Europe should blend green hydrogen into its natural gas networks at low levels to create initial demand and drive the development of the industry’s supply chain, according to Marco Alvera, CEO of Italian gas infrastructure company Snam.

Blending up to 5pc hydrogen into the gas grid can help drive the industry forward in Europe, including the lowering of electrolyser costs, he told the Financial Times Commodities Global Summit.

“The first and best way to create immediate demand for hydrogen is blending… [and] we have proven it can be done. You do not need to change anything, and you can dial it up or down based on the actual take up of industrial demand,” Alvera says.

This approach would enable Europe to frontload the electrolyser cost reductions needed to make hydrogen cost competitive. By contrast, Europe’s solar industry was supported with subsidies for over a decade—although costs did not fall significantly until manufacturing plants in China scaled up.

Alvera says that, in most European countries, blending up to 10pc hydrogen requires no changes to gas networks or end-use processes.

“If you [blend] up to 10pc, it is still within the parameters of being considered gas, so you do not need to change anything,” he says. “And we were the first in the world two years ago to deliver these blends to existing customers for a long period of time to test what would happen in their factories. And we did not need to change anything.”

Hydrogen blends can be as high as 20pc without the need for changes in the processes of industrial consumers, Alvera notes.

Storage play

In addition to blending, Snam is also focused on the development of hydrogen storage capacity. He put the cost of building underground hydrogen storage at $0.20/kW compared with $150/kW for battery storage.

“The first and best way to create immediate demand for hydrogen is blending” Alvera, Snam

The development of flexible storage capacity for green hydrogen will create new arbitrage trading opportunities that will influence prices for carbon and potentially LNG, he says.

Companies with access to storage and electrolysis capacity will produce and store hydrogen when spot power prices turn lower or negative. When power prices peak, they will withdraw hydrogen and run it through fuels cells or turbines to generate power.

“Hydrogen will create a band, a collar around power prices, and that band will also drive the price of CO₂ and will eventually drive the price of LNG as well,” he says.

The interplay between hydrogen, power and storage also offers opportunities for windfarm developers which are integrating electrolysers into their turbines, adds Juan Gutierrez, CEO of the service business unit at turbine manufacturer Siemens Gamesa Renewable Energy.

“You can integrate an electrolyser and you can decide every day what you do. You can sell the power if the power prices are high or you can store the hydrogen if you cannot sell the power,” he says.

With the addition of battery capacity, the turbine operator can also offer grid services to the system operator. “Then you have three revenue sources,” he adds.

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Author: Stuart Penson