In the city of Duisburg, at the heart of German industry, there is a vast steel complex that is one of the biggest polluters in Europe. But alongside the factory’s furnaces and foundries, technicians have developed a machine that could soon play a vital role in reducing greenhouse gas emissions.
Using electricity to split water into its two components, the device, a test model called an electrolyzer, produces hydrogen, a carbon-free gas that could help power factories like the one in Duisburg. If widely adopted, these measures could help clean up heavy industry, such as steel, in Germany and elsewhere.
“We are perhaps in one of those rare very promising industries in which Germany has a significant and very promising base,” said Werner Ponikwar, chief executive of ThyssenKrupp Nucera, which produces the electrolyzers. The company was spun off from ThyssenKrupp, a German steel giant, in 2023.
The Nucera project was supported by a German government fund worth 700 million euros, or $746 million. In total, Germany’s state and federal governments have set aside 13.2 billion euros to invest in around two dozen projects aimed at developing hydrogen.
The notion of hydrogen as a renewable energy source has been around for years, but only in the last decade has the idea of its potential to replace fossil fuels to power heavy industry taken off, leading to increased investment and technological advancements .
This support is starting to bear fruit. The owners of some of the world’s most ambitious clean energy projects, including Shell, Europe’s largest energy company, and the government of Saudi Arabia, have ordered much larger versions of the two-megawatt electrolyzer in Duisburg , with the aim of considering carbon-free production. industrial era.
Washington has earmarked more funding as part of the incentives provided by President Biden’s Inflation Reduction Act, the 2022 law that provides hundreds of billions of dollars for carbon-free, or green, technology. The Department of Energy last month awarded Nucera a $50 million grant to further expand production of gigawatt-scale electrolyzers for North America.
Such large subsidies reflect recognition that the technology won’t get off the ground without government support, said Christoph Noeres, head of green hydrogen at Nucera, pointing to multibillion-dollar pledges for steel projects and green hydrogen from Berlin to Washington.
“I think they realized that this now has to be on a large scale,” he said.
Analysts point to the ability of hydrogen produced from renewable energy to reduce carbon dioxide emissions from heavy industries, including steel manufacturing and long-distance travel by air or sea.
“The only reason we shouldn’t believe in hydrogen is if we don’t completely believe in decarbonization,” said Bernd Heid, who leads the climate technology platform at consultancy McKinsey & Company. “There are ups and downs and it comes in waves, but I am confident that we are on a long and steady path to decarbonization. »
Germany is working to radically reduce the amount of carbon dioxide it emits by 2045. This will mean not only switching to low-carbon fuels like electricity for heating and transport, but also find ways to reduce emissions from the dirtiest industries, including steel, fertilizer and chemical industries. cement.
ThyssenKrupp plans to use hydrogen to ultimately help reduce the 20 million tonnes of carbon dioxide released each year by its Duisburg steelworks, or around 2.5% of Germany’s total emissions. The company, whose roots date back to the industrial revolution of the 19th century, recently saw its existence threatened by competition from China and other factors undercutting its key businesses, including steel.
On April 11, ThyssenKrupp announced that it would reduce production capacity at its Duisburg plant, which employs some 13,000 people, by around 20 percent. The company cited high energy prices and pressure to achieve carbon neutrality among the reasons for the reduction.
ThyssenKrupp’s foray into the hydrogen sector through Nucera, of which it owns just over 50 percent, shows that the seeds of economic growth for German industries could be found in the rusting landscape of industrial decline. ThyssenKrupp’s companies included a leading global supplier of equipment for manufacturing chlorine, a chemical with many uses, including in drinking water and swimming pools. It turns out that new iterations of these machines can be used to make hydrogen.
As interest in using hydrogen as a clean fuel grew, ThyssenKrupp executives realized they could carve out a niche in the renewable energy sector. “All of these features that I would say our industry is striving for, we already have in our pockets,” Ponikwar said.
Being linked to a well-known company that has helped build factories and other large facilities around the world has proven to be a selling point for potential customers. When CF Industries, a large fertilizer manufacturer, decided to invest in an electrolyzer to help produce low-emission ammonia at a plant in Donaldsonville, Louisiana, it was ThyssenKrupp’s industrial experience that helped. ‘led to choosing Nucera to supply a $100 million unit.
“We believed it offered the lowest risk from a technology perspective and the highest performance and reliability,” said Tony Will, managing director of CF Industries.
Similar attributes led H2 Green Steel, a Stockholm-based start-up, to choose ThyssenKrupp to supply what could be Europe’s largest electrolyser for a plant in northern Sweden that will produce emissions-free steel. Very few potential suppliers “have the muscle” to meet the required performance targets, said Maria Persson Gulda, chief technology officer of H2 Green Steel.
Nucera has not entirely escaped the slowdown in renewable energy, which has sent shares of other hydrogen-focused companies like ITM Power in Britain and Plug Power in the United States tumbling. The company’s stock, listed at 20 euros in July, fell to around 12 euros.
With higher interest rates and inflation disrupt the economics of renewable energy projects, analysts have lowered their forecasts for hydrogen adoption. “Everything is more expensive than initially thought,” said Hector Arreola, senior analyst for hydrogen at Wood Mackenzie, an energy consulting firm.
Nucera said in February that its sales for the quarter ending December 31 rose 35% from a year earlier to €208 million.
The impetus mainly comes from the delivery of electrolyzers to Saudi Arabiawhere the company is supplying what could be the world’s largest network of green hydrogen producers as part of an $8.4 billion project in the region Neom, the ambitious city being built by Crown Prince Mohammed bin Salman. The Saudi government owns 6 percent of Nucera’s shares.
The economics of green hydrogen are largely determined by the price of electrolyzers and the cost of the volumes of carbon-free electrical energy required to operate them. Aiming to maintain its energy leadership in the years to come, Saudi Arabia has big ambitions as a hydrogen exporter because it can produce cheap solar power in its vast deserts. H2 Green Steel was awarded a low-cost contract for hydroelectric power, another green source.
Green hydrogen produced by electrolyzers tends to be more expensive than so-called gray hydrogen, which relies on fossil fuels and produces emissions when used in industries such as fertilizer and oil refining. An experimental hydrogen index compiled by the European Energy Exchange, a financial market, pegs green hydrogen at about eight times the forward cost of European natural gas.
CF Industries’ Mr Will said the key energy cost to make its green ammonia would be $600 a tonne, six times more than with gray hydrogen. He lines up customers willing to pay more for an eco-friendly product.
CF Industries said support for hydrogen production under the Biden administration’s Inflation Reduction Act could reduce much of the difference.
At the same time, existing industrial players appear likely to play a key role in the transition to cleaner processes using hydrogen and other alternatives.
“You need the skill set that Europe – and in particular Germany – has developed over the last hundred years.“, » said Mr. Heid. “Industrial companies have the technology and skills to develop it. »
