Low Carbon Pulse - Edition 8

Welcome to Edition 8 of Low Carbon Pulse – sharing significant news on the progress towards net-zero emissions globally. This Edition covers the period from January 12 to January 26, 2021, returning to the two week cycle after Edition 7 was published within the cycle to mark the new administration in the US.

In the first two weeks of February, the Ashurst Global Towards Zero Emissions team will publish the second article in the The Shift to Hydrogen (S2H2): Elemental Change series (considering the prospective relevance to each industry). The team will also publish the first article in the Hydrogen for Industry series (considering production of hydrogen from waste). 

Finally, during February, the Ashurst Global Towards Zero Emissions team will publish a standalone primer on current dynamics across corporate power purchase agreements, roof-top solar, feed-in-tariffs, and grid connection.

---

Results are in … and the leaders are … 

PRC – Most installed renewable energy in 2020

In 2020, the Peoples Republic of China (PRC) installed a further 72 GW of wind-power (a doubling of the previous record for installed capacity in a year), and 48 GW of solar power (a little under the previous record of 53 GW). Add to this a further 13 GW of hydropower, and the PRC installed 113 GW of renewable energy capacity within calendar year 2020. While the rate of installation of new wind-power capacity can be explained by the impending sunset for / winding-down of wind power subsidies (take your pick of the puns), it is to be expected that the PRC will continue to add renewable capacity at a rate of 100 GW (or more) each calendar year. 

The level of renewable capacity installed in the PRC exceeded the level anticipated by the International Energy Agency (IEA) (reported in Edition 4 of Low Carbon Pulse) on November 9, 2020. The anticipated Q4 surge in installation was a strong surge. 

US – Greatest fall in GHG emissions in 2020

In 2020, it is estimated that CO2 emissions arising globally fell by 2.3 billion tonnes, or 6.4% of total global emissions, compared to 2019: this is around twice the GHG emissions arising annually from activities in Japan. The US had the greatest fall in percentage terms.

Globally, the greatest fall was in the aviation sector, with an estimated 48% fall in emissions from 2019 levels. The combined source modelling of the team at Tsinghua University in Beijing considers that the fall is less than might have been expected - Zhu Liu of the Carbon Monitor program at the University is reported as having said:

"The emissions decline is .. less than .. we expected. … when the pandemic ends, we … will see a very strong rebound".

The 6.4% figure resonates with those familiar with the work of the United Nations Environment Programme (UNEP): the UNEP estimates that to achieve the Stretch Goal of the Paris Agreement (see Edition 4 of Low Carbon Pulse), GHG emissions would have to be reduced by 7.6% each year to 2030. In other words, to achieve the Stretch Goal, collectively, policy settings globally need to more than replicate the fall in GHG emissions results from COVID-19. Also, this illustrates, and the devil is in the detail, the industries, which if decarbonised, will be able to make the greatest reduction in GHG emissions. It is to be hoped that by the time of COP 26 later in 2021, the impact of COVID-19 will have been analysed for these purposes. 

see: Wind Power & Renewables Surge To New Record In China and COVID curbed carbon emissions in 2020 — but not by much

World's first hydrogen receiving terminal completed ahead of schedule

On January 22, 2021 it was announced that Kawasaki Heavy Industries Ltd (KHI) has completed the Kobe LH2 Terminal (Hy touch Kobe). Hy touch Kobe is the world's first receiving terminal: the terminal will receive liquid hydrogen gas (LHG) delivered by an LHG carrier, store the LHG (at minus 253°C) and re-gasify the LHG for use.

The core technology used to receive and store LHG is not new, and was developed by KHI to store LHG as part of the Japanese aerospace program. 

As reported in Editions 2 and 4 of Low Carbon Pulse, KHI launched and commissioned the world's first LHG carrier (Suiso Frontier) in December 2019, and as with a number of Japanese corporations is leading in technology development and commercialisation. 

See:  Kawasaki completes world’s first liquefied hydrogen receiving terminal 

Adapting to the impact of climate change – an area for increased focus

In an insightful article in the Japan Times, the environmental impacts of increased GHG levels in the atmosphere are tracked. On the basis of this tracking, the article's thesis is that: "Japan is as vulnerable to climate change as any other country in the world". The consequences outlined in the article, including the damage to the economy and environment in real terms, emphasise the need to plan for the impact of climate change on Japan. 

Bill Gates, in a LinkedIn article ahead of publication of his book on climate change (How To Avoid Climate Disaster: The Solutions We Have and the Breakthroughs We Need), identifies four key needs, one of which is the need to adapt to climate change in all aspects of human activities, including infrastructure development. 
This focus on adapting to climate change provides the opportunity to look forward, especially for countries more, or most, vulnerable to climate change, and to analyse the prospective cost of adaptation if GHG emissions are not reduced as targeted, and in any event. 

The United Nations Adaption Gap Report, 2020, identifies the likely differential in costs for different nations: the thesis is that the actual costs of adaption are greater in real terms in developed countries, but will impose a proportionately greater burden on developing countries as a proportion of GDP. Also, and consistent with the Japan Times article, even if targets for GHG emissions are achieved, the effects of climate change can be seen, and the burden of addressing those changes is proportionately greater for developing countries, particularly in Africa and Asia. 

The Ashurst Global Towards Zero Emissions team expects this to be an increased area of focus in the near term. While this is not a subject intended to be covered in Low Carbon Pulse, this area will be covered in other Ashurst publications, and in providing input on any proposed policy settings.

See: The true cost of the climate crisis on Japan

Renewable energy use achieves cross-over

During 2020, the countries within the European Union (EU) used more electrical energy derived from renewable energy (38%) than derived from fossil fuels (37%, including 13% coal) (cross-over). As important as this statistic is, the near, medium and long term trend of the installation of renewable electrical energy sources is consistent with achieving 2030 GHG emission reduction targets, and net-zero emissions. (See Edition 5 Low Carbon Pulse for EU's new 2030 GHG emission reduction target.)

On January 18, 2021, the European Environment Agency (EEA) (reporting on 2019 numbers of 34% renewable energy and 38% fossil fuel, rather than the 2020 numbers) released a study reporting that the switch from fossil fuels achieved across the EU since 2005 has "significantly reduced emissions" while providing "clear improvements" in respect of the environment. The findings of the study are not earth shattering, rather they confirm that the deployment of renewable energy has the benefits that were predicted - earth preserving.

See: History made: Renewable energy surpassed fossil fuels for European electricity in 2020 and Shift to renewables 'significantly decreased' emissions

US Off-shore wind in sails

As noted in Edition 7 of Low Carbon Pulse, off-shore wind projects on the US's East Coast are gathering momentum. The background to this is that off the East Coast of the US there are world class renewable resources (and off the West Coast for that matter), and off-shore wind farms can be located to deliver electrical energy to regions of major load along the East Coast. Also, as is the case with off-shore wind in some other parts of the world, wind speed increases during the late afternoon as the sun sets, which offers an opportunity to achieve greater efficiency in renewable energy system development. 

On January 4, 2021 the Bureau of Ocean Energy Management released a draft environmental impact statement for the South Fork Wind Project (the Project sponsored by global leader Ørsted based in Denmark) off Long Island. This is New York's first off-shore wind project. Final approval of the South Fork Wind Project is expected by the end of Q2 2021. For the author, South Fork no longer conjures up the skyline of Dallas and the Ewing Family Ranch. 

On January 13, 2021 the Governor of New York, Mr Andrew Cuomo announced the award of two off-shore wind project concessions to Equinor (another global leader, this time based in Norway). (The solicitation process for the concessions commenced in July 2020, being the largest solicitation for renewable energy in the US, at 2.5 GW). The State of New York is to contract with Equinor Wind US LLC for the development of two off-shore wind farms, both off Long Island. 

On January 20, 2021 the President of the US, Mr Joe Biden, announced that the US would re-accede to the Paris Agreement, and target a zero-emissions electrical energy grid by 2035. To achieve this target, renewable resources need to be developed, including use of off-shore wind, and the US Sunbelt. It is anticipated that the Biden Administration will make off-shore wind, and the development of renewable energy capacity across the Sunbelt, a key part of its GHG emission reduction policy settings. As is the case on all renewable electrical energy projects, the development and augmentation of the grid will be critical (see Edition 7 of Low Carbon Pulse).

See: US Offshore Wind Is Off To The Races (At Last!) - CleanTechnica and Gov. Cuomo focuses on green economy during day 3 of New York State of State address

Clock-ticking to February 19, 2021

While President Biden signed an executive order to re-accede to the Paris Agreement on January 20, 2021, the US will not actually re-accede until February 19, 2021. Re-accession of itself is not enough (see Edition 7 of Low Carbon Pulse). It is to be anticipated that policy settings will be introduced to target greater GHG emission reductions, at a faster rate than previously contemplated. The issue is, what is the target? And by when? The good thing is that a number of US States have reduction targets that are more ambitious that those of the original US commitment under the Paris Agreement, and they have continued to progress towards the achievement of those targets. 

Ahead of February 19, 2021, on January 22, the American Petroleum Institute (API) announced that it will support Federal regulation of associated and fugitive emissions of methane (CH4). (See Edition 7 of the Low Carbon Pulse – Regulation of otherwise booming industries).

"Runnin' down a dream": Aussie and US "rock" legends combine

In Australia, a further part of the vision of Mr Andrew Forrest came into focus on January 21, 2020. Fortescue Metals, founded by Mr Forrest in 2003, and one of the Big Three Australian iron ore producers (and the world's fourth largest producer) sees the development of a green steel industry as the next step in its renewable energy development program. In the words of Mr Forrest, and the late, great Tom Petty, Mr Forrest is "runnin' down a dream".

Fortescue Metals has the iron ore, and the use of green hydrogen (produced by the electrolysis of water using renewable electrical energy), would enable it to become a world leading steel producer. The steel industry is recognised as a difficult to decarbonise industry, with blast furnace steel production requiring the use of metallurgical coal, the use of which results in GHG emissions: blast furnaces (but not electric arc furnaces) use coke derived from metallurgical coal. Green hydrogen would displace the use of metallurgical coal, and as such allow steel production to progress towards net-zero emission outcomes. The development of iron ore trains by Fortescue Metals to haul iron ore would be further progress towards green steel production.

See: US rock legend inspiring magnate's green steel revolution

Running down pathways and roads

On January 19, 2021 the Hydrogen Council issued a report entitled Hydrogen decarbonisation pathways. The report will be considered in detail as part of the The Shift to Hydrogen (S2H2): Elemental Change series (considering the prospective relevance to each industry). The key take-away from the report is that there is "no one pathway" to be followed for the production of renewable hydrogen; the report considers pathways for both green hydrogen and blue hydrogen production. Critically, the report emphasises the need for pathways to production to be responsive to the circumstances. This concept appears already to be established practice: an increasing number of countries (15 in 2020) produced or supplemented hydrogen road-maps, plans and strategies, each of which was framed to a greater or lesser extent to the supply capability and demand side load of each country, often by industry and sector. 

The report considers the feedstock required for renewable hydrogen production. This includes that 9 kgs of water is required to produced 1 kg of hydrogen. The report contrasts this level of water usage with the levels of water required for the generation of electrical energy and the production of energy carriers using other technologies - in short, more, considerably more, water is required using other technologies.

The report is a useful compendium of "hows", both as to feasibility and to the need for an open mind as to the need for the development of both green and blue hydrogen to provide to the supply side to allow the development of the demand side for hydrogen. 

Also the report continues the assessment of many commentators that blue hydrogen and CCUS capacity needs to be developed in the near to medium term to provide a supply side for hydrogen: conservative estimates contemplate that by 2050 500 million tonnes of hydrogen will be needed each year, and that this will be a mix of blue and green. 

In a future The Shift to Hydrogen (S2H2): Elemental Change series (probably in June) the Ashurst Global Towards Zero Emissions team will consider blue hydrogen and CCUS in detail.

See: Hydrogen Decarbonization Pathways - Hydrogen Council

Decarbonisation of road freight

In a report published on January 22, 2021 (Decarbonising Road Freight: Getting Into Gear ), Shell and Deloitte concluded that to achieve net-zero emissions by 2050, and seemingly the Stabilisation Goal of the Paris Agreement, in absolute terms, GHG emissions arising from the road transportation industry need to reduce by 60% of 2018 levels. The report states that about 9% of global CO2 emissions arise from road freight activities (with the US, EU, PRC and India together responsible for more than half CO2 emissions arising globally from road freight transportation).

Given that road freight transportation is expected to double by 2050, the conclusion is that pathways need to be found to allow reduction in the levels of GHG emissions arising from current and future road freight. At the moment, the world's carbon budget includes no allowance for the doubling of road-freight, and as such a road freight transport needs to be a focus of all policy makers and corporations alike. BEVs and FCEVs are regarded as the answer by many commentators, but as the report points out, the answer is more nuanced.

At the same time as the publication of Decarbonising Road Freight: Getting Into Gear, separately Shell published a report entitled Decarbonising Road Freight: Shell's Route ahead, outlining its plans to decarbonise the tankers used by it to haul its products by road. The Shell report outlines the levels of GHG emissions that Shell is targeting, including a target to reduce GHG emissions by 30% compared to 2018 levels by 2030. This rate of reduction will allow Shell to reduce GHG emissions arising from road freight haulage in line with the Shell / Deloitte conclusion. 

For policy makers globally, the objective should be to require road hauliers to provide pathways to achieve the required level of GHG emission reductions. Transportation may be regarded as a difficult to decarbonise industry, and road freight haulage the most difficult sector of the industry, including because of the need for fleet renewal, and the competitive nature of the industry. As such, some level of government policy setting may be required to encourage first movers, by ensuring that they are not disadvantaged competitively. This will be the subject of a future Hydrogen for Industry article. 

See: New Shell Report on Road Freight Decarbonisation

Any which way, its Hertz

On January 21, 2021 it was reported that the transmission system operators (TSOs) for Denmark (Energinet) and Germany (50Hertz) have agreed a framework to work together on the Bornholm Energy Island in the Baltic Sea. As noted in previous editions of the Low Carbon Pulse, and the first in The Shift to Hydrogen (S2H2): Elemental Change: Why H2? Why Now?, timely development of transmission infrastructure (both interconnectors and system augmentation) is critical to the realisation of the benefits of off-shore wind development, including from any Energy Island. The framework for Energinet and Hertz50 to work together facilitates both the development of the Energy Island and more efficient connection and system integrity and stability. 

"For Europe's energy future, the seas that surround us are of central importance". [50Hertz CEO, Stefan Kapferer]

See Edition 5 of Low Carbon Pulse for Greenlights for Green Islands (i.e., Energy Islands).

On January 15, 2021, it was announced that the VindØ consortium, assisted by Copenhagen Infrastructure Partners (CIP), is to develop an Energy Island in the Danish sector of the North Sea. The consortium comprises two Danish pension funds, PensionDenmark and PFA, and Denmark's largest utility company, Andel. The Energy Island is around 100 kilometres from shore. The development of the Energy Island will be completed by 2030, and will provide 3 GW of off-shore wind capacity. 

This is regarded as the first stage of development, with 10 GW of wind-capacity, associated battery electrical storage system hosted on the Energy Island, and Power-To-X (see Edition 6 of Low Carbon Pulse) contemplated on the full development of the project.

See: German and Danish TSOs Form Bornholm Energy Island Pact

Baltic and North Seas – hot spots, even in winter

Baltic Sea

For the most part, countries with coastlines to the Baltic and North Seas have well developed legal frameworks for the grant of concessions to allow the development of off-shore wind (and solar). On January 13, 2021 it was reported that the Parliament of Poland (the Sejm and the Senate) passed the Offshore Act to regulate the development of off-shore energy in the Polish sector of the Baltic Sea. It is expected that the Offshore Act will enter into force in February 2021. 

At the moment an initial 5.9 GW of off-shore wind capacity (first phase) is contemplated, with the contracts for differences to be granted by the President of the Energy Regulatory Office (URE) to allow the projects a line of sight to revenue for the sale of electrical energy. The second phase, building on the first phase, is contemplated as including reverse auctions in 2025 and 2027, each for 2.5 GW of capacity, such that by 2027 Poland will have an operational or contracted 10.7 GW of off-shore wind capacity. Ultimately, up to 28 GW of off-shore capacity may be developed for connection to the grid. 

North Sea

On January 15, 2021, the Crown Estate Scotland opened the process for applications for the ScotWind seabed leasing for off-shore wind projects. The application process closes on March 31, 2021. The process for applications was opened following the publication, by Marine Scotland, of the Sectoral Marine Plan for Offshore Wind Energy outlining areas for development, including the North Sea.

See: Breaking: Polish Parliament Passes Offshore Wind Act and ScotWind offshore wind leasing round opens for applications

Another Australian Hydrogen Hub (H2H)

In September 2020, through an expression of interest (EOI) process, the Western Australian Government invited EOIs in respect of the proposed Oakajee Strategic Industrial Area (Oakajee SIA) Renewable Hydrogen initiative. The EOI process closed in December 2020. 

On January 21, 2021, Minister for Regional Development, Agriculture and Food and Ports (among other roles), Ms Alannah MacTiernan announced that 65 EOIs had been received to produce and export renewable hydrogen. The announcement commented on the range of EOIs received, both country or origin, and participants.

The early stage assessments for the purposes of the EOI indicated that renewable resources for the Oakajee SIA could be up to 270 MW of wind, and 1,250 MW (1.25 GW) of solar, electrical energy (1.5 GW in combination). Given the level and range and type of interest, from whole of supply chain to supply chain participant, it will be interesting to follow the development of the project.

See: Three new hydrogen hubs on South Australia’s horizon

Electrolysers from concept, to feasibility, to FEED, to development

The key technological advance necessary to allow the development of a green hydrogen supply industry is the commercialisation of electrolysers to achieve the required scale, efficiency and utilisation. 

During the second half of January, there appears to have been an increase in the news around electrolysers at various stages in the development process:

• thyssenkrupp has won an order to supply and to install a 88 MW Proton Exchange Membrane (PEM) electrolyser for Hydro Québec following completion of a feasibility study. The hydrogen production facility is to be located in Varennes, Quebec, and will use renewable power provided by Hydro Québec to power the electrolyser to produce up to 11,000 tonnes of H2 annually. The H2 (and oxygen) produced will be supplied to a biofuel production plant to produce biofuels from residual waste, with the biofuels to be supplied to the transport sector;
• TOTAL and Engie have entered into a co-operation agreement to design, build and operate a renewable hydrogen production facility in southern France to use electrical energy from solar farms to power a 40 MW PEM electrolyser to produce 5 tonnes of green hydrogen a day to meet the needs of TOTAL's La Mède bio-refinery: the development is reported to be dependent on funding support from the EU and the French Government;
• ITM and Linde (global industrial gases giant) have concluded a sale agreement for the supply of a 24 MW PEM electrolyser to be installed at the Leuna Chemical Complex in Germany, with Linde to build, own and operate the electrolyser plant to produce green hydrogen for Linde to supply to industrial customers using Linde's existing pipeline system, and for distribution (in liquified form) to hydrogen refuelling infrastructure (HRI) and other industrial customers; and
• Nel Hydrogen is to supply a 20 MW PEM electrolyser to Iberdrola to use a renewable electrical energy system (comprising a PV solar farm and a lithium-ion battery electrical storage system of 20 MWh) to produce green hydrogen to be supplied to Fertiberia's ammonia (NH3) plant in Puertollano, to displace CH4 used to produce NH3.

As will be noted, each of these projects is shore based, and each project is delivering green hydrogen to established off-takers of energy carrier feedstock to support existing demand or an existing customer base, or both. In short, the green hydrogen supplied by these projects is being under-written by credit worthy off-takers, or defined markets, and as such the projects are "bankable" if they are, or were to be, project financed. These projects do not require those building, owning and operating the PEM electrolyser to take market risk on the price for the green hydrogen produced in a way that gives rise to unquantifiable market risk (effectively price risk as things stand). Also note that the green hydrogen produced is to be used in industries that may be regarded as more difficult to decarbonise. 

At least in the near to medium term, it is to be expected that PEM electrolyser projects will require credit-worthy off-takers to contract under longer term contracts for the supply of green hydrogen, including the mega-green hydrogen projects contemplated around the world (see Editions 1 to 6 of Low Carbon Pulse). 

These are onshore projects NortH2: 'Ideal conditions': Canada to link huge green hydrogen plant to hydropower, Total And Engie Plan France’s Largest Green Hydrogen Plant, ITM Power Announces Sale to Linde of World's Largest PEM Electrolyser, Nel to supply 20MW PEM solution to Spanish hydrogen plant. 

Solar energy makes sense

As reported in Edition 6 of Low Carbon Pulse, the Al Dhafra Solar Project achieved financial close, with a world record-low tariff bid of US$ 0.0132 KW/h. The Al Dhafra Solar Project follows the earlier 1 GW Mohammed bin Rashid Al Maktoum Solar Park, another trail blazing energy project in the United Arab Emirates (UAE).
On January 19, 2021 it was announced that Dubai Electricity and Water Authority (DEWA) has contracted with Emirates Global Aluminium (EGA) to supply power from the Mohammed bin Rashid Al Maktoum Solar Park for its smelter. This makes the UAE the first country in the world to produce aluminium using solar power. It was also announced that production from the EGA smelter may increase in line with the planned expansion of the Mohammed bin Rashid Al Maktoum Solar Park. The contracted power while sourced through the grid is being "tracked and traced" using the International Renewable Energy Certification System.

See: Dubai solar park says it has started powering aluminium production

Given the length of this Edition of the Low Carbon Pulse, the series on zero heroes will continue in Edition 9 with Norway.

Author: Michael Harrison, Partner.