Statkraft bets on mix of renewables for hydrogen production

Statkraft said it sees a lot of momentum in the hydrogen space across Europe, but “few actual investment decisions so far as the EU regulatory challenges are complicating the development.” The Norwegian company has proposed a number of “clarifications” to current legislation, underscoring the importance of “improving electrolysis economics” by using diversified renewable energy portfolios instead of single renewable assets.

Statkraft said the full-load hours for solar are between 800 to 2,000 hours per year, depending on where projects are in Europe.

“But this doesn’t mean that one can use the full generation of a solar plant for a hydrogen plant, as it would require massive over-sizing of your hydrogen plant, which would not be economic,” said Norway’s largest energy producer. “In our view, hydrogen projects should be able to tap into different renewable energy sources.”

To achieve a 40% utilization rate of the electrolyzer from a single solar plant, the project would need to be oversized by a factor of five in relation to the electrolyzer capacity, according to Statkraft’s analysis of production data from new solar plants.

“When doing so, more than half of your solar production will be excess production that needs to be sold back to the market when prices tend to be very low,” said Simon Kornek, vice president for southern Europe at Statkraft.

When mixing onshore wind and solar, the situation reportedly improves.

“Combining single onshore wind and solar plants improve the utilization rate of the electrolyser to up to 60%, but it would still result in 20% excess production,” said Kornek.

According to Statkraft, hydropower from large reservoirs is the closest to a cost-competitive power source that can be derived as a stable 24/7 baseload supply over most of the year.

“In Scandinavia, where power markets are already largely carbon-free, hydrogen projects can tap into existing hydropower,” said Kornek.

Statkraft has signed four power purchase agreements (PPAs) for hydrogen production, with projects located in Sweden, Norway, and Germany. The company will supply renewable electricity to H2 Green Steel’s project in Boden, Sweden, the Fortescue Future Industries (FFI) Holmaneset green hydrogen and green ammonia project in Norway (with a capacity of 300MW), and Air Liquide’s 20MW green hydrogen water-electrolysis plant in Germany.

Despite the majority of electricity markets differing from the Scandinavian model, Statkraft, wholly owned by the Norwegian state, aims to leverage extensive portfolios through partnerships with market integrators, including utilities and intermediaries.

Statkraft said several business models will coexist. Big energy-intensive processes will need stable hydrogen supplies, power supplies and significant amounts of storage. Other projects might work with lower utilization rates and produce when electricity prices are low. Use cases in the transportation sector will offer more flexibility if they come with decentralized refueling stations and storage.

Kornek agrees with other experts that storage and transportation will be the primary drivers of the change leading to a commoditized market. A flexible market will emerge in the next 15 to 20 years. But he is worried by the legislative developments.

Statkraft’s Kornek said that companies did not proceed with many investment decisions because of the “EU regulatory challenges.” Kornek adds that a first indication of the impact of the new rules will emerge more clearly in the coming 12 to 24 months.

“The Delegated Act as currently written makes it very complicated to realize the green hydrogen targets in Europe. In particular, the strict requirements on additionality, temporality, and geographical correlation will be extremely difficult to comply with and will make green hydrogen more expensive than necessary,” Kornek told pv magazine.

Kornek stated that involving a credit-worthy integrator for the PPAs enables the project sponsor to secure more affordable financing through non-recourse project financing, utilizing only the project’s cash flow as bank security.

Statkraft is seeking clarification on the role of “intermediaries” as defined in the European Commission’s delegated regulation (EU) 2023/1184, stating that intermediaries can play a role in green hydrogen project PPAs.

“Already today, we face caution from the side of potential hydrogen producers to conclude PPAs for hydrogen production,” said Kornek. “It is therefore of utmost importance to accept PPAs with an intermediary as a contracting party either through adapting the Q&A document or, ideally, through amending the definition according to RED III (2023/2413).”

From Statkraft’s point of view, intermediaries such as utilities, traders and aggregators, are more than facilitators and will be crucial to accelerating the build-out of green hydrogen projects in Europe.

“Intermediary companies play a crucial role in integrating intermittent renewable energy in the market, warehousing and managing energy risks as well as leveraging portfolio effects,” it said. “Thereby they improve the overall market efficiency. Intermediary companies are contracting parties and not only facilitators of the PPA contracts.”

According to Pexapark’s PPA tracker, 38% of the 48 GW of PPAs that have been published since 2018, are so-called utility/trader PPAs concluded with an intermediary company.

According to Statkraft, a well-functioning market is the most effective tool to ensure profitability in renewable energy and, thus, the best facilitator for developing new renewable power production and hydrogen projects.

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