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May 13, 2021

Hydrogen - next steps - Poisoners

Tomasz Pelc

We are starting to consider the way through the transitional period from carbon to zero emission. Natural gas is one of the methods, which is determined by our (Polish) “energy poverty” and the need to “make up the shortcomings with respect of Western Europe countries”. Unfortunately, I believe that this is being done too late. Together with several of my colleagues, we proposed similar solutions during the years 2006 – 2010, but to no avail.

Poland has 5791 business entities with sources of heat and/or electricity with capacity between 1 and 50 MW, which fail to fulfil the requirements of the MCP Directive (limitation of emissions of certain pollutants into the air from medium combustion plants). Their total estimated capacity comes to almost 35 GW. They include bakeries, small and medium-sized production plants, and sources of heat and hot water in cities and gminas. This is really everyone’s problem, because – directly or indirectly – we are the ones paying for it. We often have little time to make strategic decisions, because the existing installations with capacity exceeding 5 MW have until 1 January 2025 to adapt to the new emission standards while the ones with capacity under 5 MW have until 1 January  2030. This must be a system approach with development of an “ecosystem”. Despite my great fondness for natural gas resulting from 25 years of experience in development of gas projects, this utility is poorly perceived through the prism of Taxonomy and – in my opinion – the time for gas investments financed by banks is ending for good. The fact that EBI decided to stop financing power engineering investments based on natural gas starting this year is not a coincidence. There is another matter in this context – I am aware of situations where Polish service or component suppliers receive letters from their business partners abroad on the need to adjust their CO2 reduction roadmap and “carbon footprint” in their activity. This is due to the requirements established by the banks financing said partners, who need to provide information on their entire supply chains and relevant deliveries and forces Polish companies to seek “green” solutions in scope of energy and heat supply.

The potential solution to our problems would see development of projects based on natural gas, but “H2 ready”, which means that – in the perspective of 2030+ – the conducted investment will take advantage of no longer natural gas, but “green” hydrogen. We have been working on the “Poisoners” project for over 7 years and we are continually “struggling” with the approach that “we still have time”, that “the state policy does not establish clear unavoidable events – including the final decisions concerning a “green” economy. This is why we are not making progress, but now, following the submission of the National Recovery Plan, perhaps we can find the time and will to take action in this area. And we are ready to take action – we have ideas.

As already mentioned, we need a system approach coordinated among all departments in order for the developed ecosystems to make sense from the economic point of view – so we can all believe that such activity has a future, that it will be promoted by both the market and the State.

The broad concept of the hydrogen market will play an important role in the presented approach. And how will it develop in our country? This is my projection of events:

Until 2025, the hydrogen market will continue to develop based on the “grey” hydrogen made from natural gas. The main hydrogen hubs will be located in Gdańsk, Włocławek, Płock, and Trzebinia. The key to success will lie in organisation of logistics in a way to prevent the costs of hydrogen supply from “killing off” the profitability of hydrogen projects. During this time, certain “sparrows” associated with “green” hydrogen, i.e. hydrogen made through water electrolysis, will obviously emerge. These include investments of ZE PAK, the ORLEN Group, and several local initiatives. In my opinion, ORLEN could be the one to establish interesting framework conditions for such cooperation, but right now this is hard to assess, as such activity will be determined by the activity in scope of acquisition of the LOTOS Group and PGNiG.

After 2025, numerous dispersed hydrogen production and distribution systems will emerge, which – in my opinion – is the best thing that can happen to our market. “Green” hydrogen will be made with biomethane/biogas produced in waste utilisation and this production will receive local (and not only local) support from hydrogen manufactured from electrolysers. This will also be a time for development of small and medium-sized installations manufacturing hydrogen from electrolysers. However, electrolyser operators should have available support systems in order to take advantage of Polish sources of “green” energy production for purposes of “green” hydrogen. The benchmark can be based on the German approach in order to make development of the hydrogen market more attractive and release electrolyser operators from the RES fee (the RES fee in Germany constitutes over 1/5 of the price of energy).

I am not raising the matter of using energy from offshore wind farms, because – according to our analyses – the surplus energy from the planned offshore wind farms (projects located in the Polish economic zone) available for production of “green” hydrogen will not appear until 2032-2035. Due to the above, we will need some unconventional activity in order to convert our Polish energy into hydrogen – as long as this is our objective. I am not projecting any problems in scope of availability of “green” energy from import, especially with consideration and following analysis of the operations of our closest neighbours and the organisation of the energy market in the Baltic region, but is this really what our energy security is supposed to be based on?

The analyses of the hydrogen strategies published in various EU states, both Americas, and Asia demonstrate potential changes in the ways to “pull out” economies following the pandemic and new opportunities to emerge on the local and global markets. And I strongly advise to take advantage of them – we can start by developing the gas market with “H2 ready” projects, because both natural gas and hydrogen are GASES.

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