This piece was originally published in EnergiWatch on 22 April 2021.

Jeppe Grue, Technical Director
Green Fuels and Energy, Denmark

DEBATE: Framework conditions for investments in Power-to-X must be defined – and soon

25.06.2021

We need to accelerate the development of Power-to-X if we are to meet Denmark's climate goals in 2030 and seize the opportunity to create a green business adventure. To that end, we need to define a long-term framework for investments in Power-to-X and to quickly create an attractive climate for private investors, says Jeppe Grue, Technical Director of Green Fuels and Energy with COWI.

In the coming years, green hydrogen and Power-to-X (PTX) are expected to play a key role in the green transition. First and foremost in those parts of the industry and transportation sector where direct electrification is not an option.

In fact, climate partnerships among businesses and the Danish Government's own climate programme agree that PTX solutions are a precondition for even meeting Denmark's climate goals in 2030. At the same time, investments in PTX plants and production in the order of DKK 30 billion towards 2030 are needed to meet this goal. To this should be added other investments in green energy production, the entire PTX infrastructure as well as supplementary technologies such as carbon capture and storage (CCS).

Fortunately, PXT technologies are ready, and at COWI, we are already working on different technological solutions for the projects that we are involved in; such as Green Fuels for Denmark together with Ørsted, Copenhagen Airports, Mærsk and others, and Aalborg Portland's GreenCem project. The challenge is, though, to realise the technologies throughout the value chain in a large scale and to connect PTX projects to the rest of the energy system. One of the reasons being that the PTX market lacks maturity and because the regulatory framework still has a number of unknowns.

EUR 10,000 billion in 2050

The potential is huge so there is plenty of reason to take action. Towards 2030, PTX is estimated to be able to contribute to a reduction of up to 3.5 million tonnes of CO2 in Denmark alone, and the global market for green hydrogen is expected to grow from around EUR 0.8 billion in 2020 to EUR 2,800 billion in 2030 – and a whopping EUR 10,000 billion in 2050.

If Denmark succeeds in utilising our green strengths and becoming a role model for PTX development, we could be embarking on a green business adventure. However, to do that, we need to accelerate the development right now. And kickstart investments in PTX plants and technologies in Denmark.

Otherwise, we risk seeing other countries – following ambitious strategies and offering dedicated support to green hydrogen and PTX – overtake us and, worst case, control large parts of the production. As a society, we must make a decision very soon: Do we just want to export green power and let other countries upgrade it to PTX products? Or do we want to be a forerunner by making investments in Danish PTX plants and technologies attractive, and thereby be able to produce cost-effective, green fuels for, e.g., our lorries, ships and trains, and green fertilizer for the agricultural sector domestically? One party leading the way is CIP, which is planning to build Europe's largest PTX plant for green ammonia.

Indeed, if we are to be a role model, companies, investors and politicians have to join forces in the short term to boost Danish PTX investments in order for all parties to reap the gains in terms of climate and job creation later on. And without a doubt, investors will need support and incentives that render investing in Danish projects attractive. It would be prudent to take action in three areas:

Price, security and regulation

The price must go down. Right now, PTX products cannot compete with their fossil alternatives. So, dedicated efforts must be made to reduce costs. In the short term, through dedicated, government support to help projects increase in scale, thereby lowering prices. If that does not happen, investments will target other areas.

Provide security for producers and consumers. Producers and consumers alike must be sure they will be able to sell and buy PTX products in the future. That calls for close coordination across value chains and between producers and consumers – not least to minimise the risks facing investors. The best way to do that is for the Danish Government to actively back value-chain projects that involves actors in all parts of the value chain, thereby providing security for both producers and consumers.

Implement smart regulation. For instance, by requiring fossil fuels to be replaced or mixed with other elements, or including requirements for green transportation in public tenders. Long-term regulation promoting the green choice of PTX products – without jeopardising our competitive ability and sending production and jobs abroad – will create the pressure needed to get the technology up and running in a large scale.

All these measures could be introduced in Denmark relatively quickly and could create an attractive climate for investments in PTX right away. However, for that to happen, the long-term framework for investments in PTX must be defined very soon.