Earlier this week the United Kingdom’s Department for Business, Energy & Industrial Strategy (BEIS) announced that a group led by ITM Power has been awarded GBP 7.5 million (USD $9.7 million) for the second phase of a renewable hydrogen project dubbed “Gigastack.” According to the BEIS announcement, “Gigastack will demonstrate the delivery of bulk, low-cost and zero-carbon hydrogen through ITM Power’s gigawatt scale polymer electrolyte membrane (PEM) electrolysers …” with the goal of “dramatically reduc[ing] the cost of electrolytic hydrogen.” The hydrogen produced will be used for petroleum refining, although the project partners have their eyes on opportunities that go well beyond desulfurization of oil.
Reporting on the BEIS announcement tended to focus on ITM Power. This is understandable given the scope of ITM’s plans. The Gigastack project is a central element in the company’s campaign to develop a renewable hydrogen production system at “industrial scale.” According to a company press release, the second-phase work will include a “Front-End Engineering Design (‘FEED’) study on a 100MW electrolyser system using staged installations with a nominal capacity of 20MW.” As part of the work, “ITM Power will also install and trial both their next-generation electrolyser stack and the semi-automated manufacturing machines required for large-scale and high-volume manufacture of these new large low-cost stacks.” To put a 100 MW system in context, utility-scale power plants typically have generating capacities between 100 MW and 1 GW.
But the story acquires even greater import when seen through the lens of another partner in the Gigastack project: Danish energy company Ørsted AS. The Danish government launched Ørsted in 1972 to manage oil and natural gas resources in the Danish sector of the North Sea. By the dawn of the 2010s, having adopted the name Dansk Olie og Naturgas (Danish Oil and Natural Gas, or DONG), the company had a multinational business portfolio — and a heavy greenhouse gas footprint derived from coal-fired electricity generation as well as oil and gas extraction.
But then the company embarked on a path of fundamental change:
A decade ago, we initiated our transformation from a black to a green energy company. Since then, we have reduced our coal consumption by 73%, and decided to fully phase out coal by 2023. We have become a global leader in offshore wind with a market share of 25%, currently powering 9.5 million people. Our ambition is to raise this number to 30 million by 2025.
In 2017, we divested our upstream oil and gas business, thereby completing our transformation to become fully dedicated to green energy.
Because of our actions, we have more than halved our carbon emissions over the past decade, and will have reduced them by 96% by 2023.Ørsted, About Our Name, accessed February 2020
The transformation has not been without challenges. In 2015 DONG recorded a loss of DKK 12 billion (USD $1.7 billion) when it elected to write down the value of certain oil and gas assets in advance of an initial public offering. According to the Danish newspaper Berlingske, this was the largest loss ever posted by a Danish company. But in 2017, the company said that its efforts had succeeded so well “that we have become too green for our name.” The new name comes from Danish scientist Hans Christian Ørsted, who in 1820 was the first to describe electromagnetism.
Ørsted AS will supply electricity to the electrolyzer bank that ITM Power will install at Phillips 66’s Humber Refinery. The source of that electricity will be the Hornsea Two wind farm. While Hornsea Two and its sibling Hornsea One are “the biggest offshore wind farms in the world,” according to Ørsted, they are far from the company’s only generating assets in the North Sea. Ørsted has a total of 26 wind farms operating or under construction in the national waters of Denmark, Germany, the Netherlands, and the U.K. This means that Ørsted, as much as any company in the world, has an interest in solutions that can address renewable resource variability and intermittency. The rationale is clear for partnering with a company whose technology converts electricity into a storable energy commodity.
Ørsted CEO Henrik Poulsen, who has led the company’s black-to-green transformation, is explicit on this point. The energy magazine The Energyst reported that during an investor call on January 30, Poulsen said that Ørsted will invest in electrolysis facilities “if we can find investment cases that stack up.” He continued, “From there on, some of the green hydrogen needs to be further refined into methanol or ammonia – which will take further investment. We are considering whether to integrate into that part of the value chain.”
The lead message of the investor call was that Ørsted’s 2019 financial results were “strong” and “very satisfactory.” Earnings before interest, taxes, depreciation, and amortization (excluding new partnerships) were up 17% over 2018, while return of 10.6% was achieved on capital employed. This is one case, at least, where the transition from brown (or black) to green has not resulted in economic ruin.