EU embraces wasteful hydrogen blending

New framework to decarbonise gas markets is riddled with compromise and capitulation

Dec 16, 2021

Blending low-carbon hydrogen in natural gas pipelines is an extremely wasteful use of an expensive and energy-intensive energy vector that is best deployed elsewhere. We know this. But the European Commission has put H2 blending at the heart of the new EU framework to decarbonise gas markets. Natural gas pipeline operators must be popping corks at this massive lobbying victory.

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The EU’s second ‘fit for 55’ package is the embodiment of political compromise. There are too many shortcomings against the EU’s own decarbonisation objectives to list in one article. This piece focusses on hydrogen blending, the most prominent example.

The package proposes rules on the operation and financing of hydrogen networks, on transparency of gas quality parameters and hydrogen blends, on the repurposing of natural gas networks for hydrogen transport, unbundling and non-discriminatory network access.

The regulation seeks to standardise the flow of H2 comingled with CH4 across EU networks and slash network entry tariffs to stimulate cross-border hydrogen trading. Transmission system operators (TSOs) will be forced to accept H2 blends of up to 5% at interconnection points within the bloc, although it stops short of mandatory blending quotas.

“This will create the right environment to invest in hydrogen infrastructure and develop a competitive hydrogen market,” the Commission says. It will also throw a lifeline to European gas pipeline operators who would otherwise face secular decline in volume flows (and thus revenue). But it won’t incentivise the most efficient use of hydrogen.

Countless studies, papers, and modelling have laid bare just how wasteful and expensive hydrogen blending is. Think-tank Agora Energiewende estimates (PDF) that a 20% renewable hydrogen blend by volume would raise the price of wholesale gas by around 33% but reduce emissions only by 7%.

There are other examples, too many to reproduce here. Suffice to say, hydrogen can’t be used for high-value pure-play applications (such as green steel production or in refineries) once it is mixed with fossil gas.

Davide Sabbadin @SabbadinDavide

Would you mix champagne and tap water? I would not. Champagne is for celebrations. Water for thirst. I also would not mix green hydrogen with fossil gas. But the @EU_Commission does. Watch out at the next Xmas buffet.

EEB @Green_Europe

🔴Fossil industry managed to lock-in our homes to gas for decades when renewable heating alternatives are available and ready to replace gas boilers 🟢On a positive note, the joint planning at the national level of electricity, gas and hydrogen networks is good news #Fitfor55🔥 https://t.co/wDa3BnGBGA

There is a pressing need to decarbonise existing ‘grey’ hydrogen production using unabated natural gas, which accounts for 99% of current H2 supply. Globally, hydrogen production emitted almost 900 million tonnes of direct CO2 emissions in 2020 – equivalent to 2.5% of global CO2 emissions in energy and industry, according to the International Energy Agency (PDF).

There is growing awareness of the urgent need to decarbonise that mess first before pumping precious ‘green’ H2 molecules derived from wind and solar into existing gas networks.

Blend baby, blend!

The EU’s proposed hydrogen regulation (PDF) states on the front page:

“Hydrogen is expected to be used mainly in the areas where electrification is not an option, including today’s energy-intensive industry (e.g. refineries, fertilisers, steel making) and certain heavy-duty transport sectors (maritime transport, aviation, long distance heavy vehicles).”

Further in, it acknowledges that:

“The blending of hydrogen into the natural gas system is less efficient compared to using hydrogen in its pure form and diminishes the value of hydrogen. It also affects the operation of gas infrastructure, end-user applications, and the interoperability of cross-border systems.”

A patchwork approach to H2 blending and gas quality standards would be untenable. It would segment the internal gas market and undermine security of supply – which is now a top priority as the EU endures a prolonged gas supply crisis that is roiling wholesale energy markets.

So, Commission officials were presented with two options: either outlaw (or severely restrict) hydrogen blending in gas networks, or embrace it with a unified Europe-wide hydrogen network built atop legacy gas transmission and distribution infrastructure. They chose the latter.

Why? Because opting for the former would force regulators, TSOs and asset owners to face up to the reality that existing pipelines would be rendered uneconomic to operate a few years down the line as gas demand supposedly shrinks:

European gas demand is forecast to collapse by 2045. Source: European Commission

Without hydrogen blending, would regulators allow network tariffs to rise indefinitely to compensate for ever-lower gas volume flows? If not, what would incentivise operators to invest in maintaining vital energy infrastructure that is headed for the scrapheap?

Stifling pure H2 demand

These questions are too difficult for the Commission to deal with. And so we are presented with the assertion that: “Developing a dedicated hydrogen infrastructure is necessary to release the full potential of this energy carrier [in] specific end-use applications.”

This is true in theory; but if the path towards 100% H2 networks means decades of comingled gas-hydrogen, then the very same hard-to-abate sectors identified as being the primary users of green hydrogen will find themselves competing with the gas network for scant supplies of hydrogen.

Volume risk is a real concern for industrial buyers considering switching to hydrogen. It is easy to imagine this undermining uptake of pure hydrogen in the sectors that need it most. The EU is targeting 40 GW of electrolyser capacity producing 10 million tonnes of renewable hydrogen by 2030. If pure hydrogen demand fails to materialise, then where will all that hydrogen go? Into the gas grid?

If so, it will be used in highly diluted quantities to heat homes and generate power – applications for which electrification wins hands-down on energy and capital efficiency terms. It also puts pure hydrogen out of reach of those that could make best use of it, which would only exacerbate the chicken-and-egg situation preventing H2 uptake.

Hydrogen blending won’t achieve deep decarbonisation. The irony is that it probably won’t achieve its unspoken objective of protecting gas networks from secular decline either.

The Commission’s own modelling shows building heating emissions must decline 42% reduction by 2030, but only 24% of local gas networks expect to be ready for pure hydrogen in 2035.

“Gas distribution grids need to prepare for a disruptive end of their business model,” says think-tank Agora Energiewende, which is calling for regulations to acknowledge the inevitable decline of gas grids.

“Any low-pressure gas distribution grids that survive will be close to ports, where refuelling and storage infrastructure could provide an impetus for the decarbonisation of the maritime and aviation sectors.” — Agora (PDF)