allocation of the modelled technologies are optimised in terms of minimum total system costs.

To examine the impact of Europe’s dependence on external energy supplies, two scenarios with different constraints on energy imports are considered. While in the “Global Market” (GM) scenario the import of hydrogen into Europe is unrestricted, in the “Energy Resilient Europe” (ERE) scenario the European hydrogen economy has no pipeline connections to countries outside Europe. This restriction affects the price of hydrogen that can be imported into Europe.

This article analyses the role of hydrogen in the decarbonisation of the European energy system, with a particular focus on resilient energy supply. Based on the integrated optimisation of the hydrogen sector within the energy system, key findings on the production and import, transport, and consumption of hydrogen in the different sectors are identified and discussed quantitatively.

Hydrogen is essential for the decarbonisation of Industry and Transport

Due to its characteristics, hydrogen can play a key role in decarbonising applications that are not suitable for direct electrification for economic or process reasons – among which transport, industry and synthetic fuel production are the main hydrogen consumers. According to our optimisation results, in 2050 about 298 TWh of hydrogen will be used in industrial applications (e.g. in the steel industry) and 662 TWh directly as a fuel in the transport sector (mainly for energy-intensive transport modes such as shipping, aviation and heavy-duty road transport). A further 585 TWh is used for the production of synthetic fuels and gases.

The overall analysis shows that an Energy Resilient Europe consumes less hydrogen overall with 1,540 TWh (ERE) compared to 1,710 TWh (GM) in the global market scenario. This is because hydrogen production costs in Europe are higher than import prices in global markets – with average marginal costs for hydrogen of 54 €/MWh (GM) compared to 58 €/MWh (ERE). Therefore, restricting imports will result in less hydrogen being used due to higher costs. In the global market scenario, the additionally available hydrogen is then used to a greater extent for hydrogen derivatives, i.e. synthetic fuels and gases, and a further 16 TWh is used for reconversion to electricity.

Figure 1 shows the energy flows between sectors for the EU-27 in the ERE scenario in 2050 and highlights the integration of the hydrogen sector into the energy system. It can be observed that the demand of hydrogen is almost entirely covered by electrolysis in Europe.

A resilient European energy system requires massive ramp-up of Electrolysis

Although about 10% less hydrogen is consumed in the ERE scenario than in the GM scenario, the self-contained European hydrogen market leads to increased hydrogen synthesis by electrolysis. In the ERE scenario, electrolysis capacity in the European Union is expanded to 560 GW in 2050, almost 50% more than in the GM scenario (375 GW). While in the GM scenario only about 57% of the hydrogen demand in the European Union is covered by electrolysis with 970 TWh in 2050, in the ERE scenario more than 99% of the demand of 1,540 TWh is covered by electrolysis in the European Union.

As a conventional power-to-gas application, electrolysis causes a significant change in electricity demand and becomes one of the main drivers, especially in a resilient energy system. Compared to the GM scenario, the net electricity consumption of the European Union increases by about 15% to 5,450 TWh/a in the ERE scenario. Electrolysis accounts for more than 34% of the net electricity consumption (GM: 25%).

Europe will use significantly less Gas and Oil and thus becomes less dependent on energy imports

Comparing the results for 2050 with the corresponding values for 2020, there is a reduction of oil demand by 72% (in both scenarios) and gas demand from 63% (GM) to 83% (ERE), depending on the scenario (see Figure 2). The ERE scenario shows how the EU will become more energy resilient through less hydrogen imports in the future.

Comparing the 2050 scenarios, the demand for natural gas is slightly higher in the ERE scenario (313 TWh), which is still significantly below the production capacity in the EU (2020: >480 TWh). To compensate for lower production of synthetic fuels and higher CO₂ emissions from natural gas, 72 TWh of synthetic fuels are imported into the EU. It is conceivable that these amounts could be imported from the USA or Canada, for example. The emissions from mineral oil and natural gas are compensated by Carbon Capture & Storage (CCS) and Direct Air Capture (DAC).

Climate, industry and the European sourcing strategy shape the regional Hydrogen economy

The production and use of hydrogen depends strongly on the scenario assumed, as well as on local conditions in the different countries considered in the model. For example, despite Germany doubling its electrolyser capacity from 29 GW in the GM scenario to 60 GW in the ERE scenario, it’s hydrogen demand decreases from 400 TWh to 300 TWh. At the same time, hydrogen imports are significantly lower at around 300 TWh in the GM scenario and around 100 TWh in the ERE scenario. The higher cost of hydrogen in the ERE scenario has an impact on its use in downstream sectors, an effect that can vary significantly from one country to another.

Poland provides another example: in the ERE scenario there’s an increase in electrolyser capacity, as in Germany, but the demand for hydrogen remains unchanged. The same trend can be seen in Spain. Consequently, while the production of hydrogen by electrolysis is strongly dependent on the regional conditions for the production of electricity from renewable energy sources (RES-E), the demand for hydrogen is not consistently linked to its production at the regional level.

Italy, a net exporter of hydrogen in the GM scenario, becomes one of the main importers of hydrogen (70 TWh) in the ERE scenario. For comparison, Germany imports 100 TWh of hydrogen in this scenario. The main exporting countries in the ERE scenario are Poland (85 TWh), Greece (25 TWh) and France (23 TWh).

This situation underlines the importance of comprehensive modelling that takes into account all interconnected energy sectors in Europe, as the different structures of these interlinked sectors can show divergent developments from one country to another.

Figure 3 illustrates the hydrogen production, demand, and interconnection development in the European countries in 2050 for the ERE scenario. Figure 4 shows the annual net trade between the European countries in 2050 in the ERE scenario.

Increasing resilience leads to a growing demand for Hydrogen transport

The hydrogen transport infrastructure plays a key role in a decarbonised European economy. The future grids consist of retrofitted natural gas pipelines and newly built infrastructure to complete the transportation routes in both scenarios. With limited imports of hydrogen from global markets in the ERE scenario, this leads to a higher hydrogen transmission capacity within the EU27 (220 GW) compared to the GM scenario (150 GW). As all hydrogen is produced in Europe in the ERE scenario, the production structure, storage requirements and transport routes within the continent change. The main hydrogen producers are Spain, the UK, Germany, France and Poland. These countries, together with Denmark and the Netherlands, mainly compensate for the lack of hydrogen imports from outside Europe by installing a surplus of electrolysis capacity in comparison.

Linking these production centres with demand centres leads to new flows of gaseous energy carriers in all scenarios. Hydrogen flows are characterised by strong north-south corridors compared to the historically strong east-west corridors in natural gas pipelines.

How can Hydrogen and its derivates provide flexibility for the energy system?

From a system perspective, the high rates of renewable electricity production come along with three main challenges:

1. There are regions with favourable conditions for energy production and regions with less favourable conditions. On the other hand, these regions are not necessarily those with high energy demand. Hydrogen adds flexibility to the system by geographically balancing centres of energy production with areas of high demand.
2. Variable renewables produce electricity at times that do not necessarily follow the structure of electricity demand. This applies to daily, weekly and seasonal patterns. Hydrogen can play a key role in matching generation profiles with demand profiles. For example, the use of storage increases significantly to 719 TWh in the ERE scenario compared to 421 TWh in the GM scenario. This can be explained by the strong link between the electricity and hydrogen sectors. Hydrogen storage is therefore an effective way of smoothing out fluctuations in electricity generation.
3. Electrification is the main decarbonisation strategy for all demand sectors. However, some energy-intensive demand sectors, such as hard-to-decarbonise industrial processes and heavy-duty transport, require different energy carriers. Hydrogen can serve these needs either directly or through synthesis into more complex hydrocarbons.

To access the full “Energy System 2050” study click here.

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Jonas Lotze is the HydrogREenBoost Project Manager at TransnetBW

Massimo Moser is a Senior Advisor, Energy Market Modelling, at TransnetBW

Janina Erb is a Senior Consultant at d-fine

Roman Flatau is a Senior Consultant at d-fine

Felix Greven is a Senior Consultant at d-fine

Max Labmayr is a Senior Consultant at d-fine