BP and Ørsted will collaborate on a 50-megawatt electrolyzer in Germany in the first stage of a green hydrogen partnership.

The companies announced the project in Lingen, northern Germany, on Tuesday. The plan is to use electricity from an Ørsted offshore wind farm to power the electrolyzers.

The initial 50 MW phase will produce 9,000 tons of green hydrogen per year, enough to displace 20 percent of the refinery’s existing fossil-fuel-derived hydrogen. The companies plan to have the site operational by 2024, with a final investment decision in 2022. Longer-term plans could potentially see the electrolyzers scaled up to 500 MW as the partnership develops.

The project is BP’s first full-scale commercial hydrogen venture. In its most recent conference call with investors, CEO Bernard Looney hinted that hydrogen and offshore wind progress is likely in the near term. By 2030 BP hopes to have 10 percent of the clean hydrogen market in “core hydrogen markets” as it pursues carbon-neutrality by 2050.

“Bringing together Ørsted ‎and BP, Lingen Green Hydrogen offers the opportunity both to accelerate significant ‎emissions reduction in our refinery and build experience with large-scale green hydrogen ‎production and deployment,” Dev Sanyal, BP’s executive vice president for gas and low carbon, said in a statement. “This has the potential to play an important role in the ‎development of a hydrogen economy, in Germany and beyond."

BP uses "clean" (rather than "green") to describe its hydrogen initiatives. That term incorporates hydrogen produced from natural gas with carbon-capture technology in place, which is termed "blue" hydrogen. (GTM's green hydrogen explainer is here.) No such carbon-capture technology is in use for hydrogen production at scale today. 

BP also said the excess hydrogen produced at Lingen could also become the feedstock for synthetic fuel production. In 2018, automaker Audi and BP ran a 30-day green hydrogen trial in Lingen’s fuel production process.

Public funds remain the linchpin for pathfinder projects

BP and Ørsted have applied for funding from the EU Innovation Fund to support the Lingen project. The fund will distribute €10 billion ($11.8 billion) between 2020 and 2030 focusing on energy storage, carbon capture and technology to decarbonize industry. Its focus is on what it describes as “highly innovative” and “big flagship” projects.

Ørsted already has several green hydrogen projects underway covering industry and transport. Last month it announced a 100 MW green ammonia project in partnership with a fertilizer firm in the Netherlands.

Ørsted has tempered expectations for its hydrogen project announcements by highlighting that it requires public funding in order for the investments to make sense.

In August, outgoing Ørsted CEO Henrik Poulsen told investors hydrogen was a decade away from making a mark on the company’s bottom line.

“As we start expanding some of the projects...into several hundred megawatts or even gigawatts toward 2030, it should hopefully start having a positive impact on our financials. So [in] five years, I would say very limited [financial impact]; [in] 10 years, hopefully, we should start noticing an additional value-creating growth opportunity for the company,” he said.

Why Germany?

Lingen is the center of a planned hydrogen network in the region of Emsland that includes a number of uses, including supplying hydrogen refueling stations and using waste heat from the electrolysis for local district heating. The GET H2 project, which counts utility RWE and industrial giant Siemens among its members, will also include hydrogen-fueled turbines to generate electricity when the grid needs rebalancing.

The German Federal Ministry of Economic Affairs and Energy has backed the Westküste 100 project, which is similarly linking end users, including Hamburg Airport and cement manufacturers, with electrolyzers powered by offshore wind and gas transmission infrastructure.

New research released by the consultancy Aurora found that Germany is the most attractive market for hydrogen development as things stand. As well as boasting a supportive policy environment, the country is already the largest hydrogen end user, responsible for one-fifth of Europe's consumption. Aurora also points out that it is a hub in the existing natural-gas grid on continental Europe, with vast salt caverns that present an opportunity for mass hydrogen storage in the future. Aurora estimates that the hydrogen market could be worth at least €120 billion annually by 2050.

The German utilities E.ON and Uniper are making hydrogen plans along with RWE. The recent spinoff Siemens Energy plans to be heavily involved in the hydrogen supply chain, including hydrogen gas-to-power turbines and electrolyzers.