European gas crisis drives hydrogen sector
European gas crisis drives hydrogen sector
Europe’s gas supply crisis of 2022 has stimulated much discussion about how the future security of the Continent’s energy supplies can be ensured.
Throughout 2022, LNG imports have risen sharply to compensate for interruptions to pipeline gas supplies originating in Russia. Additionally, expansion of gas supply from new and existing upstream projects in the UK and Norwegian North Sea have been prioritised, although such plans remain subject to political uncertainty.
Over the longer-term, alternative forms of energy, such as hydrogen, are also being looked at more seriously in the wake of the crisis. Seaborne imports of liquid hydrogen (LH) to Europe could become an everyday reality if the technical and commercial merits are established.
Liquid hydrogen Asia pilot
Earlier this year, a pilot study in the Asian market provided a model upon which to conduct further evaluation of LH. Japan’s Kawasaki Heavy Industries (KHI) participated in the development of an LH carrier in collaboration with the Tokyo-based association, the CO₂-free Hydrogen Energy Supply-chain Technology Research Association (HySTRA). A pilot voyage was undertaken in January 2022 by the 1,250 cubic metre (cbm) capacity mv Suiso Frontier.
The vessel undertook a 9,000km round-trip from Kobe, Japan, to Victoria, Australia, returning with a cargo of LH extracted from Australian-produced brown coal, also known as lignite.
In a process reminiscent of the shelved coal-seam-gas-to-LNG (CSG-LNG) Arrow LNG project, the brown coal was processed and hydrogen extracted at the Latrobe mining complex, then transported by road to a liquefaction plant in Hastings, in a process that could potentially provide a valuable future revenue stream for Australia’s declining coal industry. The LH cargo was then loaded and shipped back to LH regasification facilities at the Japanese port.
The successful test voyage proved that the coal-to-LH concept is technically viable and, as a result, was hailed as a major breakthrough. This initial project has enabled the development of a larger LH carrier to commence. If found to be commercially viable, it could lead to a traded market in hydrogen. KHI is now working on the development of the new (unnamed) 160,000 cbm ship which has received approval in principle from Nippon Kaiji Kyokai, Japan’s vessel classification body.
mv Suiso Frontier (IMO: 9860154) - Image courtesy of HESC
European energy groups with ambitions to become LH importers will eagerly watch the progress of the vessel’s development and test phases, to see if the model can be replicated in Europe, potentially using existing LNG import infrastructure as a receiving point.
Regulatory and technical considerations
For European states, using coal to produce LH is an alternative to other hydrogen sources such as water or natural gas, all of which pose questions for existing carbon policies. Hence, consideration would in time have to be given to the implications of such activities under the EU Emissions Trading System (ETS), and whether projects should employ mitigation efforts, such as carbon capture, utilisation and storage (CCUS) technology.
There are technical considerations to overcome. The storage of LH is unlike the storage of LNG, as it is liable to cause seepage of hydrogen into the material used in containers or transportation units. The problem, known as embrittlement, is due to hydrogen’s low atomic weight compared to other materials. LNG is usually stored and transported in tanks made of aluminium, but these may be vulnerable to embrittlement, potentially making them unsuitable for storing LH. According to KHI’s specification notes, the design of its new LH carrier’s hull will address the problem of low specific gravity of the LH cargo. But, while the problem may be addressed in the design of vessels holding LH for a short period, such as a voyage, embrittlement could become a bigger problem when storing LH onshore for longer periods of time. If it does, the adaptation of existing LNG import and storage infrastructure in Europe to accommodate LH, could be difficult, perhaps involving the installation of new tanks, or retrofitting old tanks through the addition of coatings which halt or slow down embrittlement.
Alternatively, the development of entirely new coastal LH infrastructure could be pursued to accommodate large LH carriers and support a European market for hydrogen, although this would be an expensive option at a time when global recession and higher interest rates could be discouraging large-scale investments.
As well as pursuing the import of seaborne LH, European operators could also replicate the brown coal-to-hydrogen model as tested by Australia. If Europe follows this route, two key sources would emerge: one for imported LH from overseas and another for LH produced onshore from brown coal mined in Europe. Germany has among the largest reserves of brown coal in the world (other potential sources include Turkey and Poland), and hence its natural resources could form part of the solution to the gas crisis.
If this approach is adopted, it could lead to the development of a physical traded market and an organised futures market for LH and hydrogen in Europe. This could be designed roughly along the lines of the Continent’s gas and LNG sectors. Furthermore, the evolution of a coal-to-LH market in Europe, whereby brown coal becomes a feedstock for hydrogen production, could also drive the coal trading market and the bulk shipping sector.
In light of these emerging signals, and if hydrogen is to be a credible source of energy, European officials and energy market operators must address several key questions. First, can existing LNG infrastructure or carriers be modified to handle LH imports and create a viable traded market? Second, is a brown coal mining industry in Europe a viable long-term prospect, if it is focussed on the production of hydrogen, not on the production of coal as a combustible fuel? Third, will European shipowners and energy groups elect to construct LH carriers themselves to gain closer control over the import of the fuel?
As well as the immediate questions about Europe’s attitude towards a hydrogen market, as mentioned, the onset of tougher economic conditions may not help the investment climate. Market operators will have to consider whether the development of LH carriers and infrastructure falls into the category of renewable energy, and hence could be financed by the issue of now-popular green bonds. While banks in future may not be so willing to lend for new gas exploration or production projects, the investment climate for hydrogen assets, seaborne or fixed, could be more likely to qualify.