rethink sustainability
Green hydrogen: government lays down challenge for French industry
Article published in Le Figaro
Pollution-free steel. Zero-emissions cement. For heavy industries the future is green, and hydrogen holds the key. With zero CO2 emissions at the point of both production and combustion, so-called “green hydrogen” is set to become one of our most important energy vectors – but first, the cost of manufacture must fall.
Watch our video with LHYFE to discover how they are producing green hydrogen using wind, solar and hydroelectric dam energy:
Leading from the front
French President Emmanuel Macron has ambitious plans. Over the next eight years France will spend EUR 9 billion to encourage heavy industries to switch from fossil fuels to hydrogen, and to build green hydrogen manufacturing facilities across the country. The aim is to increase production of green hydrogen a thousandfold – from near zero today, to 6.5 gigawatts of production capacity by 2030 – providing enough to cover France's entire domestic demand. “Thanks to decarbonised electricity from renewables and nuclear power, France believes it can be a leader in green hydrogen production,” said the Elysée this autumn.
Across Europe similar, albeit less ambitious, plans have been put in motion. Between now and 2040, Germany is planning to spend EUR 9 billion to expand the role of green hydrogen in heavy industries and reduce reliance on coal. Brussels is also committed to the gas – green hydrogen has become a central pillar of the EU's “Green Deal” plan to decarbonise the European economy.
Subsidies and physical limitations
In France, success will depend on the extent to which industry can be encouraged to switch from fossil fuels to green hydrogen, or to go through the costly process of upgrading their production equipment to be able to use it. Green hydrogen is currently much more expensive than its cousin, “grey” hydrogen, which is the same molecule, though produced using a highly polluting process known as steam reforming.
Green hydrogen, produced in a zero-emissions process via the electrolysis of water, currently costs between three and four times more than grey hydrogen, and is likely to remain more expensive until at least 2030, according to a report by the Energy Regulation Commission published in June 2022. For industry demand to grow, prices will need to fall significantly, and public spending is likely to be needed to cover the cost differential with grey hydrogen. As with the development of renewable energy, subsidies will be required.
President Macron plans to harness the hydrogen revolution to reindustrialise France, attracting factories from overseas and energising domestic manufacture with the promise of reliable, affordable, clean power.
A large part of the subsidies needed will go towards building electrolyser producers across the country. France currently has four companies specialising in the field, and, in a sign of the strategic importance of this growing industry, major firms are taking up shares in these SMEs, including EDF at McPhy, Engie at Elogen (via its 30% participation in the GTT group), and Schlumberger and Vicat at Genvia. Belgian group John Cockerill is also planning to build an electrolyser plant. As one industry insider puts it, “It is unlikely that France will have four success stories, but one or two will suffice.”
The sheer scale of the planned production is likely to lead to major infrastructure challenges. The objective set by Emmanuel Macron will require nine gigawatts of electrical production, equivalent to several thousand wind turbines, or more than five nuclear reactors. For the planned Dunkirk site alone, where Arcelor Mittal operates a steel plant, two gigawatts of electrolysers would be needed to meet industrial demand.
Read also: Challenge or opportunity? Rethinking hard-to-abate sectors
Electricians and gas producers clash
Will it be possible to produce domestically the huge quantities of green hydrogen France needs? On this question, nuclear and gas companies, long-time rivals in the energy sector, are at odds.
Nuclear power stations have to give way to electricity from renewables at times of high renewable production. By siting hydrogen production facilities locally, near to nuclear power stations, this could offer nuclear power stations a reliable customer for times when nuclear energy output is in low demand. The World Energy Council's report on hydrogen imports into the European Union, published in the autumn, states that “nuclear-based electrolysis could provide 11% of domestic decarbonised hydrogen production in 2050, simply by increasing the rate of nuclear power.” For France, which has a large nuclear energy industry, this could mean opportunity – Macron's team believes it likely that German industry will import French hydrogen.
The gas industry points out, however, that this approach would not produce sufficient hydrogen to meet the government's plan for reindustrialisation. “If we stick to our dogmas, and decide to build more nuclear reactors in order to produce hydrogen locally, we will miss the train of reindustrialisation,” worries a sector specialist. “If we want to attract factories back to France, we must first and foremost have cheap and competitive green hydrogen. And so we must look for it wherever it can be produced as cheaply as possible, including abroad."
The three challenges of hydrogen
Transport
Hydrogen must be compressed in order to transport it. Even compressed, the energy capacity transported is about half that of methane transported in gas pipelines.
Storage
The plan is to store both imported and locally-produced hydrogen in underground caves. While feasible technically, this will require major infrastructure adaptation and testing. This work is currently being carried out by the French storage companies Storengy and Terega.
Safety
When compressed in tanks, hydrogen presents a risk. “It's like any other energy carrier: when you try to put as much energy as possible in as little space as possible, it can go boom,” says one expert.
Read also: Investing in the future of hydrogen
Europe turns to imports
European gas companies are working on adapting their pipelines to build a hydrogen “backbone” to link the sunny countries of the South, including Spain and the Maghreb region of Africa, to industrialised countries in the North. Sébastien Arbola, Engie's deputy managing director in charge of hydrogen, explains: “We will have to look for low-cost renewable energy sources wherever they are, to bring the price of green hydrogen down even further. This will be in the Maghreb, Spain, Australia or Chile, or even in Brazil. If we want sufficient volumes and flexibility of supply of green hydrogen, we will have to import.” Gas companies see hydrogen following the same development path as natural gas. “The green hydrogen ecosystem will first be local, then national, then international, with a supply chain that is becoming more complex and subject to geopolitics,” foresees McPhy president Luc Poyer.
Germany – which does not share France's need to reindustrialise – is preparing to import the precious molecule on a massive scale. The German government has already signed an import agreement with Morocco, which wants to take advantage of its exceptional sunshine to become a green hydrogen Eldorado. Siemens Energy has signed a similar deal with Egypt.
Meanwhile the Netherlands, true to its economic history, is already planning to become the main European hub for green hydrogen imports – the port of Rotterdam will receive its first shipment in 2025. These moves are worrying French industry specialists, with one saying, “If we don't send the right signals to the players right now, hydrogen imports won't come through France, and manufacturers won't set up shop in France.”
Increasingly, green hydrogen is emerging as the future for European industry. For President Macron, the race is on to capitalise on this vast new opportunity.
Important information
This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.
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