Development of

Business Cases
for Fuel Cells and
Hydrogen
Applications for
Regions and Cities
Hydrogen injection into the
natural gas grid

Brussels, Fall 2017

This compilation of application-specific information forms part of the study "Development of Business Cases for Fuel
Cells and Hydrogen Applications for European Regions and Cities" commissioned by the Fuel Cells and Hydrogen 2
Joint Undertaking (FCH2 JU), N° FCH/OP/contract 180, Reference Number FCH JU 2017 D4259 .

The study aims to support a coalition of currently more than 90 European regions and cities in their assessment of
fuel cells and hydrogen applications to support project development. Roland Berger GmbH coordinated the study work of
the coalition and provided analytical support.

All information provided within this document is based on publically available sources and reflects the state of
knowledge as of August 2017.

2
Table of Contents

Topic Page
A. Technology Introduction 4

B. Preliminary Business Case 9

3
A. Technology Introduction

4
 A

Hydrogen into gas grid applications provide a sustainable solution

for renewables-based storage and transformation of energy grids
Hydrogen into gas grid 1/4
Brief description: Hydrogen can be Use Case: Cities and regions can inject (or
converted from renewable energy sources and call for / incentivise the injection of) green
injected into existing natural gas grids for initial hydrogen (i.e. from power-to-hydrogen P2H
(or long-term) storage and subsequent use in a sources) into gas grids to further promote
range of different applications (power generation, renewable energy sources, decarbonise the gas
heat provision, transport applications such as grid and provide long-term energy storage
gas-fuelled urban buses or passenger cars) solutions

Fuel cells in commercial buildings

Key components Electrolyser, fuel cell, blending/injection system
Electrolysis technology for P2H Alkaline (ALK), PEM, (Solid Oxide)

H2 production efficiencies 50-83 kWel/kg (2013), 36-63 kWel/kg (2030)

Cost of H2 production for P2H dep. on electrolyser size, technology, power input price, etc.
Maximum H2 blend level 5 – 20% (potentially even 25%, dep. on gas infrastructure)

Hydrogen provider E.on, RWE, Thüga

Gas distributors Private and municipal utilities (e.g. German Stadtwerke),
gas TSOs or DSOs
Typical customers Public and private utilities, public and private TSOs or gas
shippers, ultimately e.g. passenger car fleet operators
Competing technologies Other energy storage (e.g. pump storage, batteries)

Source: Roland Berger, FCH2 JU 5

 A

Several successful demonstration projects provide a valid

foundation, also for the assessment of future commercialisation
Hydrogen into gas grid 2/4
Overall technological readiness: Large scale demonstration and lighthouse projects ongoing
and more being commissioned, showcasing technical and economical viability of technology in a relevant TRL* 1 2 3 4 5 6 7 8 9
operational environment (especially combination of P2H and injection into gas grid) Idea Tech. formulation Prototype Fully commercial

Demonstration projects / deployment examples (selection)

Project Country Start Scope Project volume
P2G Ibbenbüren demonstration plant (RWE) 2014 Operation of 150 kW P2G demonstration plant producing green hydrogen to be n.a.
injected into gas distribution network, grid operation by Westnetz GmbH

WindGas Falkenhagen (E.ON) 2011 Green hydrogen production from 2 MW wind power to be fed into gas n.a.
distribution network, grid operation by Ontras Gastransport GmbH

Network management by injecting hydrogen 2013 Phase 1: Two-year preliminary study adapting existing natural gas vehicle n.a.
to reduce carbon content (GRHYD) (NGV) fuelling station with new hydrogen/natural gas mixture (Hythane®)
Phase 2: Five-year demonstration phase of hydrogen injection into natural gas
distribution network with blend level of up to 20%

HyDeploy 2016 0.5 MW electrolyser to demonstrate the use of blended hydrogen in the UK gas GBP 6.8m
grid

*) Technology Readiness Level ≤5 6-7 8-9

Source: Roland Berger 6
 A

Besides supporting the integration of renewables, hydrogen-into-gas

grids offers an efficient storage solution with existing infrastructure
Hydrogen into gas grid 3/4
Use case characteristics Benefit potential for regions and cities
Stakeholders > Electricity generating utilities, e.g. operators of wind Environmental > Reduction of carbon footprint of natural gas grid and ultimately
involved farms or larger solar PV parks gas-fuelled energy and transport applications
> Natural gas transmission system and distribution > Improved flexibility for electricity system supporting the
operators integration of renewable energy
> Regulatory and permitting authorities

Demand and > Utilisation of excess power from intermittent sources Social > Improved stability and security of energy supply, through a
user profile (e.g. PV, wind) to produce "green" hydrogen, on-site viable medium- and long-term storage opportunity
electrolyser, e.g. built into container for scalability > Improve social acceptability of hydrogen and fuel cell
> Maximum H2 blend level of gas grid as critical applications – as larger component of an integrated transition
framework condition of the energy system

Deployment > Hydrogen production and electrolysis Economic > Shift of energy transport to gas pipelines and thus lower
requirements > Quality of (local or regional) gas grid infrastructure intensity of electricity grid expansion
(e.g. material durability of meters) > Efficient utilisation of existing natural gas infrastructure,
> Adequate downstream infrastructure (e.g. satisfactory especially in parts of Europe with high gas grid densities
connection to H2 consumer) > Short-term, medium-term and seasonal storage opportunities

Key other > Facilitation of hydrogen infrastructure and wider Other

aspects adoption of mobile FC application such as FCEV > Further promotion of renewable energy sources as a result of
converted hydrogen being injected into gas grid and overall
higher ability of electricity/gas system to absorb variable
electricity generation from renewable sources

Source: Roland Berger 7

 A

Among others, a lack of standardised gas composition, blend

concentration and missing incentives inhibit large scale deployment
Hydrogen into gas grid 4/4
Hot topics / critical issues / key challenges: Further recommended reading:
> Appropriate hydrogen blend concentration may vary > Study on Early Business Cases for H2 in Energy Storage
and More Broadly Power to H2 Applications
significantly between pipeline network systems and natural http://www.fch.europa.eu/studies
gas compositions (e.g. range of 5-25%)
> Blending Hydrogen into Natural Gas Pipelines:
> Additional pipeline monitoring and maintenance measures https://energy.gov/sites/prod/files/2014/03/f11/blending_h2_n
will likely be necessary, necessitating investments on the at_gas_pipeline.pdf
gas TSO/DSO's side > Power-to-Gas system solution:
http://www.powertogas.info/fileadmin/content/Downloads/Bro
> Degrading durability of metal pipes and materials when sch%C3%BCren/dena_PowertoGas_2015_engl.pdf
exposed to hydrogen may require necessary infrastructure
upgrades
> Lack of incentives and compensation systems to reward
energy storage services is a key element of a commercial Key contacts in the coalition:
business case that is currently not clear enough (e.g. under
German Renewable Energy Sources Act (EEG)) – revenue Please refer to working group clustering in
remuneration / monetisation streams have to defined stakeholder list on the share folder

https://sharefolder.rolandberger.com/project/P005

Source: Roland Berger 8

B. Preliminary Business
Case

9
 B

Injecting (green) H2 into the gas grid promises 4 key benefits: sector
coupling, gas decarbonisation, energy storage and H2 de-risking
Main potential and value propositions

A. Sector coupling B. Decarbonising the gas grid

… allowing for environmental benefits of increasingly … greening the gas grid by lowering its carbon
green electricity to spill over to other sectors that are intensity (with "admixture" of natural gas and green
linked to the natural gas infrastructure, e.g. industrial hydrogen), improving the environmental performance of
power/heat, mobility efficient gas-based power and heat generation – a "low-
hanging fruit" for decarbonisation

Injecting green hydrogen into the natural gas grid

… enabling the de-coupling of variable energy supply > Offering power-to-hydrogen operators a
from renewables and energy consumption, by using complementary value stream to de-risk potential
the existing natural gas transmission, distribution and initial demand shortfalls from industrial or mobility off-
storage infrastructure takers

C. Energy storage D. Risk mitigation

Source: FCH2 JU, Roland Berger 10

 B

For the business case, regulatory framework, additional cost and

monetisation options have to be considered
Key elements of the business case

1. Regulatory framework 2. Additional cost

> Maximum blend level / hydrogen > Cost of injection equipment
injection limit (CAPEX, OPEX)
> Additional regulatory > Allocation of cost betw. operator Overall business case
requirements and gas TSO/DSO
assessment

> NPV, payback period,

etc. as economic
decision-making criteria
3. Monetization / revenue streams 4. Specific use case > Key drivers and
> Biomethane feed-in-tariff (FIT) > Size, technology, etc. sensitivities
regimes > Injection level – TSO vs. DSO
> Competition with natural gas, > Stand-alone injection vs.
biomethane (possibly under combination with other green H2
carbon penalty regime) production purpose

Source: FCH2 JU, Roland Berger 11

 B

The maximum (local) blend level of hydrogen into the gas grid
varies greatly across (and even within) European countries
#1 – Regulatory framework, esp. maximum blend level / H2 injection limit
> Regulatory injection limit
varies greatly across
Belgium Switzerland
Europe and even within
countries (e.g. local limits in
Germany of 2%vol in case of
presence of downstream
CNG refuelling stations or
UK Austria storage (e.g. underground)
Germany Germany … higher injection levels > CEN and EASEE-gas are
technically (in principle) working toward a
possible, but requiring gas harmonized standard for
infrastructure investments gas quality in the EU. Due
Sweden France Netherlands to varying degrees. Local to the type II vessels for
alignment with gas TSO/ CNG vehicles, 2%vol
DSO is key for every project hydrogen tolerance in the
gas mix is the current basis
Volume/ for discussion
0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% molar
percent > Higher H2 blend levels
might require add. pipeline
monitoring/maintenance
Mass measures (gas TSO/DSO);
0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0% 2.2% 2.4% 2.6% 2.8% 3.0% 3.2% percent degrading durability of
metal pipes and materials
when exposed to hydrogen
may also necessitate
infrastructure upgrades

Source: Hinico, Tractebel ENGIE, ITM Power, FCH2 JU, Roland Berger 12
 B

Direct injection requires add. CAPEX and OPEX on site, dep. on

national/local context – Add. cost of injection are relatively small
#2 – Add. cost components of hydrogen injection interface – INDICATIVE
Key add. cost elements Example for effective cost of injection
> Key assumptions of this example: 5 MW PEM (at 2017
Gas distribution grid 2017 2025 parameters); 2,500 FTE with full injection; 30 EUR/MWh

Current focus
Pressure 10 bar average electricity cost; DSO-level injection; 250 m piping
CAPEX injection station EUR 600 k EUR 480 k > Cost of injecting H2 into the gas grid [EUR/kg]:
OPEX [% CAPEX] 8% 0.39 5.60
Lifetime 35 years 0.27
5.21 0.12
Gas transmission grid 2017 2025
Pressure 60 bar
CAPEX injection station EUR 700 k EUR 560 k
OPEX [% CAPEX] 8%
Lifetime 35 years Production Injection Total

> Please note: Cost dynamics change with regards to e.g.

CAPEX H2 connection piping EUR 300 k/km size of electrolysers, technology, operating hours, share of
CAPEX H2 equipment EUR 200 k hydrogen injected vs. share that is monetised otherwise
OPEX [% CAPEX] EUR 200 k OPEX injection CAPEX injection Hydrogen production

Source: Hinico, Tractebel ENGIE, FCH2 JU, Roland Berger 13

 B

Short-term monetisation may come via biomethane FIT, long-term

competition with CO2-penalised natural gas conceivable
#3 – Monetization / revenue streams, esp. equivalence to biomethane injection
Biomethane injection tariff Hydrogen equivalence
[EUR/MWh] [EUR/kg]
0 32.3 150 0 1.3 10
Germany 5 / 10%1)

45-1402) 1.8-5.5
France 6%

50.53) 2.0
UK 0.1%

67.5 2.6
Denmark n.a.

> The injection of green hydrogen into the gas grid decreases the carbon footprint of natural gas and should thus be
eligible for feed-in tariffs in line with supporting regimes for biomethane
> In the long run, it is conceivable that an effective carbon price is introduced that would apply (among others) on natural
gas, thereby mechanically reducing the cost gap between green hydrogen, biomethane and natural gas

Hydrogen injection limit

1) <2% vol. in some conditions 2) 2015 3) 2016

Source: Hinico, Tractebel ENGIE, FCH2 JU, Roland Berger 14

 B

Significant feed-in tariffs are necessary to allow for a profitable

investment – Stand-alone business cases are generally difficult
Overall preliminary business case assessment – 2 INDICATIVE EXAMPLES1
Requ. FIT with pay-back time of 8 years Requ. FIT with pay-back time of 8 years > Significant FITs are necessary
(with electricity discount) (without electricity discount) for profitable investments in
hydrogen injection
Injection tariff (EUR/MWh) Injection tariff (EUR/MWh) > Combining injection with
hydrogen sales to mobility or
industry users reduces the
level of the required FIT
Mobility (6 MW) Mobility (6 MW)
+ injection (6 MW) 73 + injection (6 MW) 90 > Most of the electrolyser capital
Albi (FR) FR cost is paid by mobility or
industry clients; injection tariff
only needs to cover marginal
-20% -10%
injection costs (and very
limited injection-specific
Stand-alone Stand-alone CAPEX).
injection (6 MW) 91 injection (6 MW) 100
Albi (FR) FR > Here: in case the stand-alone
injection business case only
receives a FIT of 73
EUR/MWh, payback time will
Benchmark nat. gas Benchmark nat. gas double to >16 years
price: 39 EUR/MWh price: 39 EUR/MWh > H2 injection might thus be best
considered as a secondary
application
1) Comparing two specific scenarios in France for the target year 2025 , with and without access to discounted electricity

Source: Hinico, Tractebel ENGIE, FCH2 JU, Roland Berger 15

 B

Gas grid injection can be a key enabler of other power-to-hydrogen

applications – if and when the right policies are in place
Key additional considerations

1 Combined use cases and business cases:

"X plus gas grid injection"
2 Key success factor from a policy-making
perspective: recognition

> Gas grid injection can be a complementary > Power-to-hydrogen electrolysers can provide gas
application that has the potential to increase the with low carbon intensity
revenues of an electrolyser used e.g. for mobility
> Policy makers can provide a level playing field for
or industry
the injection of carbon lean gas into gas grid, be it
> It could help mitigate the risk of lower-than- biomethane or green hydrogen
expected mobility demand ("valley of death")
> Green hydrogen should be recognized as
covering the operation costs and part of asset
"compliance option" to reduce carbon intensity of
depreciation towards break-even
conventional fuels

Source: Hinico, Tractebel ENGIE, FCH2 JU, Roland Berger 16

 B

Regions and cities can identify suitable locations for power-to-

hydrogen projects with gas grid injection along 4 main criteria
What to look for in identifying power-to-H2 projects with gas grid injection …

1. Local grid challenges with growing 2. Intersections of gas and electricity

renewables capacities distribution grids
> Increasing wind and solar capacities > Urban / suburban areas with RES feeding
> (Distribution) grid constraints, e.g. due to into MV electricity distribution grid and
low interconnectivity – rising congestion medium-/low-pressure gas grids for
challenges, possible needs for curtailment residential/commercial gas supply

3. Sufficiently high hydrogen 4. Monetisation options for green

injection limits for the local gas grid hydrogen – in gas grid and otherwise
> Hydrogen injection levels of e.g. 2%vol or > Primary monetisation / value stream, e.g.
more permitted acc. to local regulation hydrogen supply to mobility users
> Plus existing regime for biomethane injection
accessible for green H2 (or bespoke regional
remuneration schemes, e.g. green-H2-gas
admixture remuneration)
Source: FCH2 JU, Roland Berger 17
Please do not hesitate to get in touch with us

Contact information

Carlos Navas
FCH2 JU
Strategy and Market Development Officer
[email protected]
+32 2 221 81 37

Source: FCH2 JU, Roland Berger 18