HyNet North West and East Coast Cluster

The chosen clusters are HyNet North West (Merseyside and nearby areas) and East Coast Cluster (Teesside/Humber). By 2030, the Government plans to have established four such CCS clusters, with a combined capacity to capture and store 20-30 MT CO₂. Infrastructure development will receive funding from the government’s CCS Infrastructure Fund, which has set aside £1 billion. HyNet will develop a hydrogen net, so that local industry is able to change from fossil fuel-based energy to hydrogen.

24 companies have signed a memorandum of understanding with HyNet, which is led by gas distribution company Cadent and project development company Progressive Energy. East Coast Cluster is led by Northern Endurance Partnership, which consists of the energy companies BP, Eni, Equinor, National Grid, Shell and Total Energies. The purpose is to capture CO₂ from various types of local industry and store it in the UK’s side of the North Sea.

A final agreement will be signed by the Minister once necessary socioeconomic assessments have been made. If a deal cannot be made with one of these clusters, the Scottish Cluster is listed as a reserve candidate.

Increased energy demand

There seems to be a consensus that the main reasons are related to increased energy demand in connection with the post-pandemic reopening of the economy, as well as the failure of energy companies to increase supply quickly enough due to low investments over time. The fact that the crisis has hit Europe harder may be linked to its considerable dependence on imported natural gas, less gas storage than usual and less wind than normal, to name a few reasons. As the reopening happens across the world, it puts pressure on all suppliers of coal and gas. This has increased energy prices, which in turn will drive inflation in society, which can lead to social unrest over time. At its highest in October, gas prices in Europe were 7x what they were a year ago.

Impact Europe’s energy strategies?

Even if the IEA believes that the energy crisis cannot be attributed to the growing dependence on variable renewable power, opinion on this is divided. Nevertheless, it is difficult to estimate how the energy crisis will impact Europe’s energy strategies, and thus its climate efforts. The EU president’s perspective is that the EU is currently too dependent on natural gas, especially from Russia, and that focusing on renewables, batteries and energy security will become more important in the future. Others believe that the EU’s energy transition has not been sufficiently thought out, should have a longer timeline, and should invest more in natural gas to faster phase out coal. Nuclear power and CCS will certainly become more relevant in public debate going forwards.

More ambitious Nationally Determined Contributions 

This year’s climate negotiations are significant because this is the first time since the Paris Agreement was signed in 2015 that all countries will submit more ambitious Nationally Determined Contributions (NDCs). This year’s report from UNEP notes that the new, updated NDCs, along with already announced plans, will make real positive contributions to the climate.

Nevertheless, the updated NDCs are not nearly enough to meet climate goals; This year’s calculations show that emissions in 2030 will only be 7.5% lower than similar calculations made last year, while they need to be 30% lower by 2030 in order to meet the 2°C goal, and 55% lower for the 1.5°C goal. In concrete figures:

Under current policy, global emissions in 2030 will be 55Gt of CO₂, which is on par with current emissions, while the 1.5°C target requires that emissions in 2030 are brought down to 25Gt. UNEP also states that although all stated national ambitions (such as net-zero emissions by 2050) will be fully implemented by those countries who have agreed to them, the global temperature rise in 2100 could be 2.2°C.

Stands by the Paris Agreement

In a closing statement, the G20 states that, among other things, it stands by the Paris Agreement and its goal that global warming should be limited to ‘well below 2°C and to pursue efforts to limit it to 1.5°C above pre-industrial level’, and that this must entail ‘meaningful and targeted measures’ in all countries, taking into consideration each country’s capabilities and limitations. The statement allows for continued investment in coal-fired power plants, but does not allow for the financing of such facilities outside of one’s own country. This closing statement does not mention other fossil energy sources, but emphasises the importance of energy security, open energy markets and market stability on the way to achieving climate goals. Among some commentators and the media, there is a general consensus that the G20’s statement is characterised by compromise, and that it isn’t binding.

Invest £1 billion to transition power generation

In September, Petroineos (a JV with Ineos and Petro China) announced plans to invest £1 billion to transition power generation and other operational aspects of the refinery and petrochemicals facility at Grangemouth from using natural gas to using hydrogen reformed from natural gas with CCS. Grangemouth is one of four clusters that the British government has identified as hubs for CCS development in the UK. The transition by Petroineos will see CO₂ emissions reduced by 1 million tonnes – and will ensure that the facility reduces its overall CO₂ emissions by 60% in 2030 when compared with 2005. They plan to store captured CO₂ in partnership with the Scottish Acorn project. These changes will help to ensure that the Scottish goals for carbon neutrality are met by 2045, some five years ahead of the rest of the UK.

A biofuel refinery in Rotterdam

In the Netherlands, Shell announced in September its decision to build a biofuel refinery in Rotterdam to contribute to European climate goals while also helping to meet Shell’s own climate targets. Deliveries from the refinery will partly cover demand for sustainable aviation fuel and biodiesel. The plant will result in a reduction in emissions of 2.8 million tonnes of CO₂ per annum. Shell plans to convert its 14 refineries into five “energy and chemical parks”. Its park in Rotterdam is the second such site to be announced, following the launch of an energy park in July in Rhineland, Germany for the production of green hydrogen.

Positive view

The analysis takes its point of departure from the revised targets that China submitted to COP26 last autumn, as well as policies adopted in relation to energy and the climate and ongoing trends. This analysis then seeks to assess whether these targets can be realistically met. Generally, the analysis sets out a positive view of China’s ability to meet its goals, and indeed to overfulfil them. In its rationale, the IEA stresses that China largely has what it will take in terms of technology, finance and political experience, as well as the fact that such a transition will generate an array of positive socioeconomic ripples effects across the country. The IEA’s scenario for a possible accelerated transition concludes that early interventions to reduce the use of coal will give China a reasonable chance of peaking its greenhouse gas emissions by 2025 rather than by 2030 at the latest as the current goal stands.

The country ought to reduce

The Carbon Action Tracker (CAT) is less positive in its most recent updated assessment from September when considering China’s efforts to meet its climate goals, which its classifies as “highly insufficient”. CAT gives weighting to necessary measures in order to meet the climate goals when carrying out its assessments – rather than whether China will meet its own climate targets when carrying out its assessments. Their analysis suggests that China may well overfulfil in terms of its submitted climate goals, but that the country ought to reduce its use of coal and set a date for the phasing out of coal altogether. By way of example, an overview published by the Centre for Research on Energy and Clean Air (CREA) in August shows that in the first half of 2021 alone, China announced new projects relating to coal power and coal-powered steelworks which, if they are built, will result in emissions of up to 150 million tonnes of CO₂ per annum.

Forecasts the energy transition globally and in 10 world regions

DnV’s annual Energy Transition Outlook (ETO) was published in September, providing an updated projection of trends around global energy consumption in the run up to 2050 and the associated climate impact. Compared with two years ago (pre-pandemic), DNV’s latest prognosis shows that it will take one additional year before the 1.5°C goal is missed (2029 vs 2028) and four additional years before the 2°C goal is missed (2053 vs 2049). Globally, DnV estimates that the consumption of fossil fuel-based energy in 2050 will be on a par with levels in 1990, with a somewhat altered composition. 6% of emissions from the use of fossil fuel-based energy are expected to be removed through the use of CCS, which is a far lower figure than was set out in last year’s ETO where the estimate was 11%. The reduction in the proportion of CCS is, according to DNV, due to improved data and increased accuracy in associated models in use.

Net Zero in 2050 will not be achieved

The analysis for Europe concludes that Net Zero in 2050 will not be achieved, but that there will be a 74% reduction in CO₂ emissions vs 1990. Hydrogen production will quadruple, but new volumes will be used directly (and eventually also converted into synthetic fuels) in new industries and sectors of society. Hydrogen use will be slowed by associated costs. Almost all new hydrogen volumes will come from electrolysis. According to DNV, green hydrogen costs will become competitive against those related to blue hydrogen by around 2030. This development will be driven by falling costs for renewable power and economies of scale achieved by electrolysers. Hydrogen produced from natural gas will be more than halved, and it will be primarily produced in combination with CCS. Sharper falls in gas prices may make blue hydrogen even more competitive and thus slow interest in green hydrogen. In the run up to 2030, DNV anticipates that CCS in Europe will develop rapidly in the chemical and petrochemical industries, as well as in relation to various process-related emissions, rising to as much as 65 million tonnes in 2030.

The Environmental Analysis is prepared by Gassnova’s analysis team.

Green light to realise the EU’s first fullscale CCS project

Today, Porthos is the hub that is closest to receiving the investment green light to realise the EU’s first fullscale CCS project, which will have a primary focus on the capture of CO₂ from existing hydrogen production. An investment decision may arrive as early as next year. However, Athos announced in September that its long-term partnership with TATA Steel developing a potential carbon capture project in Ijmuiden was to be discontinued following changes to TATA’s technology strategy, as they embark on a direct reduced iron process using green hydrogen rather than coal and CCS. According to TATA, they are now placing an emphasis on a faster transition to a more sustainable approach to steel production, and the hydrogen option is therefore of greater interest to them. The steelworks in Ijmuiden has total carbon emissions of approximately 12 million tonnes per annum.

TotalEnergies

In September, TotalEnergies signed a deal with Air Liquide for the latter to assume control of operations at Total’s hydrogen production plant in the northern French city of Le Havre. This will include the use of Air Liquide’s CCS technology with the aim of cutting carbon emissions from the plant. Air Liquide also has its own hydrogen production facilities in the area, with natural gas being used as a factor input, but they are also planning to establish new capacity based on electrolysis. Overall, it is stated that the companies’ aim is to cut annual carbon emissions in the region by 650,000 tonnes. It is planned that captured CO₂ will be shipped by sea to the Dutch Aramis hub or potentially to Northern Lights. TotalEnergies thus entered into a partnership in September with stakeholders including Shell and the Dutch state-owned energy firm EBN pertaining to the development of Aramis and associated infrastructure to allow for the transportation and storage of CO₂ in the southern North Sea. TotalEnergies is also involved in other collaborative ventures relating to CCS in the same region. Carbon emissions from the French industrial sector amount to around 80 million tonnes of CO₂ per annum, of which around 10 million are emitted in Normandy alone. Last winter, the French government was ordered to do more to protect the climate, and according to analysts the country is still not on track to meet its 2030 targets.

 

The Environmental Analysis is prepared by Gassnova’s analysis team.

Working Group 1 relates to the physical climate system and contains little that was not previously known. It primarily serves to provide a strengthened basis for known conclusions.

The most interesting aspect is perhaps therefore to note that the wording has shifted away from emissions ‘will lead to’ various effects to stating that emissions ‘have led to’ those same effects.

The IPCC will finalise the remaining reports as part of its AR6 work by next year – including a Mitigation Report (March) and the Synthesis Report (August).

IPCC: Little news – but one significant change is worth noting

The publication of the first part of the IPCC’s Sixth Assessment Report (AR6, Working Group 1) in August generated a degree of legitimate interest globally.

Working Group 1 relates to the physical climate system and contains little that was not previously known. It primarily serves to provide a strengthened basis for known conclusions.

The most interesting aspect is perhaps therefore to note that the wording has shifted away from emissions ‘will lead to’ various effects to stating that emissions ‘have led to’ those same effects.

The IPCC will finalise the remaining reports as part of its AR6 work by next year – including a Mitigation Report (March) and the Synthesis Report (August).

UK’s hydrogen strategy proposal launched – including draft consultation on associated business models

August marked the launch of the government’s ‘plan for a world leading hydrogen economy’. The strategy outlines the main ways in which a hydrogen value chain would contribute to meeting the British government’s 6th Carbon Budget (2033-37) and subsequent targets. Hydrogen production may account for up to 1/3 of the country’s energy consumption.
The ambition to achieve 5 GW of production capacity by 2030 (up to 42 TWh/p.a.) remains in place. At present, hydrogen production in the UK is estimated to stand at around 27 TWh/p.a.. After 2030, it is estimated that growth will increase significantly to 250-460 TWh, and may then represent up to 1/3 of the country’s overall energy consumption.

British hydrogen strategy more tangible
The strategy does not set out a distribution between blue and green hydrogen, but it does stipulate a ‘twin track approach’ in which the best aspects of each technology are to be utilised. This means that the choice between ‘green’ and ‘blue’ should balance long-term potential against the necessity of phasing technology in at an early stage – in order to optimise value to the taxpayer over the long-term. A production strategy for hydrogen is due to be published in early 2022. The British hydrogen strategy is more tangible when compared to Europe. It is also approximately equal in terms of ambition when measured by volume (EU: +40 GW green H₂ by 2030, Germany total 90-110 TWh H₂ by 2030).

Consultation on different business models
Alongside the strategy, there is also a consultation on various mechanisms (business models) for how the government envisions remunerating industry for the additional costs associated with the establishment for hydrogen value chains. It is assumed that this support will be channelled through producers rather than in the consumer sector. The consultation describes various models for how support of this kind might be organised.
A number of support schemes have been established with a focus on investments throughout the value chain, including storage of hydrogen and CCS.

‘Net Zero Hydrogen Fund’ highlighted
In this context, the ‘Net Zero Hydrogen Fund’, which is worth a total of £240 million, particularly emphasises support for investment in hydrogen production facilities. It is assumed that the first contracts for the supply of low-carbon hydrogen will be operational by early 2023. The use of hydrogen is specifically targeted at industries that cannot easily electrify or where the use of CCS will be particularly costly.
Four areas are highlighted: industry, transportation, power generation, and local heating. It is expected that the hydrogen strategy will deliver reductions in emissions totalling 41 Mt CO₂e over ten years from 2023 to 2032, and that it will create a hydrogen economy worth £900 million by 2030.

 

Scientific study casts doubt on climate impact of blue hydrogen

A peer-reviewed scientific report produced by two researchers based at Cornell and Stanford Universities respectively, titled ‘How green is blue hydrogen?’ has made headlines throughout the energy and climate sectors around the world. Based on a life cycle assessment (LCA), the authors draw the conclusion that hydrogen produced from natural gas using CCS has a climate footprint on a par with hydrogen from natural gas without CCS (just 12% fewer emissions of GHG). In short, the reason for this conclusion is that CCS does not have an impact on diffuse methane emissions connected to the production and transportation of natural gas, and that CCS in itself requires increased energy consumption which in turn leads to higher methane emissions. The report has added fuel to what was already a fiery debate on the issue of whether it is really feasible to base the green transition on natural gas and blue hydrogen. In addition to discussion about methane emissions, this debate also touches on the fact that present day CCS technology is unable to achieve 100% capture rates and that we may also become dependent on expensive carbon negative solutions (such as DACCS) if we are to count blue hydrogen as ‘net zero’.

A memo from IEAGHG seeks to address some of the assumptions and figures used by the researchers, including pointing out that there are various opportunities to reduce methane emissions throughout the value chain and that there is new technology on the horizon. For the sake of comparison, the international stakeholder body ‘The Hydrogen Council’ published an LCA analysis earlier this year that showed the climate footprint of blue hydrogen as being dependent on multiple factors, and that in some circumstances it can be almost as low as is the case for green hydrogen from wind power (2-3 times more emissions rather than 10-20 times more without CCS). The climate impact of methane emissions is significant. According to the IPCC, historical methane emissions have contributed to a 0.5°C increase in the global temperature from the pre-industrial era, and approximately 22% of current methane emissions are from the energy sector. Emissions have been on the increase – and the share from natural gas is significant. The IEA has pointed out that major cuts in methane emissions from gas production can be achieved without any extra net costs (depending on gas prices).

SSAB sets new climate standard with the production of ‘fossil-fuel free steel’

In August, SSAB announced that their multi-year project, HYBRIT, which is aiming to create a fossil-fuel free production process for steel, had successfully made its first official deliveries to its customer Volvo. The venture was announced in 2016 and has involved LKAB and Vattenfall.

The process uses electricity as an energy source and hydrogen as a reducing agent, rather than fossil fuel-based energy. This pilot is designed with a capacity of 1 ton of steel per hour. It states that the CO₂ footprint will be reduced from 1.6 tons of CO₂ to 25 kg CO₂/ton of steel, while energy consumption will increase from 235 kWh to 3.488 kWh/ton of steel. SSAB’s plan is to scale up its production facility to enable commercial market deliveries from 2026, and SSAB is aiming to be a fossil-fuel free company by 2045. It was also recently announced that the car manufacturer Mercedes has formed a partnership with SSAB to source fossil-fuel free steel for their auto production line.

Expectations relating to the decarbonisation of steel production through the use of hydrogen have increased somewhat of late.  In August, an investor group published a report to help investors accelerate decarbonisation of the steel industry by 2050. The report identifies 12 actions that investors can promote to steel producers, including transition plans for how solutions such as hydrogen and CCS will help to meet climate goals. One of the world’s biggest steel producers, ArcelorMittal, recently published its second climate action report on their ongoing work to meet their NetZero climate goal by 2050. This report states, among other things, that they expect the costs of green hydrogen to fall in future and that this will help to make hydrogen increasingly relevant to the steel industry, while also noting that CCUS will be important primarily in North America due to infrastructure access.

World’s first climate-neutral cement works planned / Unexpected challenges with supply of raw materials

In June this year, HeidelbergCement’s Swedish firm Cementa outlined its ambition to capture and store 1.8 million tons of CO₂ per annum from 2030.

HeidelbergCement’s Swedish firm Cementa has spent many years working to develop technology and solutions that will allow it to become the world’s first climate-neutral cement works. This has been subject to necessary state support, infrastructure development, etc. In June this year, Cementa presented is initiative setting out the ambition to capture and store 1.8 million tons of CO₂ per annum from 2030. This initiative will build on the work already carried out by Project Longship. Additionally, the company is working in partnership with Vattenfall to develop a solution to electrify cement production – CemZero. Cementa’s venture has received widespread attention internationally. However, during the summer the cement works saw its application to extract further lime from its current mines rejected by Sweden’s Land and Environment Court of Appeal. The grounds for rejection relate to the lack of scientific evidence relating to groundwater conditions in proximity to the mines. Cementa has until next summer to resolve these difficulties.

Maersk ships will run on synthetic fuels – preparing for production of green methanol

In August, Maersk announced the selection of a Danish partner for the production of 10,000 tons of green methanol per annum for use by Maersk’s eight ships due to be launched in 2023.

The ships will be capable of running both on methanol and traditional fuel. The methanol will be produced with hydrogen from renewable power and biogenic CO₂. Maersk says that they hope the initiative will have a ripple effect in other companies and contribute to the more rapid decarbonisation of the industry.

The Environmental Analysis is prepared by Gassnova’s analysis team.