Europe’s manufacturing sector accounts for around 20% of its greenhouse gas emissions, making it one of the most polluting segments of the European Union’s (EU) €14.5tn economy. EU and national climate change targets and growing momentum behind individual industrial companies’ own net zero goals have unleashed a major industrial decarbonisation movement that keeps gathering pace.

Clean hydrogen – produced via electrolysis using renewable energy – is increasingly seen as an attractive low carbon feedstock for industrial manufacturing where direct green electrification is not applicable. Not only because it’s a climate-friendly solution but, more recently, also because costs for producing hydrogen from natural gas – as the vast majority of hydrogen is – have become eye-wateringly high.

‘Indirect electrification via fossil-free hydrogen can play a vital, key role in the decarbonisation of hard-to-abate sectors like aviation, plastics and steel,’ says Mikael Nordlander, Director for Industry Decarbonisation at Swedish utility Vattenfall. ‘That’s where the heavy emissions are and also the potential business cases – it’s a win win.’

Easy switch from grey to clean hydrogen 
The switch to clean hydrogen within industry is already taking shape. The lowest hanging fruit of the transition are those industrial sites already using fossil fuel-based hydrogen as a feedstock. Global hydrogen demand returned to pre-pandemic levels in 2021 at 94mn tonnes, according to the International Energy Agency (IEA), with demand from the chemicals and refining sectors leading the growth. In fact, the IEA estimates that hydrogen demand from the refining sector will reach a record high of 41mn tonnes this year.

Among these industrial users, the switch to clean hydrogen is a relatively easy step that can make a substantial difference in lowering carbon emissions of their production processes.

French oil major TotalEnergies, for example, will save around 15,000 t/y of carbon emissions once it replaces some of the grey hydrogen used at its La Mède biorefinery in southern France with green hydrogen from an electrolyser it is jointly building with utility Engie nearby.

Therefore, it is no surprise that some of the first clean hydrogen applications and electrolyser project announcements have come from oil and chemical companies.

Another company is oil major Shell, which earlier this year opened a 10 MW green hydrogen electrolyser at its Rheinland energy and chemical park near Cologne in western Germany. Green hydrogen produced at the site is replacing a small fraction – around 1% – of the 180,000 tonnes of gas-based hydrogen used at Shell’s Wesseling oil refinery, but the plan is to increase the electrolyser’s capacity tenfold to 100 MW.

Cluster demonstration projects 
Although often small, first-of-a-kind projects such as Shell’s Refhyne plant are crucial to demonstrating that clean hydrogen production and application are feasible at a larger scale.

‘Clusters where companies are investing in small clean hydrogen ecosystems are really important to accelerating the hydrogen market. If there’s green hydrogen being produced and companies can understand the pricing, people are much more likely to join in because they can point at something real,’ comments Michael Wagner, Special Adviser for Hydrogen at Afry Management Consulting.

One such cluster is the Heavenn (H₂ Energy Applications in Valley Environments for Northern Netherlands) project in the north of the Netherlands. The regional project ties together production, distribution, storage and local end-use of green hydrogen in an integrated value chain that stretches across a chemical park, a gas treatment plant, a storage site and a refuelling station for transport.

‘Heavenn is an accelerator, it’s a testing environment, a real-life demonstration. The learnings we’ve taken from the project are that we need more and larger electrolysers: we need to speed up and scale up, that’s essential,’ says the project’s founder and architect, Patrick Cnubben.

Clean hydrogen is increasingly seen as an attractive low carbon feedstock for industrial manufacturing where direct green electrification is not applicable.

Eightfold rise for gas-based hydrogen costs 
With the economics for producing green hydrogen now also improving on the back of high gas prices, the switch is an increasingly attractive decision to make. According to the IEA, European refinery operators have seen costs for gas-based hydrogen multiply eightfold to around $5/b since 2019, eating up nearly 50% of refinery margins net of hydrogen costs. ‘This increases the opportunity to boost the use of renewables-based hydrogen in European refineries with a view to help decrease demand for natural gas,’ the Paris-based agency said in its recent Global Hydrogen Review.

As part of its RePowerEU package to cut reliance on Russian energy, the EU has set a target of producing 10mn tonnes of renewable hydrogen and to import another 10mn tonnes by 2030 in order to replace the use of fossil fuels in hard-to-abate industries. From next year, a €3bn EU hydrogen bank will also start subsidising the cost difference between grey and green hydrogen in Europe, highlighting that political support is also adding momentum to the clean hydrogen switch.

Natural fit for oil majors 
To integrated oil majors in particular, investing in the green hydrogen switch has come naturally because of their existing supply and demand portfolio. They are also able to rely on decades of experience in building complex energy production infrastructure, while bringing in either their own refineries or their existing customer base as green hydrogen offtakers.

‘They’re thinking about how to create decarbonised oil. They’ve got the infrastructure and the storage, they just need to replace the sourced fuel either through carbon capture and storage (CCS) on the existing units or they may be expanding their facilities using green hydrogen,’ comments Jonathan Carpenter, Vice President of New Energy Services at Petrofac.

Oil major BP was the first oil company in the world to trial the application of green hydrogen in a fuel refinery when in 2018 it replaced grey with green hydrogen for one month at its Lingen refinery in Germany. The British company now plans to build a 100 MW offshore wind-powered electrolyser at Lingen in partnership with Denmark’s Ørsted to supply its refinery and other green hydrogen customers.

The oil major wants to bank on its existing global, integrated footprint to become a leading player in clean hydrogen, including exporting it. ‘We’re progressing opportunities across the globe, leveraging the BP footprint in locations like Mauritania and North Africa or Latin America. We are looking to bring the capability BP has to deliver major integrated energy projects at the active hubs to develop hydrogen value chains,’ said Felipe Arbelaez, Senior Vice President for Hydrogen and CCUS at BP, at a recent hydrogen industry conference.

Night view of BP’s Lingen refinery in Germany
Photo: BP

Finding offtakers 
Where integrated energy companies have an advantage in having a direct green hydrogen customer, other developers need to work harder to conclude offtake agreements to improve the feasibility of their projects.

This is where industrial players can make a real difference in progressing green hydrogen projects. Today, hydrogen is mainly used in industry to produce ammonia, methanol and direct reduced iron (DRI) in the steel industry, but virtually all of it is based on fossil fuels. The steelmaking sector, for example, can blend green hydrogen relatively easily into conventional DRI units without elaborate technical changes, making the sector one of the main potential industrial green hydrogen users.

In fact, Vattenfall, in partnership with Nordic steelmaker SSAB and iron ore producer LKAB, has found that hydrogen-reduced DRI produced as part of its Hybrit project in northern Sweden has better handling, transport and storage properties and quality than its gas-based alternative, alongside the benefit of being CO₂-emission free.

‘These extraordinary test results confirm that we are on the right track in establishing an efficient fossil-free value chain in the iron and steel industry,’ says Lars Ydreskog, Chairman of the Hybrit board and Senior Vice President for Strategic Projects at LKAB.

Vattenfall’s Hybrit pilot for the iron and steel industry
Photo: Åsa Bäcklin

One of the world’s largest green hydrogen projects, the 7.4 GW HyDeal programme in Spain, includes steel producer ArcelorMittal and ammonia-maker Fertiberia as offtake partners. Together, they have pre-committed to purchasing 6.6mn tonnes of green hydrogen over 20 years to clean up their respective industrial production processes. In turn, the locked-in supply of green hydrogen helps the industrial companies push forward with investments in decarbonisation plants.

‘The offtaker is key to any hydrogen project and its starting point… It is very helpful to involve the offtaker as early as the project’s design phase. Some of the projects we are working on are directly in partnership with the final user, allowing us to share the responsibility with our offtakers,’ notes Enrica Piscolla of Enel Green Power’s hydrogen unit, adding that she is seeing demand for clean hydrogen increase among final users.