The person leading Shell's hydrogen business has said large-scale hydrogen and carbon capture developers need to press ahead without waiting for demand-stimulating policy frameworks to be put in place.
Paul Bogers, Shell’s vice president for hydrogen, told a session at this week's SPE Offshore Europe 2021 conference, being held virtually, that the business case for developing projects was “still pending”.
“I think there is a classic chicken [and] egg,” said Bogers .
“If we wait until everything is completely transparent and we know exactly what incentives are in place for both the emitters or for the people building out the scheme, we're simply going to run out of time and we have eight weeks to go before COP26,” he said.
“I couldn't agree more that there is a more coherent need for a policy framework that drives demand,” he added.
But “unless we are bold... and start building projects and to some extent run a little bit ahead of those policies to show what is possible and how it can be built, very few things will actually happen”.
Reflecting on the issue of early financial help from governments to stimulate projects, Bogers argued developers are less interested in obtaining grants to help cover upfront capital costs of schemes and more focused on long term structuring.
He said of more importance is “how do you allow an emitter to actually pay over time for the difference for a low-carbon solution for sequestering the carbon versus what the current incentives are around emission trading schemes or a carbon price”?
“There's still a substantial difference there. And that... causes inaction,” he said.
He added: “You have to build it at scale. You have to get those benefits of scaling up. And you don't get that by making a lot of point-to-point kind of plays and keeping it really in that area of small-scale demonstrations.
“We have to be bold and I think dare to go big and scale it up much faster than you would do under a normal policy scenario.”
Simon Bennett of the International Energy Agency (IEA) said it was “pleasing” to see a number of governments beginning to put in place policies to tackle the demand issue for low-carbon hydrogen.
This included the UK, which recently released its long-awaited hydrogen strategy containing proposals for a “contracts for difference” (CfD) subsidy mechanism similar to the one used to kick-start the nation’s now successful offshore wind sector.
Bennett said the IEA’s net zero scenario sees about $1 trillion being invested in hydrogen projects and infrastructure by 2030 alone.
Achieving that will require “policies, grants and investment models that minimise risk and attract capital”, he said.
Bennett said both green and blue hydrogen will be needed and warned against what he termed "the hydrogen colour wars".
He was referring to competition between developers of blue hydrogen projects — produced from natural gas with carbon capture and storage in a process that is not totally carbon free — and green hydrogen, which is produced by splitting water molecules using renewable energy.
“We really cannot afford to get lost in a system where options are taken off the table and progress is delayed,” he said.
He also added that it was vital carbon capture utilisation and storage projects should demonstrate “very, very low CO2 intensities, very high capture rates, so that they can compete with electrolysis on a CO2 basis” and that regulators need to put in place certification systems that are technology neutral as a result.
“We need those projects and we especially need them in Europe, where CCUS is so far only evident in a very small number of projects.”