(Bloomberg) --
Two of Europe's largest energy companies, BP Plc and Orsted A/S, said they'd join to develop an industrial-scale electrolyzer to make hydrogen as a green fuel at a major oil refinery in Germany.
If it gets financial backing, the plant at the BP's Lingen refinery in northwestern Germany would draw 50 megawatts of electricity from North Sea wind farms to make hydrogen. The gas would power 20% of the facility's energy needs and replace streams of hydrogen now made with fossil fuels.
It's the latest example of interest in hydrogen as an alternative to natural gas and coal for industries that need thousand-degree heat to run their processes. With utilities cleaning up greenhouse gas pollution, policy makers, especially in the European Union, are focusing on how to slash emissions from heavy industry. They're finding hydrogen is one of the primary options.
“Of course we need funding to fall in place for the project to materialize,” Anders Nordstrom, vice president of hydrogen at Orsted, said in an interview in advance of the announcement on Tuesday. “And we also need further clarity from the regulatory side regarding the definition of renewable hydrogen.”
The Lingen Green Hydrogen project will be one of Europe's largest if it starts as expected in 2024. The companies have applied for money to support the investment from the European Union's Innovation Fund, which backs low-carbon technologies.
The processes to make green hydrogen aren't yet economically viable without government support. Now, it's about 3.3 times more expensive than fossil fuel-derived gray hydrogen, according to analysts at Redburn.
But if funding and “appropriate enabling policies” fall in place, BP and Orsted say they expect to make a final investment decision by early 2022.
Lignen is expected to produce almost 9,000 tons of green hydrogen a year, reducing emissions equivalent to those produced by around 45,000 cars in Germany, BP said.
“We see it as having a critical role in decarbonizing the power industry, transport sector and especially those hard-to-electrify, or expensive-to-electrify, industries,” Louise Jacobson Plutt, senior vice president for hydrogen BP, said in an interview.
BP anticipates the industry will have to shift to hydrogen to meet stricter climate-protection rules. In August, it said it would identify “core markets” for hydrogen and seek to make up 10% of each of them by 2030.
“There is a likelihood that if political ambitions are converted into the right incentives for renewable hydrogen, it could be significant by the end of the decade,” said Nordstrom. “But it all depends on whether things work out as projected.”
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