Hydrogen storage: Where’s it at?

Clean hydrogen is becoming an important elements of many country’s decarbonisation strategies. As supply and demand grows, so will storage requirements. In this episode, Jon and Sandra talk with LCP Delta experts Nerea Martinez and Brendan Murphy to explore the role of hydrogen storage, where it’s at, and how it will develop.

Episode transcript

[00:00:04.570] — Jon Slowe

Welcome to Talking New Energy, a podcast from LCP Delta. I'm Jon Slowe.

 

[00:00:09.370] — Sandra Trittin

And I'm Sandra Trittin, and together we are exploring how the energy transition is unfolding across Europe through conversations with guests from the leading edge of the transition.

 

[00:00:25.210] — Brendan Murphy

You.

 

[00:00:26.330] — Jon Slowe

Hello and welcome to the episode. Clean hydrogen is becoming an important element of many countries’ decarbonisation strategies. And as supply and demand of clean hydrogen grows, so will storage requirements. So today we're moving up the value chain a bit to look at some of the largest scale assets, maybe beyond the customer scale that we often look at and how that will develop.

 

[00:00:53.410] — Sandra Trittin

Yes, and we are curious to see on how it works with the supply, with managing the demand, and also the storage in between and how this is all balanced out.

 

[00:01:06.550] — Jon Slowe

So, I think that storage question in general for the energy system is going to become a bigger and bigger part of the energy transition. Let's introduce our guests who can tell us a bit more about the role hydrogen will play. First of all, Nerea Martinez, who leads LCP Delta's Hydrogen Research. Hello, Nerea.

 

[00:01:27.440] — Nerea Martinez

Hi Jon. Hi Sandra.

 

[00:01:28.980] — Jon Slowe

And second, Brendan Murphy, Head of Hydrogen here at LCP Delta. Hello, Brendan.

 

[00:01:34.570] — Brendan Murphy

Hi Jon. Hi Sandra.

 

[00:01:36.510] — Sandra Trittin

Hello. So, actually, I would like to come straight to the most interesting point, at least from my side. Nerea, can you tell us about how hydrogen can be really stored?

 

[00:01:49.410] — Nerea Martinez

Yeah, of course. I think as Jon alluded in his introduction, hydrogen storage has been increasing in popularity in the recent months and the hydrogen economy. We've talked a lot about creating hydrogen production, creating demand. But I think for us, we're seeing in the latest months, there's a lot of focus coming into storage and distribution. So, kind of connecting the point of production and consumption and really from a long energy duration point of view, there's three main ways in which we can store hydrogen. So that's mainly coming from salt caverns, then kind of the porous rocks medium. So depleted gas caverns and aquifers and also from lion rock caverns. So those are the three main types of technologies. They're all at different types at different levels of technology development. So, with salt covers being the most advanced today, a lot of development is focusing there. A lot of existing projects are looking to repurpose salt carbons, which currently store natural gas, to use them for hydrogen storage. But also, the other technologies will bring a lot of potential into the future. So depleted gas fields are generally larger, for instance, and could allow for larger volumes of hydrogen storage.

 

And line rock caverns have the advantage that they can be drilled wherever it's necessary. So, the other storage medium depend on whether geologically formed. But with line rock carbons, you can be a bit more versatile. So that's kind of the spectrum of possibilities today. And once the hydrogen networks develop, also we will see line pack storage in the networks as a way of kind of storing hydrogen from point of distribution and also from a project perspective, you have the hydrogen tanks, but at a much lesser scale, of course.

 

[00:03:37.980] — Jon Slowe

And Brendan, what about the need to store hydrogen? We're in the really early days, right in I don't think we're even in the foothills yet of the hydrogen economy in many ways. So, as we get into the foothills, and I'm going to stop this analogy now, you know what I mean, as the hydrogen economy develops, how quickly is storage going to become an important issue and will it be an important issue everywhere as clean hydrogen develops?

 

[00:04:11.190] — Brendan Murphy

Yeah, sure, I like that analogy, except I wouldn't want to fall into a crevice. But yeah, we'll carry on with that. So, I think in many ways the natural gas system, which hydrogen would sort of naturally replace over time, has many similar features to what a hydrogen system would look like. But in many ways, it's very, very different as well. So, the way that we extract and then consume natural gas is very familiar to us all. We know how that works across the energy value chain, across its own value chain. It's not the same thing for hydrogen. So, in the future when we're producing hydrogen and it's clean, so it's green, hydrogen resorts at the mercy of the supply profiles from renewable electricity. So, your production profile looks very different.

 

[00:05:01.980] — Jon Slowe

Okay, so that's a big difference from natural gases, isn't it? Because natural gas is pumped out of maybe wells in the North Sea at a steady rate or comes off a tanker, so the production will be variable in many cases.

 

[00:05:20.630] — Brendan Murphy

Yes, and of course, it's a very mature market. So, if you think back to the last couple of years with the conflict, we've seen in Europe recently and the impact that that had on the natural gas market, that market also responded very quickly because it had mature supply chains and mature routes for supplying gas and rediverting internationally to where the fuel was required. Hydrogen is really early in its days as an energy source. And then just to sort of add extra complication to that picture, naturally, when we think about where natural gas is used, generally we're thinking in heat. So, space heating and in power generation with a couple of other applications in small volumes, a hydrogen energy system or hydrogen economy, a fully-fledged hydrogen economy, sees hydrogen displacing lots of different types of existing fossil fuels in different sectors, each with their own unique demand profiles, price setting mechanisms, regulatory requirements, safety requirements. So, matching that up, matching that supply and that demand is tricky. In fact, it's impossible without large scale in seasonal storage.

 

[00:06:39.880] — Jon Slowe

Okay. In my mind, one example that really illustrates that might be the interseasonal aspect. So, if we've got lots of surplus wind in the summer and a huge demand for electrification of heat or heat from electric sources in the winter, we might want to turn that hydrogen back into power in the winter and that's very long duration energy storage.

 

[00:07:05.110] — Brendan Murphy

Correct. I mean, it's something I was going to bring up a bit later, but it's true to this point, really, when you think about energy storage as a service, that particular strand of the energy system has been devalued gradually over the last couple of decades in the UK, to the point where it's not an investable proposition at the moment. Now that really needs to change if we're to see hydrogen really meet its potential in the future. Energy systems in a sense that a hydrogen storage asset developer won't go near it as an investment unless it can cover the very long-term capital requirements to basically hold large volumes of hydrogen in reserve for when it's required by different sectors, much of which is quite unpredictable at this point.

 

[00:08:04.730] — Sandra Trittin

So, you would think that subventions would be necessary, or any kind of support programme from the regulatory.

 

[00:08:14.830] — Brendan Murphy

I mean, that's where we start to drift into the different approaches to hydrogen storage and energy storage. Anyway, looking at it from a regulated asset-based point of view or a merchant point of view. Now, in the UK, traditionally we've taken a merchant approach to storage assets and that's reflecting on the UK. That particular model, to go back to the point I made just now, is completely uninvestable in the UK at the moment. So, something would need to change there from a policy and regulatory point of view to enable that to happen, if we continue to go down that road. Whereas I think in Europe, the current preference is to manage energy storage at a regulated, asset-based level, which of course is a lot more secure, but just a slightly different approach from a commercial point of view. So maybe less attractive to commercial or private investors, but probably more secure in terms of being able to get those assets actually built and maintained long term.

 

[00:09:25.430] — Sandra Trittin

And out of curiosity, then, do we have enough storage today already? And if we think about the trajectory until 2030, and where's that storage sitting at the moment?

 

[00:09:43.850] — Nerea Martinez

So, I mean, if you look at kind of the hydrogen market today, the volumes of clean hydrogen that are consumed across Europe are quite low. It's an emerging market. So as part of the service, we track in high base hydrogen projects that are announced across Europe. So as of last year, we've seen around 250 electrolysers in Europe, but when we look out to 2030, we see this is currently sitting around 60 gigawatts (GW), so that's over 200, eightfold increase in the market. We see hydrogen targets also set across Europe with a repower EU strategy, setting a target of 10 million tonnes of hydrogen to be produced domestically, another 10 million to be imported. So those are quite big numbers when we look at them. And in terms of the end customers like Brendan were saying earlier, this is mostly going to come from industrial customers which need a reliable secure offtake of hydrogen. So, to meet that puzzle, we definitely need hydrogen storage. So as part of our research, we modelled the UK hydrogen system and, in an environment, where we're meeting our targets, I think we said around 28 terawatt (TW) hours of hydrogen to be consumed and then run our model to see how many hours a year basically storage would be required.

 

[00:11:12.540] — Nerea Martinez

So, trying to match that intermittency from the production side to when the demand is happening, and we came across with a number of around 6%. So, 6% of the hydrogen consumed would require storage just simply to match production and demand. So now when we look at the pipeline of projects that are coming across Europe, we see around eight terawatt hours of hydrogen production of hydrogen storage projects in the pipeline. But that really comes around 1% of the total hydrogen demand we are expecting by 2030. Right? So, the storage requirement really depends on a lot of factors. A lot of them come down to the operational aspects of production and demand. But of course, if we extrapolate our UK model, which was needing at least 6%, if not more, because of geographical constraints that would be placed on the system, we can probably start to see that 1% is not enough. So, we would be talking more around 50 terawatt hours of hydrogen storage required compared to the eight-terawatt (TW) hours that we're seeing in the pipeline just from extrapolating that model. Of course, there's a lot of interest against seas in the way, but there's a lot of work to be done still on the way and I think regulatory uncertainty like we discussed here is still a barrier.

 

[00:12:39.160] — Nerea Martinez

So, trying to understand how those models are going to look like to make it investable and secure the investment is really important at an early stage because these projects take five to ten years to develop. So really, we're talking about having projects today that are being planned to be able to be operational by 2030. So, it's a long scale project and.

 

[00:13:02.350] — Brendan Murphy

I think that's actually a really interesting point to make. The timescales for these projects, when you think about how quickly or relatively quickly you can go from a plan to operation for a production site versus the time frames for much larger in terms of the size and the capital and then the time for the project of a storage site, it puts it into perspective. The current production focus for the policy on the policy side is great, but in fact the timescales for storage are so much longer and the storage policy areas is quite far behind really.

 

[00:13:40.330] — Jon Slowe

Nerea, just in terms of that eight-terawatt (TW) hours that you think will be there by 2030 from planned projects at the moment, give us a feel. Is that across one or two big projects? Is it across loads of projects. Is it mainly of the three types that you explained at the beginning? Is it mainly depleted gas fields or lined rock cabins or salt cabins? Give us a feel for what's making up that planned eight-terawatt (TW) hours by 2030 that you talked about.

 

[00:14:09.330] — Sandra Trittin

Yes.

 

[00:14:09.970] — Nerea Martinez

So those eight-terawatt (TW) hours are coming from 32 different projects across Europe. The scale of each of them is quite different, but when we look at a country basis, for instance, we can see it's 3.5 terawatt (TW) hours coming from Germany. So, it's the leading market by far, followed by the UK with 1.8 terawatt hours, and then France just under the one-terawatt (TW) hour mark. So, it's really kind of dominated, if you want, by Germany and a handful of projects there. And in terms of the type of storage we're seeing, it's mainly salt caverns. So above 90% of that capacity release coming from reconverted salt caverns that were previously used for natural gas, we have seen four projects which go into depleted gas reservoirs. But I'd make a caveat that because these sites tend to be larger in volumes and the volumes of hydrogen are simply not there at the moment. These projects tend to blend hydrogen into natural gas storage, which obviously has the advantage of you can use the existing natural gas reservoir, but at the same time you're kind of losing the value of that hydrogen into the natural gas mix. So, there's a few of them before we see kind of dedicated hydrogen depleted gas fields later on.

 

[00:15:34.890] — Jon Slowe

So, it feels to me like coming back to what you were saying, Brendan. This is a bit of a forgotten part of the supply chain, that we've got this focus on production, we've got this focus on demand. But unless we get this big infrastructure type storage assets built, then we're going to struggle to join it all together.

 

[00:16:01.330] — Brendan Murphy

Yeah, I think from a policy point of view, from discussions that we've had, it's quite overwhelming in some senses to try and get this right from a framework point of view, a policy point of view, trying to get the right pieces in place to incentivize investment in these really large projects. When you think about the way that the UK has approached the hydrogen puzzle through clusters as a way to try to de risk the investment, it's clever in one sense, but in another sense, it also isn't really an enabler, typically for large scale hydrogen projects per se, because you're limited to where these projects are. Locationally, as in you can't really move them. They are where they are. And the clusters in the UK tend to have some storage, or some of them have storage as part of the project, but others are the production. Part of the project is supplying hydrogen to the offtaker on site. So, it's not really answering the question about how you join up the energy systems and how you get a whole country, whole hydrogen system properly joined up and de-risking the investment in that really crucial part of the entire hydrogen economy.

 

[00:17:28.910] — Brendan Murphy

That's a UK focus on the continents. Of course, it's slightly different. They don't necessarily have gone down the cluster route and there's more interconnectedness between the projects, which helps. But we will swiftly reach a point where unless we do have that sort of six, seven, eight percent capacity storage capacity for hydrogen, the actual volume of hydrogen will be slowed down or capped, if you like, in a sense, because it won't have anywhere to go. When you're producing hydrogen, as, let's say, an electrolysed project, you're not necessarily going to be connected to your consumer. Your consumer in an advanced hydrogen system is going to be the storage facility at the very high level and then that storage facility takes on the responsibility to sell the product later on. And that's where you need to be able to de-risk that for them.

 

[00:18:25.250] — Nerea Martinez

And I think up until now it has been okay just because the size of the projects has been smaller and kind of the idea of colocating hydrogen production at the point of consumption is quite popular. But of course, as we start to see more of a merchant model arriving and kind of the scale up of these sites and aside supplying multiple customers, then that won't be sustainable, as Brendan says. And you're looking at storage as that middle customer, really.

 

[00:18:55.340] — Brendan Murphy

And then just to add to that, of course, once you start to see volumes of hydrogen being imported into Europe, changes the dynamic again. So, we talk about hydrogen, we tend to talk about hydrogen at the moment in big numbers. So, capacity of electrolysers, terawatt hours of storage and terawatt hours of consumption. But in a mature hydrogen system, what you're likely to see is different layers. So, you will have that sort of big numbers layer at the top, which will be your power generators and your heavy industry users, steel producers. Then you'll have sort of more localised or regional hydrogen production and consumption where that hydrogen won't leave that area and that's likely to be consumed by different mobility use cases, transport, buses, trains, that type of thing. And then you got your international level, which was likely to be your sort of hydrogen derivatives trading, sustainable aviation fuel type world, where you'll have again, a different type of storage asset required, maybe at an import terminal. And I think that's where the policy area gets quite confusing and tricky for policy setters to try to create a framework that can incentivize all of those different types of storage.

 

[00:20:31.450] — Sandra Trittin

But also, if I see what you're all saying around these big numbers right, that are needed and the big storage, and I think it's a huge investment which has to happen. So, who would you think are the players who can do that and who will make it, let's say also in the mid and long run, besides pilot projects?

 

[00:20:54.450] — Brendan Murphy

Well, I guess it depends on a bunch of things, but one being what type of approach you take as a government, whether you go down the merchant route or the regulated asset base route. If you stick to merchant for the moment, you're looking at your traditional for the moment because of the expertise they have and the capital that they can leverage against their balance sheets. You're looking at the very large natural gas storage operators that are currently in the market now at a rab level. If you go down that route, you're looking at sort of regulated returns on a 9–10-year period. So that could be potentially your gas distribution networks if they were allowed to do that or a new form of regulated operator in that type of model. But just simply because of the uncertainty. I suppose Nerea is probably closer to the actual firms that are currently investing in storage. But you're probably just looking at your natural gas companies at the moment.

 

[00:22:02.550] — Nerea Martinez

Yeah, that we've seen that definitely in terms of up to 2030 it is natural gas storage operators who are looking to kind of diversify their portfolio, start looking into hydrogen as a way of future business. Most of them tend to just go ahead with one project. There's a few of them which will have two. And in the biggest case, I think storing G has five different projects across Europe. But there's also some kind of chemical players if you want or kind of power generators which at the moment are still kind of playing with the idea of hydrogen storage. Again, as it's kind of not regulated market, it's kind of allowed under the current regulations but a lot of clarity has to emerge, and a lot of these projects are still pending final investment decision again on regulatory clarity needed in order for that final commitment to be made from the parties.

 

[00:23:01.030] — Jon Slowe

So, is it still really pilot projects, test and learn, build one type of activity in the main at the moment while these bigger questions are debated and then resolved?

 

[00:23:15.390] — Nerea Martinez

Yeah, I think from the projects we've seen there's still kind of a number of questions open to be addressed. So, I think part of that is technical feasibility as you alluded there, but I think there's still a lot of consensuses across the industry that it can be done. It's just kind of taking it from the lab into a commercial scale project and then also understanding consumer profile demands. That's a huge question. So, we talked a lot about how hydrogen storage is going to be very different to natural gas storage because volatility now happens on the production side instead of kind of on the consumer side as we used to have, understanding how your storage sites have to be operated, what kind of flexibility.

 

[00:24:01.090] — Jon Slowe

So, things like injection rates and withdrawal rates then become quite different maybe from what natural gas storage companies are used to.

 

[00:24:13.060] — Nerea Martinez

Yes, exactly. So, a lot of focus on the salt carries, for instance, and understanding what kind of fast cycling can be done. So, we know we can store hydrogen, but also kind of how fast can we pump it in, pump it out and be reactive to that market, but also understand what the market is going to want. So, we're seeing a lot of projects now are opening for kind of calls for interest from stakeholders, for future clients, basically just to get a sense of the numbers and orders of magnitude they need to have to provide for. And the final thing they're looking for is an understanding on the costs. So, on paper, everyone has an idea of how much it's going to cost. But taking these big projects into action, there's always different costs that will emerge in the process. So, learning by doing.

 

[00:25:01.060] — Brendan Murphy

Again, if you try to make that kind of problem real, if you think about the natural gas power fleet, the gas turbines operating in the UK, producing power in the market at the know, they don't run baseload, they're providing power when renewables cannot. And that's unpredictable. You can give or take predict the hours in a season, but you can't easily predict when that power will be required. So those consumers, or that group of hydrogen demanders, if you like, will need hydrogen immediately when they need it, and in very large volumes. So, from an energy security of supply, a power security of supply point of view, there is a case who made potentially for ring fencing some of that hydrogen to make it available for power.

 

[00:26:03.650] — Jon Slowe

But that's a strategic decision then that's not a market decision.

 

[00:26:09.910] — Brendan Murphy

Absolutely, but it has to be designed into the policy framework and it has to be designed into the business model that supports hydrogen storage because you've got lots of different sectors with different price points competing for the same fuel.

 

[00:26:22.750] — Jon Slowe

Sandra, before we move on to the crystal ball, how does this sector feel to you or what's your sort of observations on the discussion so far?

 

[00:26:31.070] — Sandra Trittin

So, for me it looks like it's really still an exploration phase. Right? And I just remember that let's say three years ago probably there was a huge discussion how much hydrogen would play a role in the residential sector also in the future, especially on mobility. I think this has now moved away a little bit, but as I said, it looks to me like an exploration phase still. And the poor regulator, right, I mean, a lot of it is depending on them, which is clear, but it also shows how early stage the industry is in and that it will still take some time.

 

[00:27:10.330] — Jon Slowe

Well, let's move on to the talking new energy crystal ball, and I'm going to set the dial this week to 2035, which, well, it's twelve years away, so quite far, but maybe not that far away in terms of big infrastructure. So Nerea? Brendan? Can you paint a picture or one aspect of a picture, or give an anecdote for hydrogen storage in the year 2035?

 

[00:27:41.170] — Nerea Martinez

I think in the year 2035 we will have hydrogen storage. I think that's the first point that we currently don't have. So, I think we'll see the first sites being operational, but I think it'll be also quite a different environment that we are today, because by 2035, we'll also have hydrogen imports into Europe. So, we are going to very quickly move away from those small hydrogen production plants which are colocated with a customer into a much more traded commodity globally. So that's going to change the dynamics in there and I think we will no longer be only talking about some sod cavern projects, but I think at this point, also, depleted gas fields are going to start to become a very key technology into the market and potentially start to see the first few projects being launched. The UK has its own depleted gas fields looking at hydrogen conversion also. So, the rough facility from Centrica, potentially some advancements by this point, then, and a much more obviously clear regulatory framework. I think by 2036, the European Union wants to move to that regulated, asset-based model. So probably a change also in that dynamic in Europe by then.

 

[00:29:00.670] — Jon Slowe

Thanks, Nerea. How about you, Brendan?

 

[00:29:03.130] — Brendan Murphy

I mean, to be honest, you hit the nail on the head. That's basically where I see the world, too, I guess. It's funny you picked that date because that's around the date, as you mentioned, where we might see some real investment from Centric into the rough asset and it's aligned to the current European gas package timeframes, as Nerea mentioned. So, it's funny you picked that date. I guess what might also be going on at the time, which will be interesting to see how it plays out, is seeing how that import of hydrogen into Europe plays out from a policy point of view. So, do we start to see more protectionist type policies to protect domestic hydrogen supply or production? Or are the volumes high enough that they're coming in from elsewhere in the world for a low enough cost for Europe to change its focus away from supporting domestic production? And you start to see a much more sort of international marketplace for hydrogen? That's going to be quite interesting.

 

[00:30:21.190] — Jon Slowe

The politics get everywhere, doesn't it, Brendan?

 

[00:30:24.790] — Brendan Murphy

Can't escape it.

 

[00:30:26.890] — Sandra Trittin

But then, Jon, what is your key takeaway, then? I mean, if you see the future, how Brandon and Nerea were writing it now or telling us now for 2035, what would you say? Is that realistic? How would you draw, let's say, similarities to the electricity industry and the changes going on?

 

[00:30:51.170] — Jon Slowe

What you said earlier has stuck in my mind, Sandra, which is poor regulator. And I think when we talk about the energy transition, it's really easy to knock regulators and policymakers, isn't it, and say, oh, they should be doing this and they should move faster, but I don't know. Would you like to be a regulator in this area at the moment, Sandra?

 

[00:31:12.870] — Sandra Trittin

No, but I think it's our job to help them, right? To make it move quicker, help them to understand that. Because I always say the poor regulator as well, because they are not really into hydrogen, right, every day. But they will have to make the policies and the frameworks. So, I think we should do our best to help them get the wheel going.

 

[00:31:38.350] — Jon Slowe

I think what Nerea said earlier, the 6% of the demand will need to be stored. You could model that in different countries. I'm sure you'd come up with some slightly different numbers, but numbers like that and to look at how hydrogen will move around, there's lots of talk around hydrogen transport backbones, different countries then maybe, I guess, Sandra, what you need is these no regrets or least regrets. Maybe the idea of no regrets is impossible given the current uncertainties, and it's supporting regulators and policymakers with these least or minimal regret steps.

 

[00:32:20.390] — Brendan Murphy

And I think on that as well, that really struck a chord for me as well, poor regulators. But as you say, Jon, it's moving the stuff around that's as important, if you like. And I think what would be really important in the coming years is to not become blinkered into how we see various assets in the energy system and what role they have at the moment, and try to reimagine them in different ways, because that also helps the regulator. I'm talking specifically about the gas pipes and repurposing natural gas infrastructure to support the growth of the hydrogen economy. And I think the regulator understands that asset base, it understands how to support investment in that. So, we mustn't throw things out for something new and shiny. We can repurpose things.

 

[00:33:16.030] — Jon Slowe

Well, time's getting the better of us, so let's leave it there for now. We've got a little taste of the area of hydrogen storage. We've certainly shined a light on the scale of the requirements and the scale of some of the challenges in how we're going to meet those requirements in the future. Thanks very much, Brendan and Nerea, for joining us today. And thanks, as always to everyone listening. Hope you enjoyed the episode and look forward to welcoming you back next week.

 

[00:33:46.330] — Sandra Trittin

Thank you very much. Thank you. Bye.

 

[00:33:48.910] — Brendan Murphy

Thanks everyone.

 

[00:33:51.530] — Sandra Trittin

Thanks for tuning in. We are excited to bring you captivating conversations from the leading edge of Europe's energy transition. If you've got suggestions for topics or guests for future episodes, please let us know.

 

[00:34:03.530] — Jon Slowe

And if you're enjoying the podcast, then please do rate it and share it with colleagues. For show notes, trans, scripts and more, please visit www.lcpdelta.com.