In an industry that continues to see rapid growth due to the its demand as an end use final product, the current landscape of electricity generation supply has seen a shift towards renewable technologies. Keeping this in mind however, fossil fuels continue to be the major supplier for to generate electricity accounting for 65% of the overall share (IEA, 2018d, p. 281). Hence, the greatest source of GHG emissions comes from the power sector accumulating to a touch over 40% of total energy related GHG emissions (IEA, 2018d, p. 319). Furthermore, from a consumption standpoint, growth will continue to try and meet the demands of households and industry over the next twenty five years (IEA, 2018d, p. 279). These statistics alone bring reasoning as to why electricity and the power sector continues is a focal point for limitations surrounding the Paris Agreement Goals.
Possible abatement options in both the electrical and power sector involve looking at many different components such as; switching the generational supply from coal to gas, increasing power plant efficiency by improving technological components within the generation phase or using renewable energy supply for the generation of electricity. Regarding the first two proposals, switching from coal to gas or improving power plant efficiency has cost benefits as it is quite cheap to switch sources and improve efficiency, however when looking at increasing de-fossilisation processes, with the most up to date technology available, this is quite limited. From a political lens, there are measures found at on all levels of governance which see appropriate measures to reduce greenhouse gas emissions whilst producing electricity. These include:
Whilst in recent years, there has been a shift to electricity providers using renewable energy sources, the hard facts are that renewable energy systems are getting cheaper. There are however further variables that need to be addressed. These include peak generation times with wind and PV, and how region also influences these peak figures. This is where powerfuels could step in and be a solution to such a variable as there is a need for dispatchable power generation. Due to the fact powerfuels are chemical energy storage, they have the capacity to provide dispatchable power generation.
Two pilot projects are currently live within Europe. First, Uniper SE has the Falkenhagen demo project producing power-to-hydrogen and power-to-methane. This is the first project in the world which is known for creating and storing gas from wind energy. Uniper SE claim the plant is capable of generating around 360 Nm³/h of hydrogen by means of electrolysis and fed via a 1.6 km hydrogen pipeline into the gas grid operated by ONTRAS Gastransport GmbH, where the energy is available to the electricity, heating, mobility and industrial market as and when required, just like normal natural gas (Uniper, 2019).
Second, the Magnum project in the Netherlands is currently testing hydrogen use through means for power generation. A €1bn contract to the Mitsubishi Hitachi Power Systems (MHPS) was awarded by the previous owners Nuon to construct the gas-fire part of the power plant. Due to first failings with the operational factors by Nuon, MHPS has aligned with subcontractors to execute and manage the entire project. Whilst the hydrogen is planned to be blue hydrogen (SMR+CCS), it allows for the foundations to feed into a singular power-to-hydrogen unit (Power-Technology, 2019). This project like the Falkenhagen project is of small scale as production capacity is about 1.2MW. Whilst the foundations are being put forth by a small number of companies, it is vital for powerfuels to have more projects on the ground as soon as possible to further validate the necessity for everyday use.
Within the electricity sector, barriers arise from the fact that the power market is a commodity market, hence they are homogeneous goods with high competition for low prices. From this, power generation using power-fuels is rather expensive. It will be “in the market” most likely targeting deep de-fossilisation scenarios due to its potential, but it will be indispensable and required in large volumes to balance renewable power and provide secure energy supply. The challenge is to bring a product to the market where there is the demand for a large scale project by 2050. In the current context to which this could be a possibility. The question is how to scale those technologies quickly enough to serve our needs by 2050.
Oil & Gas is the main fossil raw material source for the industries discussed above (mobility, industries, heating & cooling, chemicals etc.). Moving from these fossil based sources to powerfuels is also beneficial for several reasons apart from achieving the GHG goals.
The general value chain of the Oil and Gas industry is shown in the flow chart below left hand side. Of these various steps, some are also relevant for powerfuels (highlighted in the black box). Exploration, Production are very specific to oil & gas deposits and hence the infrastructure and technologies here cannot be utilised for powerfuels. The refining, transport, storage and distribution infrastructure on the other hand can be directly used for powerfuels instead of fossil fuels with minimal modifications (Hydrogen is already injected into the natural gas grid in Germany and there are proposals to convert parts of the natural gas grid to transport only hydrogen (Amprion and Open Grid Europe, 2019)). Oil and gas is an internationally widely transported commodity. So the core competency of companies that operate in these areas of the value chain could be directly used for power fuel transportation. This cross utilisation of existing infrastructure built for the fossil based systems in the future by power fuel systems would be economically beneficial.
For the oil and gas majors the primary source of revenue today is naturally from the sale of oil and gas. The availability of oil reserves that are easily extractable (typically onshore based) are reducing. Extracting oil and gas from offshore fields is costlier than onshore fields thus resulting in increasing costs for oil and gas production (Shell, 2018, p. 35). From a long-term strategic perspective this is not sustainable from both economic and environmental perspectives. In the future, powerfuels could replace fossil fuels in several applications as discussed above. So the core competency of oil majors would not be enough to sustain in the future when they compete with powerfuels. Companies like Shell have realised the need for strategic transformation and have become active in other energy areas through its ventures initiative (Shell, 2019) and by acquisition of promising energy companies like Sonnen. Statoil was rebranded as Equinor in order transition from an oil and gas company to an energy company thus focusing on long term sustainability. Powerfuels could be a natural next step for these oil majors as they already have the expertise in various aspects of the conventional value chain which would still be relevant for powerfuels. Involvement of multiple oil majors in pilot power-to-hydrogen projects could be seen as a step in this direction.