(This article first appeared in Upstream's sister renewable energy publication Recharge on 3 April, 2020.)
A plan by oil major Shell, Gasunie and Groningen Seaports to build the world’s largest offshore wind farm in the Dutch North Sea to produce green hydrogen should survive the coronavirus crisis unscathed due to its early development stage, the companies told Upstream's sister renewable energy publication Recharge.
Reassuring comments over the North Sea wind-to-hydrogen plan came as analysts warned that oil and gas firms in general could delay other energy transition projects, as they try to protect their core fossil business in the short to mid-term.
The three companies in late February unveiled plans for what’s claimed to be Europe’s biggest green hydrogen project in the Netherlands, powered by a 3-4 gigawatt offshore wind farm in the North Sea by 2030 that would be expanded to up to 10GW by 2040.
Groningen Seaports chief executive Cas Konig revealed to Recharge that the government in The Hague said the giant ‘NortH2’ project “in principle” could be built in Dutch waters.
'Covid-19 impact limited'
“Since NortH2 is still in a feasibility study-phase for the remainder of this year, impact [from Covid-19] is limited to none,” Shell’s spokesman in the Netherlands, Marc Potma, told Recharge this week.
A Groningen Seaports spokesman was even more determined, saying at present the coronavirus had “absolutely no influence” on the project, and that the feasibility study is continuing normally, a view also shared by the Netherlands Wind Energy Association (NWEA).
The NortH2 project is one of the world’s largest hydrogen projects, and could be an way for Shell to finally get more than just a foot in the door of the booming offshore wind market, while at the same time entering the future hydrogen business with a splash.
Groningen Seaports said it will provide the land needed for building an electrolyser with a capacity of around 800,000 tonnes per year by 2040. It is also the owner of a network of pipelines in a chemical and industrial cluster in the port area that in part can be re-fitted to transport hydrogen.
Analysts also expect Shell and its partners to go through with the ambitious project, but are not so sure about other ventures by Big Oil into renewable energies.
Shell an early mover
“I believe Shell has been an early mover in incorporating the energy transition into its strategy, and seeing this as a prestigious project in its home market, I think the current crisis will not affect these long-term ambitions,” Alexandre Flotre, vice president and product manager offshore wind at Rystad Energy, told Recharge.
But Flotre adds that while it is too early to tell what the long-term implications of the current crisis will be, “broader energy players heavily exposed to the oil price may delay other projects as they look to salvage their oil and gas business in the short- to mid-term”.
Oil and gas companies are facing their worst crisis in decades as oil prices have plunged dramatically over the past weeks, because lower demand due to the coronavirus crisis came on top of a price war between two of the world’s largest producers of crude – Saudi Arabia and Russia.
A brief surge Thursday following comments from US President Donald Trump that he was brokering a deal between the two countries, was followed by more declines Friday as doubts about such a deal emerged, with Brent prices down 3.27% to $28.96 per barrel as of 3.35 am GMT.
Feasibility studies
Shell and its partners, meanwhile, will continue with the early feasibility studies for the massive Dutch offshore wind-to-hydrogen project, monitoring the situation as it progresses, while allowing some flexibility as to when a final investment decision potentially can be made, Flotre believes.
“The cost of continuing the early-stage development of this concept is small relative to the cost of the construction, and there are still several years before the consortium needs to make that choice – and the outlook may look a lot different by then.”
His colleague at Rystad, senior vice president and product manager for renewables Gero Farruggio, however, points to the fact that NortH2 is competing with other mega renewable projects aiming to supply the burgeoning global hydrogen demand in the coming decade.
So far, all of those large hydrogen projects have been powered by solar photovoltaic, the costs of which have declined by up to 30% per year.
“It will be a race to the line which technology will bring the cost of green hydrogen down to the market price by 2030. Cost remains the major challenge,” Farruggio said.
“Green hydrogen costs from $40 to $50 per gigajoule (GJ) to produce today, typically using solar PV.”
Pushing costs down is one of the reasons why the three Dutch companies are scaling the NortH2 project up so much, Groningen Seaports chief König had told Recharge.
(This article first appeared in Upstream's sister renewable energy publication Recharge on 3 April, 2020.)
