Jens-Peter Saul, CEO, Ramboll
May 21, 2023
In the media: "Danish hydrogen ambitions need political courage to materialise"
Denmark is uniquely positioned to become Europe’s green power plant. Whether the government goes all-in on that opportunity will soon be clear in their plans for green hydrogen, writes Ramboll CEO Jens-Peter Saul in leading Danish daily Berlingske.
Green hydrogen is a key element in the clean energy transition which is now quickly accelerating.
To keep up this pace – and keep a clear course towards net zero – our infrastructure must not be allowed to become a bottleneck. In this op-ed for leading Danish national publication Berlingske, Ramboll CEO Jens-Peter Saul argues that the Danish and German governments must be bold in their ambitions to close the gap to a sustainable future.
Read the full translated op-ed below:
"Go big or go home. That is the choice Denmark currently faces in the green transition.
If Denmark is to deliver on the ambition to become a green, global superpower, we have to go big. The recently announced hydrogen pipeline to Germany will be a bellwether for the government and parliament’s ambitions.
The race to Germany
When you talk with Germans, they acknowledge their predicament. Their industry is deeply dependant on natural gas, which until recently predominantly came from Russia. Now they must urgently transition to renewable energy sources – and fast.
Denmark has a unique opportunity to deliver up to 25% of Germany’s hydrogen, according to an analysis by Danish TSO Energinet, in addition to meeting Danish domestic demand. The German Government has recently adjusted their demand projections upwards, meaning Denmark has a near inexhaustible offtake market south of the border, which expects to import the majority of its hydrogen.
If we go all-in, data from Ramboll shows that this export could net Denmark upwards of 9 billion DKK annually already by 2030.
But Denmark’s neighbours are also eyeing the same prize, and Finland, Sweden, Norway are all betting big on becoming the preferred supplier of hydrogen to Germany.
That is the significance of the meeting between German vice chancellor Robert Habeck and climate, energy and utilities minister Lars Aagaard in late March, where they signed a memorandum of understanding outlining intentions to establish cross border hydrogen infrastructure no later than 2028, connecting Denmark to Germany and eventually wider Europe.
That is a big step forward that we in Ramboll have advocated for over many years. Setting a target year is important, because it gives the hydrogen developers a timeline to work from. But so far it is also just an agreement about an agreement.
Before that agreement can materialise into concrete action, the Danish Government still needs to answer three fundamental questions, each of which will significantly impact whether the hydrogen industry will flounder or flourish.
The first question is how big the pipeline to Germany will be. It can seem banal, yet it is anything but.
Here a rule of thumb is useful: for every time we double the size of the pipe, its capacity quadruples. So while a smaller pipeline is cheaper, because it requires less steel and the earthwork costs are lower, we get more from our investment by choosing a larger pipeline. The capacity can also be raised by increasing the pressure, but this also puts higher demands on the compressor stations, meaning the costs rise accordingly.
By far the cheapest option therefore is to choose a pipe that is larger than there is initial production capacity to fill. Because while we can increase capacity by increasing the pressure in line with demand, it would be a very expensive option to place another pipeline next to it in 5-10 years as demand rises.
We are awaiting the conclusion of Energinet’s feasibility studies, which will hopefully come sooner rather than later, to give us a solid knowledge base from which we can decide the required pipeline dimensions. Armed with this data, the government and parliament must think long term, so the size of the pipe does not become a bottleneck and risks placing an indirect cap on the investments, by limiting the export potential for hydrogen producers.
Billions in investments
The second question is who will foot the bill and – perhaps even more important – when. The Danish Government has kickstarted the production of green hydrogen with its 1.25 billion DKK Power-to-X tender. This is necessary, but also just the beginning.
According to Energinet’s analysis from 2021, it will cost between 3-6,5 billion DKK to establish a hydrogen pipeline to Germany depending on the capacity, route and reuse of existing infrastructure. If a smaller proportion of existing pipeline can be reused, or an entirely new pipeline is needed with associated compressor stations, the cost of course rises. Counting inflation as well it could land in the vicinity of 10-15 billion DKK.
To alleviate this challenge, the government should aim for a long payback period of e.g. 30 years, and a stable, relatively constant tariff throughout. Doing so will enable costs to be spread out, so the first movers are not paying an exorbitantly higher fee than the late comers.
It would also be sensible for the government to provide state loan guarantees for the establishment of the pipe infrastructure. That would enable a wider degree of risk-sharing if, for instance, the production of hydrogen underperforms compared to projections, which is always a risk with new technology.
Don’t skimp on the competitive advantage
What will the state get in return for this investment and risk, some may ask. The answer is we get a whole lot more from our investment if we dare to bet on an ambitious roll-out of green hydrogen than the middle of the road option.
In addition to being a prerequisite for hydrogen developers to invest in Denmark, which creates jobs, export revenue and reduces European reliance on fossil fuels, a large hydrogen network functions as energy storage, raising the effectiveness of our energy system.
As we progress on the build-out of hydrogen infrastructure in Denmark, the need for standalone hydrogen storage facilities will initially be lower because the pipelines themselves function as storage.
Second, an analysis from Energinet shows that Power-to-X could reduce the need to expand the electrical grid. At least 110 billion DKK will be needed to futureproof and upgrade the Danish electrical grid, according to an analysis by Ramboll.
It would be a simplification to say that a krone invested in hydrogen is a krone saved on the electricity grid. But if we skimp on the hydrogen infrastructure, we miss out on large synergies which could ultimately mean our energy system becomes more expensive and less efficient.
If the government and parliament dare to go all-in, it could give Denmark the decisive competitive edge compared to the other countries in the North Sea region.
Because when hydrogen developers decide whether to invest in Esbjerg or Rotterdam, transport links, costs and tariffs could be what tips the scales.
The last outstanding question is also the most fundamental.
The government has still not provided an answer to who will own and operate the Danish hydrogen infrastructure. There are two options, the publicly owned companies Energinet and Evida. Both are effectively prevented from progressing with their plans until they receive clarity about their roles and responsibilities.
That this clarity is still lacking delays the transition, with no upside for any of the involved parties.
The land of big decisions
In these dramatic and restless times, questions about a pipeline can seem mundane. Perhaps even a little boring. But in actuality, these questions are at the heart of the green transition. Because the future only comes about when we build it – rather than just talk about it.
The most precious resource we have is time, and the clock is ticking. That is what this pipeline represents.
Let us commit wholeheartedly and close the gap to a sustainable future – neither Denmark, Germany nor the climate for that matter are served by any less."
This op-ed was published by Berlingske 22 May, 2023. Read the op-ed in Danish on Berlingske’s website.
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