Final Report Summary - HYUNDER (Assessment of the potential, the actors and relevant business cases for large scale and seasonal storage of renewable electricity by hydrogen underground storage in Europe) Executive Summary:The decarbonisation of the European energy system faces the challenge of how to integrate an increasing share of intermittent renewable energies (shares of 60-80% could result in tens of TWh´s of so-called surplus electricity, annually, in countries such as Germany, the Netherlands, Spain and UK). Hydrogen is one of the options that may facilitate this integration. Underground storage of hydrogen in salt caverns is a technically feasible option for large-scale storage of electricity for weeks and months and make economic sense in places with (i) suitable geology, (ii) electricity generation from intermittent renewables and surplus in the order of tens of TWhs over extended periods, (iii) low electricity prices during a significant part of the year and (iv) a favourable policy framework. However, in the “merit order of flexibility solutions” to integrate fluctuating renewable energies, hydrogen is certainly not the first option that will be applied and its competiveness as storage option hinges on its successful introduction as low-CO2 energy carrier in other sectors, most importantly the emergence of hydrogen mobility. Related to the costs, electrolysis dominates the total costs of an integrated production and underground hydrogen storage facility with over 80% (at some 50% utilization), of which electricity costs have a major share. Although a cavern requires a significant upfront investment, it has a relatively small contribution to the total specific hydrogen costs of <0.5 €/kg. Besides, the costs of hydrogen from electrolysis strongly depend on the electrolyser utilization. At less than about 2,000 hours the capital costs start to dominate the production costs, making hydrogen from electrolysis increasingly expensive. The transport sector is the only market expected to allow a hydrogen sales price that may enable the commercial operation of an integrated hydrogen electrolysis and storage plant in medium term. Where hydrogen from water electrolysis has to compete on a heating value basis with natural gas, i.e. where the benchmark for the hydrogen sales price is set by the price of natural gas, such as in the case of admixture to the natural gas grid, when used as feedstock in industry or for re-electrification, it is not economic. Therefore, potential business cases for other sectors depend on the “willingness-to-pay a premium” by the end-user, or a very favourable policy support. Specifically, the use of ‘low-CO2’ hydrogen (from electrolysis) in industry depends on its cost-competitiveness against natural gas reforming (SMR). It is questionable whether this will happen in the absence of a regulation that allows monetizing its potential CO2 benefits. The future development of electricity prices, and more generally electricity market designs, and the actual pricing of ‘surplus’ electricity are among the biggest uncertainties. Other factors that could contribute to a positive business case include favourable feed-in tariffs for ‘green’ fuels, reduced grid fees and a significant increase of CO2 certificate prices to a level of 100 €/t. Project Context and Objectives:Interest in the use of hydrogen as a universal energy carrier and storage medium has been growing in recent years. This is based on the insight that in our energy future, which will require the integration of increasing amounts of renewable electricity generation, chemical methods offer one of the most promising solutions of storing large amounts of energy. Hydrogen offers highly versatile chemical energy storage, and therefore ideally suited to large-scale load balancing of renewable electricity generation: renewable electricity can be used to generate hydrogen by electrolysis, and the hydrogen can be converted back to electricity by combustion or in a fuel cell. The large-scale storage of hydrogen in underground sites also opens up additional uses of hydrogen which present future economic opportunities – as a transport fuel, by industry, or injection into the natural gas grid.The general objectives of the project are the following ones:• Understand the potential role of hydrogen underground storage in comparison to other large scale or seasonal energy/electricity storage concepts, i.e. compressed air energy storage (CAES), advanced CAES (A-CAES), pumped hydro power schemes, storage of methanised hydrogen (SNG) and large scale battery storage as well as other grid based structural measures and under consideration of energy/electricity storage needs and process performance (efficiency) and economy.• Compile and present all known options of underground high pressure gas storage, their characteristics and a ranking of the applied technologies, their applicability as well as their potential for the use as hydrogen storage. Furthermore develop scalable model hydrogen storages as input for the Case Studies.• To identify and to map geological formations suitable for bulk high pressure gas storage, i.e. depleted oil & gas fields, deep aquifers and rock salt deposits. Mapping based on evaluation criteria to be developed at first. Estimate hydrogen storage capacity particularly in salt caverns; estimation based on assessment procedures to be developed at first.• To compile an overview and provide detailed information on the below- and aboveground process technology for hydrogen underground storage plants.• To identify potential business cases for the use of hydrogen storage in future energy markets for regions with a potential of storing hydrogen in geologic formations underground, i.e. Germany, the UK, France, the Netherlands, Romania and Spain.• Dissemination to improve stakeholder awareness.The central topics of HyUnder are the representative case studies with a focus on salt cavern storage:the project foresees the development of individual case studies on hydrogen underground storage for Germany, Spain, the UK, Romania, France and the Netherlands. The case study approach comprises:- Development of a common methodology for all individual case studies: electricity cost will be variable in function of the case study; equipment cost will be fixed for all case studies.- The main actions to be developed in each case study: regional storage prototype location analysis, economic scenario type assessment, introduction of hydrogen underground storage into different markets.- Sensitivity analysis based on scenarios assumptions.- A comparison of the individual case studiesThe HyUnder project will provide the first European-wide assessment of the potential for hydrogen storage in underground salt caverns to renewable electricity over the long term. The ambition of HyUnder is to develop a European Implementation Plan, based on a detailed assessment by six individual Case Studies of the hydrogen utilization options and salt cavern. The Implementation Plan will be a concrete action plan how to develop and move hydrogen storage from the current development phase through the demonstration to the deployment phase and to make policy recommendations how to overcome technical, commercial or regulatory deployment hurdles.The project consortium set up a communication protocol at the inception of the project that was followed up throughout the project implementation, reducing to a minimum possible frictions among participants. The project website includes a system for internal document sharing accessible only to consortium members.Project Results:All the results and conclusions of the poject have been collected in an Executive Summary which is attached to this deliverable. Potential Impact:The increasing need for flexibility options to facilitate ongoing implementation of electricity from intermittent renewable energy sources is not expected to drive the deployment of hydrogen energy storage on a structural basis in the near-term. But hydrogen definitely has a role to play in the longer term as a low/zero-CO2 energy vector in a highly decarbonised energy system. To use its full potential, hydrogen needs to become an integral part of the energy system as universal energy carrier next to electricity, with its additional capability of electricity storage. An example of this role already becomes apparent in the automotive industry where hydrogen developments have entered a new phase. The German H2Mobility initiative, for example, has recently announced plans to establish 400 hydrogen refuelling stations until 2023, and similar market preparation and early market development initiatives are being developed in other European countries like the UK or France, as well as in Japan, the USA and in South Korea. Furthermore, several OEMs (Toyota, Honda, Hyundai, and Daimler) have signalled intentions for market introduction of FCEVs between 2015 and 2017. Fuel-cell based electric mobility in combination with hydrogen from water electrolysis, ideally using renewable electricity, is also one of the few options able to meet future CO2 emission reduction targets for the transport sector. The HyUnder project has solely focused on the role of underground hydrogen storage as a technically feasible means for large-scale electricity storage, without in detail considering hydrogen energy storage in the context of the wider set of options to integrate fluctuating renewables. While technically feasible, the economic viability of hydrogen as a means for renewable electricity storage will depend on many energy system-specific parameters. These comprise the emergence of new structures in the power markets with a high renewable electricity share, a new market design for ancillary services as well as the level and spread of electricity prices. Their influence should be analysed in more detail and in the context of other means to integrate renewables at large-scale, such as the extent of curtailment, the ability of the required electricity grid extension to keep pace with the build-out of renewable generation capacity or the impact of large-scale deployment of battery storage: • Specifically, a need for further assessment has been identified whether it will be possible to improve the business case for electrolysis in the short to medium term by leveraging additional revenues from the balancing power market, thereby easing the pathway through the early implementation phase. This could be the bundling of ancillary grid services performed by electrolysers, which would be additional to the provision of large-scale energy storage, and which today is also partially impeded by existing regulations. • The penetration of renewable energies is increasing all across Europe and hence the intermittency of electricity supply. If underground hydrogen storage is expected to play a role in a future renewable energy system, there is a need for hands-on operational experience and demonstration in preparation of future markets, as it may well take more than a decade from the decision to start developing first hydrogen salt cavern projects to the implementation of the learnings of such projects in appropriate technical standards and suitable policy, market and regulatory frameworks. This would call for action to incentivise the development of demonstration projects. • Although residual electricity storage per se does not justify the construction of a hydrogen cavern in the short term, cavern storage may enable other hydrogen applications and business cases in relation to its use in industry and transport, such as for (back-up) supply and trading, as distribution hub as well as for hydrogen import/export; given the stochastic nature of the hydrogen production profile from surplus electricity, large-scale hydrogen admixture to the natural gas grid would also require buffering capacity in order to maintain a constant gas composition. Incentivizing the construction of hydrogen caverns for these applications, which may be more economically viable use cases, would put the required infrastructure in place that could later on also be used for large-scale storage of electricity. • Especially during the early transition and introduction period, all options and all markets are in need of favourable policy and regulatory frameworks with high level of continuity, in order to reduce early investment risks. Specific policy measures have not been defined in the project. The HyUnder project was initially motivated by the fact that many studies hint at a significant (double digit TWh) amount of surplus renewable electricity supposed to occur by 2050, at which scale the conversion to hydrogen (as a first step) is currently the only storage option considered feasible, given its energy storage potential.However, the underlying economic assessment of all case studies has shown that the development of potential business cases will be challenging; this is mainly due to the fact that hydrogen from electrolysis struggles to be cost-competitive with other hydrogen production routes, all the more in the absence of regulation that enables the monetization of its potential CO2 benefits. Without (the pull of) an emerging hydrogen mobility market and the exploitation of synergies between different energy sectors (electricity generation and transport) as well as a favourable and sustained policy support, hydrogen underground storage will be difficult to develop.This apparent mismatch between the perceived technical necessity for large-scale electricity storage on the one hand and low profitability of hydrogen underground storage for most application cases on the other hand, leads to the question how else to enable and incentivise the integration of an increasing share of intermittent renewables as a means to achieve the EU’s long-term climate targets. The points to be taken into carefully consideration in short term related to the development of underground hydrogen storage should be: • Maintain focus on electrolysis as a key technology for low-CO2 hydrogen production. Reach technology cost goals by R&D, and implement calls that aim at demonstrating and improving the performance of electrolysers for electricity storage and ancillary service applications across a number of countries with a high expected share of intermittent renewables.• Perform a review of regulatory regimes for ancillary services like balancing power in all EU countries and the potential role for electrolysers, as a means to leverage additional revenue streams. • Maintain a placeholder for an integrated electrolysis and underground hydrogen storage demonstration project in the Multi Annual Work Programme (MAWP) in order to gain operational experience, engage with public authorities on permitting requirements and test public acceptance. A small-scale project may entail a 50,000 m3 cavern and 10 MWel installed electrolyser capacity; the total costs for such a project, including investment for topside facilities (hydrogen compressors and purification), operational costs and project development are estimated to be in the order of 30-40 M€. • Further practical understanding of the technical challenges of storing large quantities of hydrogen in caverns is required. This includes the interplay of the rock formations with the well with its technical installations (steel, cements, seals) and potential reactions with hydrogen. In addition, given the limited geographical spread of suitable salt formations for hydrogen storage, feasibility studies could focus on exploring porous formations (aquifers and depleted gas reservoirs) for underground storage. • Explore business cases for hydrogen caverns other than for electricity storage, such as for hydrogen back-up supply for industry, as distribution hubs for mobility markets and to facilitate future import/export of hydrogen, possibly including building a strategic energy reserve. Related to the dissemination activities, these could be divided into two groups; conferences and workshops and presentation of the project at events. In the first group are included: - HyUnder Project Launch Conference (30th of November 2012, Brussels): the aim of the conference was to inform participants about the current status the art of energy storage and the future need for electricity storage in Europe. The conference set the context of the project by providing a comprehensive introduction to the project HyUnder, focusing on the environmental benefits and economic opportunities related to the technology. - Workshop 1: Hydrogen underground storage: geological options and mapping in Europe (12th of March 2013, Essen): This workshop was dedicated to presenting the results of WP2. Its main objective was to provide participants with the opportunity to receive feedback and discuss with stakeholders the delineation of selection criteria for storage options and key candidates for underground hydrogen storage. - Workshop 2: Storing renewable energy: Is hydrogen a viable solution? European potential for storing renewable energies with hydrogen: Insights into four European revolutionary projects. (26th of June 2013, Brussels): The main objective of the workshop was to collect feedback on the evaluation criteria to be developed for the assessment of European hydrogen storage capacities, notably in salt caverns. Workshop 2 gave an insight into the work of WP4 and provided consortium members with the possibility to interact with each other, with supporting partners and stakeholders on the definition of evaluation criteria for identifying storage possibilities - Workshop 3 on Plant Technologies and case study guidelines. (4th of July 2013, The Hague). The objective of the workshop was to gather different stakeholders to discuss safety issues, regulation code and standard and public acceptance. Due to the sensitivity of the issues raised by the topic, local government authorities and consumer associations of interested regions were also involved and required to provide their input. - Workshop 4 on European Case Studies (12th February 2014): Workshop 4 looked at representative case Studies with a focus on salt cavern. It provided opportunity for consortium members and supporting partners to discuss insights into the case study methodology and initiate comparison of case studies results.- HyUnder Final Conference (26th of June 2014): The goal of the final conference was to present the projects results and delineate next steps for the implementation of a complete hydrogen infrastructure in Europe. The project participants shared their learnings and exchanged their experience and best practices on hydrogen storage and production in the context of EU decarbonisation targets. The speakers outlined opportunities to create synergies between hydrogen as a storage medium and several potential applications including industrial uses, re-electrification, power-to-gas and zero-emission mobility. The events where the project has been presented are listed below: - Hypothesis (11-12th of June 2013, Edinburgh, UK).- World Hydrogen Technology Conference (25-28th of September 2013, Shanghai, China).- Hydrogen and Fuel Cells Energy Summit (4-5 of December 2013, Berlin, Germany).- Seminar on Hydrogen and Industry hosted by Iberdrola (6th of February 2014, Bilbao, Spain).- EHEC (12-14 of March 2014, Seville, Spain).- Fuel Cell and Hydrogen Joint Undertaking Water Electrolysis Day (3rd of April 2014, Brussels, Belgium).- International Discussion on Hydrogen Energy and Applications (12-14th of May 2014, Nantes, France).- World Hydrogen Energy Conference (15-20th of June 2014, Gwangju, South Korea).Interaction with interested stakeholders was managed through the dedicated email: info@hyunder.eu. Questions submitted by interested parties through the project websites were forwarded to the relevant parties within the consortium. Throughout the project implementation subscribers via the project website received regular newsletter providing information on events and projects: kick off meeting, HyUnder project launch conference website, HyUnder first workshop, HyUnder Workshop EUSEW, HyUnder public deliverables, HyUnder final conference press release. The template in use for the newsletter is attached. Finally, flyers and posters of the project were ready for dissemination by end of October 2012 and were distributed among project participants. These flyers are also attached. A promotional video of the HyUnder project was produced to deliver the key messages of the project to the general audience, portray its broader industrial, societal, technological and environmental implications in a European context, convey the major findings from the case studies and outline its future outlook. List of Websites:http://www.hyunder.eu/ Documenti correlati final1-executive-summary.pdf
