December 2, 2021

Here’s what the Power-to-X sector says it needs to grow

Short-term subsidies, a massive increase in renewable energy, and carbon tariffs are seen as key enablers for the Danish Power-to-X sector, according to the results of a recent survey conducted by Ramboll. Here are the highlights.

New technologies often enter the mainstream slowly, and then in a sudden rush. This has proven to be true for everything from air travel to televisions and even renewable energy. Innovation, competition, and economies-of-scale mean that these technologies gradually become cheaper and a part of everyday life.
Whether the same will be true for Power-to-X, which can reduce emissions in hard-to-decarbonise sectors, is still uncertain. While the technology is proven, key pieces of the puzzle are still missing before the sector can take off. That is the main takeaway from a first-of-its-kind survey of the central actors and stakeholders in the Danish Power-to-X sector, conducted by Ramboll in November.
The survey was aimed at the entire value chain from energy producers to investors and end users. They say Power-to-X can contribute to carbon reductions by as early as 2025, but also caution that the sector needs help to grow. Specifically, they underscore the need for short-term subsidies, a commitment to expand the share of renewables by 10 GW or more, and carbon tariffs.
Massive expansion of green energy
“The message from the sector is loud and clear: If Power-to-X is to contribute to Danish and global climate ambitions, a massive expansion of green energy is needed,” says Mogens Skov, Director for Power at Ramboll. “10 GW is equal to building at least 10 more offshore windfarms like the planned 1GW Thor windfarm in the North Sea, which will be Denmark’s largest when finished, so the scale of ambition is hard to understate,” he says. While the survey focuses on the Danish Power-to-X sector, the insights are globally relevant.
“Expanding the supply of renewable energy is a key prerequisite for Power-to-X in Denmark and elsewhere, and urgency is of the essence because of the large quantities of power needed to make Power-to-X viable,” says Anders Nimgaard Schultz, Vice Director for Power Generation at Ramboll.
“In addition to the energy needed for Power-to-X, we must not forget that we are rapidly electrifying societies, which adds an additional pressure on the production of renewable energy. Therefore, it is crucial that there is a push to dramatically expand renewable energy production,” he adds.
Click to enlarge. With the right support, the Danish PtX industry believes an export potential of more than two billion EUR is realistic. Source: Ramboll
Economic incentives needed to get the industry “off the ground”
Ramboll sent the survey to 80 stakeholders in the Danish Power-to-X sector, of whom 39% responded. The responses help identify key enablers that will be necessary for the sector to deliver significant carbon reductions. There was strong consensus on three areas:
  • 66% of respondents said an expansion of renewable energy was needed to deliver reductions through Power-to-X by 2030
  • 66% said subsidies were necessary in the short term to deliver carbon reductions by 2025, but only 38% said subsidies were necessary to deliver reductions by 2030
  • 50% said carbon tariffs were needed to deliver reductions by 2030, and 47% said tariffs were needed to deliver reductions by 2025
With the right support, the Danish Power-to-X industry believes an export potential of more than two billion EUR is realistic, according to the survey results. Economic support through tariffs and subsidies will both help mature the sector and expand the market for green hydrogen in sectors such as shipping and heavy-duty road transport, which currently rely on cheap but polluting fossil fuels.
Speaking to Danish industry media Energiwatch, Anders Nimgaard Schultz explained that subsidies would likely only be temporary:
“Many of the projects we are currently working on will need economic incentives to get off the ground. But the sector is determined to quickly wean themselves of government support, because they realise it is not a viable long-term solution”. He sees a big need to nurture demand for new green fuels:
“We must ensure that there is a market for these new products. Whether that’s through subsidies or by abating fees will probably vary from country to country, but some form of incentive structure must be developed to spur demand,” he says.
There is momentum in the sector
The survey comes as the Danish Government is expected to soon launch its national Power-to-X strategy, thereby joining countries like Germany, Norway and the UK. The EU has also announced a hydrogen strategy, setting a strategic objective of installing at least 40 GW of renewable hydrogen electrolysers by 2030.
Ramboll has more than 60 Power-to-X projects and studies in the company’s portfolio. One of the most prominent is the proposed energy island in the North Sea, currently at the tender stage, where Ramboll has supported the VindØ consortium with a masterplan which included scoping the potential for Power-to-X.
About the survey
The survey is the first of its kind to deliver data on what the executive management of leading Danish companies in the Power-to-X sector believe is necessary for the industry to deliver significant contributions to the Danish Government’s goal of reducing emissions by 70% in 2030 and 50-54% in 2025. The questions focused on the carbon reduction potential, energy sources, and export potential.
Ramboll has asked 80 industry actors across 75 companies and organisations within the following categories in the Power-to-X value chain:
  • Energy producers
  • Investors
  • Power-to-X producers
  • Power-to-X suppliers
  • Companies working in transmission, storage, and distribution
  • End users
  • Stakeholder groups
  • Knowledge institutions
The survey was conducted from 5-21 November 2021.
Read the full report here (in Danish).