On 11th November, renewables intelligence specialist Tamarindo will host the first meeting of our Power-to-X Leadership Council, an action-focused, member-driven working group that is advancing the integration of renewables and hydrogen.
This is an exciting initiative. Power-to-X technologies have emerged in recent years as a vital pillar of the global transition to low-carbon energy sources. As a result of increased political support, we have seen companies emerge and a first generation of projects is now being commissioned. It’s great to witness.
However, companies in the renewable energy sector need support if they are to take advantage of this opportunity. We cannot simply sit by the sidelines. This is why we have established our Power-to-X Leadership Council.
On 11th November, our members will convene to discuss the biggest opportunities and challenges involved in integrating fuel production with renewable power generation. In doing so, we will help to find the ideas and forge the business connections that will support the success of power-to-X in the next decade.
It is a role that Tamarindo has played before in offshore wind. When we were set up in 2011, offshore wind was at an early stage in its commercial journey and needed a forum where experts could discuss challenges in three areas: financial, technical and geopolitical. We helped facilitate those discussions, and played a vital role in supporting the sector to achieve commercial success.
Here are some of the key questions for power-to-X in those three areas:
1. Financial: How can investors get more comfortable?
One of the biggest challenges for developers and utilities trying to move from pilot to utility-scale projects is how to gain the large amounts of money these bigger projects require. Utility-scale developments cannot be built easily on a utility’s own balance sheet, and the developers will require project finance.
However, investors require confidence in a few key areas if they are to back a development with an emerging technology, such as power-to-X.
First, can they be confident in the technology being used over the life cycle of the development? Second, is there security of income at the project, either in the form of government financial support or long-term commercial deals? And third, does the developer have a track record of delivering similar projects?
Winning support from the financial sector is crucial if the power-to-X sector is to achieve its long-term goals, but it has a long way to go to build confidence.
2. Technical: How can we successfully scale?
One good thing about power-to-X is that there are operational projects, which shows that the concept works. But it is one thing to get projects working on a small scale. It is quite another to develop technology that delivers at scale.
For developers, we are increasingly hearing questions about how to compare different electrolyser technologies in terms of their efficiency and output. This is normal in a new sector where winners and losers - both the companies and the technologies they developed - are not yet entrenched.
These questions about technology are crucial because developers are often looking to secure permits based on applications they make with technology available in the market now, but which may look outdated when their project completes in six years’ time. This is a challenge we have seen in offshore wind where turbines keep getting bigger, and we are seeing likewise in power-to-X.
Then there are other technical questions. How can we secure water supplies? Can we secure sites near supporting infrastructure including roads? What can we do about the excess oxygen emitted? All big questions. All key to long-term success.
3. Geopolitical: Will there be long-term support?
The other aspect that developers and financiers need confidence about is that there will be long-term government support for projects. Political shifts are one of the few risks that can send an industry quickly into reverse.
Therefore, developers and investors need to ensure they have support at local and national level for their schemes, and the ambition of growing power-to-X is shared by the main political players. The recent uncertainty in the European Union about how best to define whether hydrogen is ‘green’ should serve as a reminder even the most apparently supportive politicians can cause issues.
This will have a bearing over where firms choose to base themselves to grow their power-to-X operations. How can they get this long-term stability?
We may not be able to answer all of these questions at the first meeting of our power-to-X Leadership Council this month, but we can give it a go! By doing so, we hope to be a catalyst for growth in this industry in the next decade.