Summary - Over 20% of all Dutch emissions are coming from the Port of Rotterdam, of which the production of grey hydrogen from fossil feedstock is one of the main culprits. This article explores what is needed to build such a green hydrogen refinery. It provides an overview of the existing fossil infrastructure and fuel consumption, which technologies are required to transform, how much it would cost and who are actually working on it. If you do not agree with the assumptions or would like to contribute, share your thought and comments below.

Rotterdam refineries are among the biggest polluters in Europe

Rotterdam has the dubious title of being the absolute leader in the throughput and storage of crude oil in northwest Europe. Almost 100 million tonnes of crude oil enter Rotterdam every year, destined for refineries in the port itself and in the Netherlands, Belgium and Germany. In addition to the import and crude oil storage, the port of Rotterdam also contains several refineries and distribution hubs for petrochemical products. This might all sound very exciting for those who make money out of it, the resulting environmental footprint is immense.

Over 20% of all Dutch emissions are coming from the Rotterdam port area, of which the petrochemical industry is one of the main culprits. In particular, the creation of so-called grey hydrogen. This is the practice where natural gas is separated into hydrogen and CO2. Hydrogen is then used for the petrochemical industry and CO2 is simply released into the atmosphere. According to the Port of Rotterdam, approximately 400,000 metric tons of grey hydrogen a year is produced. For each kilogram of hydrogen produced in this way, about ten kilogram of CO2 is released. You do not need to be a great mathematician to know that this practice has to change.

Can we fix this?

Converting the petrochemical industry - most if it built by our grandparents decades ago - is quite the challenge. If we are to transition this massive piece of 20st century legacy engineering, the most important aspect is to find a new feedstock for the 100 million tonnes of crude oil import in Rotterdam. We will need to create a circular, sustainable feedstock to power our industry into the 21st century. For that we need green hydrogen. Lots of green hydrogen.

This article explores the current situation in Rotterdam, how many refineries there are, the fuel and hydrogen demand, the basic technological requirements for a synthetic fuel refinery and the costs involved. It ends with an overview of several key partners who are already working on this. We conclude with putting on our black hats and explore reasons why it might perhaps not work at all. Though we are optimistic and believe there is a moral imperative to facilitate the production of green hydrogen, it never hurts to think about what might be stopping this.

It should be noted that there are countless ways to reshape the current carbon-intense industry, this article suggest merely one of many possibilities. In addition, we could use your help improving on the ideas as there is certain information we are lacking. If you see anything you could add to, feel free to share your thoughts and comments below.

Why focus on creating sustainable marine fuels?

> Because sea going vessels are costly to electrify and we are Mr. Sustainability

Eventually all fossil fuels are to be replaced with a sustainable alternative, hopefully some time before 2050. At Mr. Sustainability however, we are not interested in replacing all fuels. We focus on the maritime industry for a reason.

It is believed by many that land-based transport will become mostly electric by the end of this decade, which would reduce the need for petroleum-based products (gasoline and diesel) by almost 80%. Aviation and maritime shipping are the only modes of transport left that will most likely take several decades to fully electrify, if they can fully electrify in the first place.

Aviation and maritime shipping industries will only become fully electric on the assumption that miracle batteries are invented and produced at scale. Great strides are being made on the scaling of battery production, but we are living in the present and not in some magical battery land (yet). In the coming years and perhaps even decades, we need to come up with a way to provide sustainable fuels for aviation and maritime shipping. That is why at Mr. Sustainability, we focus on making the maritime industry sustainable. So let us explore.

Where do we start?

> With what we know well: refineries, oil terminals, pipelines, fuel and hydrogen consumption

According to the Port of Rotterdam there are five oil refineries that form the core of the petrochemical cluster in the area. These refineries manufacture products such as gasoline, diesel, kerosene and heating oil. They also provide feedstock for the chemical industry in both Rotterdam and Moerdijk. Another five refineries in the Netherlands, Belgium and Germany are supplied with crude oil via pipelines coming from the port of Rotterdam. All this infrastructure, pipelines and refineries are there for a reason.

Almost 10,000,000 m3 of fuels and 400,000 tons of grey hydrogen were consumed in the Port of Rotterdam last year. This is roughly equal to 25,000 tons of fuel and 1,000 tons of grey hydrogen per day. Although this hydrogen is used to refine the fuel in chemical processes - for example to remove sulfur from the crude oil feedstock - we assume they are separate demands for this article. That means we would need to replace both the grey hydrogen used in the refining process, and provide a circular feedstock for the fuel. This is an important distinction and will come back to haunt us later.

The total amount of infrastructure and refining capacity is thus vast. Gigantic. Daunting. We can use its size to our advantage however. We can re-use most of the existing equipment directly in a circular economy by means of existing chemical processes. Which one, you ask? The key ingredient here is called the Fischer-Tropsch process.

What can ‘replace’ existing crude oil refineries?

> Synthetic fuel refineries using the Fischer-Tropsch Process

To be fair, our goal is not to ‘replace’ existing refineries. We simply aim to ‘transform’ them from using crude oil feedstock and grey hydrogen, to have them produce a sustainable, circular alternative. There are several options available to do this, but we propose to use the Fischer-Tropsch process.

This technology is literally older than sliced bread and has been around since the 1920s. It is a collection of chemical reactions that converts a mixture of carbon monoxide and hydrogen intro liquid hydrocarbons, which could be anything ranging from gasoline, to diesel and kerosine. Other essential products for the chemical industry can be made using this process as well, such as ethanol, methanol, ammonia, isobuthane, waxes and olefins. As the technology is almost a century-old, there are many oil and gas majors who have great experience with it.

Shell has been using this process in their Pearl installation since 2012. It has been rumored this facility is one of their most profitable installations despite the almost $20 billion cost overrun upon construction. The reason? Shell’s contract with Qatar provides them with the input gas for free. You read that correctly; the feedstock Shell uses to create high-grade and expensive synthetic fuels is allegedly given to them for free.

Of course it is very hard to compete with a fossil fuel feedstock that is provided for free. Nevertheless the world needs us to do so. The alternative to fossil feedstock, is to replace it with hydrogen and carbon in other sustainable forms. Where exactly will we obtain these vast quantities of hydrogen and carbon in Rotterdam?

How about right next door in the best area for offshore wind in the world?

It might sounds almost too easy to ‘simply’ replace the fossil feedstock by a sustainable and circular feedstock. But as you can see from this nice corporate video from Shell, the only thing that is needed to make it sustainable are circular Hs and Cs. Click here to go to YouTube.

What is needed to create a green hydrogen refinery?

> Re-use existing infrastructure and copy paste from existing green refineries

Luckily, we do not have to come up with a design from scratch. We can make use of the existing infrastructure in Rotterdam and subsequently copy and paste from other refineries that are already being transformed. Although there are many sizes and shapes of refineries, two of these facilities stand out as a benchmark: BP’s Lingen refinery and the soon-to-be-build Helios green hydrogen facility in Saudi-Arabia.

It should be noted that for the Lingen refinery, ‘grey hydrogen is replaced by green hydrogen’ but it remains unclear if the feedstock of crude oil is also being replaced. We assume that it will not, though it is an assumption that needs to be revisited later. Let’s first figure out what we need in terms of equipment before we start making difficult calculations.

Besides the electrolyzers needed to produce the green hydrogen, a vast array of chemical systems are needed to create synthetic fuel. These include heat exchangers, large mixing columns, reactor vessels, mixing tanks, centrifugal machines, you know, the usual. It is fortunate that most of this equipment is already installed and operational in all Rotterdam refineries. As is the case when re-using decades old equipment however, most of it can probably not be directly re-used without some retrofitting. Nonetheless, making use of existing infrastructure, pipelines, knowledge and most importantly, the people with the knowledge to run the refineries will significantly reduce costs and accelerate a transformation from fossil to circular fuel. Are you one of the people with knowledge on the refinery and willing to improve this idea? Share your thoughts and comments below.

The next ingredient on our list to create a green hydrogen facility is a good old tasty source of carbon.

> A source of carbon

The main ingredient of a marine fuel - besides hydrogen - is carbon. That is, any form of carbon that can be converted into carbon monoxide as that is required for the Fischer-Tropsch process. The question is, where do we get our carbon from? In the coming years, perhaps even decade, we can use concentrated ‘point-sources’ of CO2. That is a fancy way of saying that we can connect the exhaust of a coal plant or steel mill to the green hydrogen refinery. Despite what you might think, this is actually happening a lot.

Power plants and open-source carbon sinks

Equinor and SSE Thermal have unveiled plans to jointly develop two first-of-a-kind, low-carbon power stations in the Humber, England. This will be one of the UK’s first power stations with carbon capture and storage (CCS) technology, and the world’s first 100% hydrogen-fueled power station. Closer to home the Port of Rotterdam is developing Porthos, a project in which CO2 is transported and stored in empty gas fields under the North Sea. The project aims to construct a pipeline in the Rotterdam port area, to which multiple companies can connect. The Porthos infrastructure is set up as an open access and non-discriminatory system. Together with the likes of Exxon and Shell, this infrastructure could serve as a backbone to collect and reuse carbon from the entire North Sea.

Such a system would support the development of a circular fuel supply chain in the future. Rotterdam and its partners in crime are not the only ones developing such an infrastructure. Following a historic vote in parliament on December 15th 2020, the Norwegian Government announced its funding decision for the Northern Lights CO2 transport and storage project. In cooperation with Shell and Total, the project aims to create a carbon capture and storage hub (or ‘sink’) in Norway, also open to third parties. The race is on to create the first ever cross-border, open-source CO2 transport and storage infrastructure network in Europe.

Direct Air Carbon Capture

Whether Rotterdam or Norway will win, both these projects require a massive amount of engineering, most of all funding, which means it could take many years before we have the proper industry and supply chains ready. Perhaps by that time, it might be easier to suck it directly out of the air using Direct Air Carbon Capture (DAC). This technology is currently being developed by several companies, one great example being Heliogen. This company aims to create circular fuels by combining direct air capture, solar power and green hydrogen. It is not yet commercially scalable, although that too would be a matter of time.

According to the World Resources Institute, the costs for this technology today vary between $250-$600 per metric ton CO2 captured. The technology is expensive because of the large amount of energy and heat that is needed to capture and boil the CO2 out of the solvent. In the long term, it might therefore be beneficial to combine direct air capture with a refinery and chemical plants, as they need to produce a lot of heat already. It is expected that costs could fall to around $150-$200 per metric ton over the next 5-10 years, given the amount of money streaming into this technology backed by initiatives such as Elon Musk’s gigaton scale carbon removal challenge. For this business case however, direct air capture of CO2 remains but a very expensive dream.

> Cheap electricity

All plans for green hydrogen and synthetic fuel hinge on access to dirt-cheap electricity, as tremendous amounts of energy are needed to create green hydrogen from water and convert it into a fuel. Luckily the Dutch are blessed with a lot of water, as well as one of the best places in the world to generate electricity by offshore wind: the North Sea. Also dubbed ‘the Middle-East of Wind’, the North Sea provides us with ample energy opportunities.

Offshore win(d)

According to WindEurope’s Central Scenario, there would be 323 GW of cumulative capacity installed in the North Sea area by 2030, of which 70 GW will be offshore. Some estimates go all the way up to 400 GW. These numbers are also backed by the International Energy Agency (IEA). Even under the most pessimistic scenario, IEA predicts 292 GW of cumulative wind energy capacity installed by 2030 in the area. Although that is 31 GW less than WindEurope’s Central Scenario, it is still a gigantic amount of energy. To put things into perspective, this is four to five times more than the total electricity capacity installed in the Netherlands according to Statista. It is all years ahead into the future however. What is actually on the drawing board right now that we can use as a source of cheap electricity?

Gigawatts of offshore wind are already planned to be installed in the Netherlands, the best example being the IJmuiden Ver windfarm which is 4 GW in size. The project’s footprint on the map is slightly more than the size of the entire Rotterdam harbor area, approximately 400 square kilometers. Considering the limited amount of space on the North Sea, and the fact we might need a lot more than 4GW, we need to generate more power with the same footprint. There is one thing that could increase the energy output of a windfarm significantly. That thing is floating solar.

Offshore winning

The potential for floating solar has been explored in one of a previous blog back in 2019. At the time it was still in its infancy, but it is reaching adolescent stage now and being scaled rapidly by several companies. This includes energy majors like Equinor, who are flirting with floating solar in Norway. Some stakeholders in the maritime industry even claim that floating solar can boost the energy output of a windfarm by at least five times! This would mean an incredible intensification of electric energy production. For the IJmuiden Ver windfarm, it means the maximum capacity would be in the order of 20 GW. The true impact of floating solar on this scale has yet to prove itself however, especially when considering seasonal differences in energy output. Nonetheless, floating solar might become required at some point to generate a sufficient amount of energy to power all our green hydrogen dreams.

Summarizing, the available energy in the North Sea is overwhelming and will serve our needs perfectly. Not just that, power produced from the North Sea are already cheap. The production costs for offshore wind energy average out at 0.047 EUR/kWh according to the Dutch Government. Given the price developments and costs reductions in both offshore wind and solar, these costs could go down even further in the future as these technology become commoditized.

There is only one ingredient missing in our green hydrogen pie. And that is the green hydrogen itself.

> Electrolyzers, lots of electrolyzers

An electrolyzer is a device that creates green, sustainable hydrogen using electricity. How much hydrogen do they produce? This is very hard to narrow down exactly, as every electrolyzer is unique and the output is dependent on many factors. We will use our benchmark projects - BP Lingen refinery and Helios green hydrogen facility in Saudi-Arabia - to provide an estimate of the required electrolyzer capacity.

From a refinery viewpoint - replacing grey hydrogen - 4,000 MW

At BP's Lingen refinery, they plan to install a 50MW electrolyzer, which is expected to produce 24 metric tons of green hydrogen per day. They claim the project could be expanded up to 500 MW at a later stage to replace all of Lingen’s fossil fuel-based hydrogen. It can be assumed however that this will not replace all feedstock, simply replace the grey hydrogen for refining. Saudi-Arabia is building a massive 4,000 MW green hydrogen facility, which will produce 650 metric tons of hydrogen per day. This is in the same orders of magnitude as what is required for refining capacity in the entirety of Rotterdam, almost 1,000 metric tons, but relatively less than the Lingen Facility. So how much capacity is needed in Rotterdam?

What we are about to do is called a gross generalization on the existing 5 refineries in Rotterdam. Until we have a better understanding and more information however, we will do it nonetheless.

When we take Lingen as a benchmark, we can conclude that we would need roughly 2,500 MW of electrolyzer capacity to fully replace the grey hydrogen currently used in all refineries, about 500 MW for each existing refinery. This however might only be enough to replace existing grey hydrogen. We assume that the 1,000 metric tons of hydrogen used in Rotterdam is used to refine crude oil, not to replace the actual feedstock.

When we take Helios as an example, we would need 20,000 MW of electrolyzer capacity on top of the existing 2,500 MW. Yikes. This is almost twice the amount of total installed electric capacity in the Netherlands. We can make life easier for us however if we focus on the maritime industry only.

When we assume however that almost 80% of all transport will be electrified, and we only need fuel for shipping purposes from our refineries, we would essentially only need to ‘replace’ a single refinery currently in Rotterdam. In that case, we would need ‘only’ 4,000 MW of installed electrolyzer capacity given Helios as a benchmark.

Is it as easy as that? No, certainly not. Anyone with only a single course in chemical engineering can most likely point our several errors in our methodology. Is there another way to determine the required electrolyzer capacity to verify our claims? Yes there is. But is is not getting any better.

From a fuel viewpoint - replacing fossil feedstock - 50,000 MW+

We can make another estimate based on the amount of fuel consumed by shipping in Rotterdam. From the numbers provided in the Lingen and Helios cases, we can deduce that 1 MW of electrolyzer capacity will yield between 163 and 480 kilograms of hydrogen per day. We also know that roughly 25,000,000 kilograms of marine fuel is bunkered ever day in Rotterdam. That would lead to an incredible 50,000 MW of electrolyzer capacity required in the very least.

These orders of magnitude of electrolyzer capacity are staggering, something we should not see before 2050 according to all current outlooks. Granted, the methodology used does not hold up under careful scrutiny, but we can assume the numbers BP and Saudi-Arabia provided via public sources are somewhat correct, in the very least the right order of magnitude. Still, even if we could technically make this a reality, we could never afford such a thing.

Or could we?

How much would a green hydrogen refinery cost?

> At least €2.5 billion, with a resulting fuel price between €900 - €3,000 per mT

If you ask two hydrogen experts on how much hydrogen will cost in the future, you probably get three answers. Estimating how much a green hydrogen refinery would cost is speculative and therefore a bit silly. We are going to do it anyway, stubborn and silly as we are.

We do so by using publicly available information on the key technical ingredients. The costs for converting an existing refinery are based solely on the CAPEX costs of the electrolyzers, retrofitting costs have not yet been taken into account. The investment costs for the eelctrolyzers alone are in the order of €2.5 billion. Fuel price is determined by adding costs for hydrogen production, CO2 feedstock and energy required to convert hydrogen and CO2 into synthetic fuel.

This provides us with a low and high estimate, as shown in the ballpark figure below. It shows that the highest costs are incurred due to green hydrogen production, which are a direct function of the electricity price. Even with an electricity price of 1 cent per kWh, we can sadly conclude the costs for marine fuel are higher than regular fuel.

In order to derive a more detailed level of costs, and in the case you do not agree with the assumptions we made, feel free to provide a comment below.

> Electrolyzer & Production Costs (€350+ per mT)

Production costs are the costs needed to convert an existing refinery to be able process green hydrogen. By far the biggest equipment cost would be the purchase of electrolyzers to create green hydrogen. Costs of electrolyzers are currently at around €632 per kW. These things are not cheap. The main reason for their high price is that they are not being produced at mass scale, and there is a lot of detailed engineering design work required to manufacture them in the first place. In addition, an electrolyzer contains a lot of rare-Earth metals like platinum and iridium which are very expensive.

Costs for electrolyzers are expected to go down with massive R&D efforts, but by how much? Looking into the hydrogen-crystal ball is a very speculative exercise, but is needed to obtain our ballpark figure. For the sake of argument, and to get a feeling for the numbers, we will assume electrolyzer costs remain roughly €632 per kW. This will ensure a certain amount of conservatism in our calculations, as we do not take retrofitting costs into account. With a required capacity of 4,000 MW to 50,000 MW, that would lead to a total cost of roughly €2,500 to €35,000 million. Yes, those are thousands of millions.

Is this a lot of money in this world? Let’s compare with other green refineries.

From a refinery perspective

Saudi Arabia’s new Helios plant - a 4,000 MW green hydrogen facility - is expected to cost $5 billion. This is a newbuilt however and we can only assume that the costs for electrolyzers are included. That means half of all costs will be electrolyzer costs. The costs to convert BP’s Lingen facility - a 500MW facility - have not been disclosed unfortunately. Without someone on the inside or a spy that can give us more information, it remains hard to say how much the added production, retrofitting and conversion costs would be. That leaves us with one question: how high an impact do these CAPEX investments have on the fuel costs?

How much would the fuel cost?

Given a lifetime of 10 years for an electrolyzer, a price tag of €632 per kW and a production of 0.5 kilograms of hydrogen per kW per day, that would lead to a production cost of roughly €350 per metric ton of hydrogen produced. This however would not be the cost to produce hydrogen, simply the purchase costs of the equipment. This initial investment only gets you the electrolyzers, now you need to convert green electricity into hydrogen itself.

> Green hydrogen (€480+ per mT)

The costs to produce green hydrogen - when you already have electrolyzers - are a direct function of electricity costs. How much electricity do we need? A 100% efficient electrolyzer requires 39 kWh of electricity to produce 1 kg of hydrogen. Devices today require as much as 48 kWh.

We can assume electricity is provided cheaply by our benevolent friend the North Sea. The current price for 1 kWh of generated electricity is 5 cent, leading to a cost of €2,400 per metric ton of hydrogen. Costs could go down dramatically over the next few years, especially in case floating solar is used to boost power output. When the price is 1 cent per kWh, one metric ton of hydrogen would cost only €480, but that would be an extremely low price and not many people believe that is viable in the future. Nonetheless this is a price range we will have to go to in order to make green hydrogen a commercially feasible reality.

> CO2 (€50 per mT)

From a supply chain feasibility study performed by Max Buirma on ship-based carbon capture and storage, it is known that the wholesale cost price for CO2 is currently at least €50 per metric tons. In the future, point-sources like coal power plants or carbon capture and storage projects like Porthos might reduce the price of CO2. It can also be argued however that prices will go up as demand for CO2 might outrun supply. For simplicity’s sake, it is assumed the CO2 price is €50 per metric ton.

> Cheap electricity for fuel conversion (€7+ per mT)

The last hurdle we need to overcome, is to convert the raw feedstock of hydrogen and CO2 into a synthetic fuel. The amount of energy required to convert the feedstock into a fuel depends on the type of fuel. No surprise there. Given our lack of knowledge on this specific topic, we cannot state with confidence the energy required to create a metric ton of synthetic fuel, whether it would be methane or diesel. We do know the energy required to create a metric ton of ammonia and methanol, which is 731 and 1192 kWh respectively. These numbers lead to costs ranging between €7 and €60 per metric ton for a low and high electricity price respectively. Share you thoughts and knowledge in the comments below if you have more information on this topic.

Who wants to pay for it?

> Roughly 2% of EU Green Deal budget is required

We now know synthetic marine fuel in Rotterdam would cost about €900 to €3000 per mT, whereas regular marine fuel oil is in the order of €450 at the time of writing. Even in the case of an electricity price of 1 cent per kWh, the price for synthetic fuel would still be twice the current fossil-based fuel price. Unless the cargo owner or someone else pays for it, you can forget about any shipowner willing to pay for that. If no ship owner is willing to pay the fuel, which investor would take the risk of purchasing billions of euros of electrolyzers? We have ourselves quite the circular investment paradox here.

So what does this mean? If no one is willing to pay such an amount for this fuel, will anyone invest in this at all? As always, the answer is… Maybe.

Perhaps we can turn the question around and ask ourselves: what exactly is needed to make this a profitable business case? Even when assuming a fossil-based fuel price of €450 per metric ton and an extremely low electricity price in the future, at least half the price for a synthetic fuel will need to be subsidized. What that means, is that the investment costs for electrolyzer need to be subsidized.

In come the governments, and they are here to help.

Subsidies to the rescEU

The EU Hydrogen Strategy describes hydrogen as one of the key ingredients to Europe’s Green Deal, which aims for a strict 2030 emission-reduction target and the elimination of net greenhouse gas emissions by 2050. The new strategy presumes that hydrogen will play an indispensable role in a future ultra-low carbon energy system. It is the EU’s ambition to increase electrolyzer capacity six-fold to 6 GW by 2024, allowing the production of 1 million metric tons of hydrogen. Looking to 2030, there is a leap to 40 GW of renewable energy hydrogen electrolyzers producing ten million metric tons of hydrogen in the EU.

The funding involved in this program is massive. As described in the Just Transition Mechanism, they aim to mobilize at least €100 billion over the period 2021-2027 in the regions most affected by the move towards a green economy. In fact, governments across Europe have announced new funding for hydrogen, much of it as part of COVID-19 recovery packages. For example, Germany plans to invest EUR 9 billion of its recovery spending in renewable hydrogen to help increase the country’s hydrogen capacity to 5 GW by 2030 and 10 GW by 2040, while France has committed €7 billion to help the country reach 6.5 GW of renewable hydrogen capacity by 2030.

Let’s go Dutch

The Dutch government has announced that an investment of 646 million euros and a reservation of 3.5 billion euros from the National Growth Fund is to be put in ten projects to ensure economic growth in the Netherlands, including projects dedicated to green hydrogen. Although these announcements are generally vague, take years to be fulfilled and do not have a breakdown of how much would be invested into hydrogen and how much into others sources, it is still quite a lot. In addition, the Netherlands Maritime Masterplan has recently been brought to life as a joint initiative from industry partners. The plan has the ambitious goal of ‘30 zero emission vessels by 2030’ and has a rumored budget of 250 million euros.

Plenty to go around

The above summaries of EU and Dutch subsidies show the ambition level, but do not provide any reassurances. Nonetheless it shows the enormous ambition level of all parties involved, with a total subsidy budget in the order of €100+ billion in the next decade. Only 2% of this budget could cover almost the entire costs for the electrolyzers today, which could provide clean hydrogen to the entire Rotterdam area. Surely one could argue at a few hundred millions could be used to build a green hydrogen facility, right?

What about CO2 taxes?

> Carbon taxes will most certainly help, and most likely be needed

Can we ever create a fossil fuel with green hydrogen that is cheaper than fossil feedstock? Perhaps not with the current incentives. Especially not if fossil feedstocks remain untaxed and in some case actually free, for example the gas provided to Shell in Qatar.

To level the playing field for green hydrogen, implementing a carbon tax might be the silver bullet it needs. It might actually work in favor of energy companies, as they can leverage it to their advantage. How high would such a tax have to be? According to the EU, carbon prices in the range of €55-90 per ton of CO2 would be needed to make fossil-based hydrogen - with carbon capture - competitive with fossil-based hydrogen today. That means carbon taxes would have to be in excess of well over €100 per ton. This is a lot.

Although the case for a CO2 tax can be easily made in favor of green hydrogen from a moral standpoint, many questions remain. How is it taxed? Who taxes it? Is it state- or EU tax? Is it a consumer tax? Most definitely a carbon tax is helpful for many sustainable business cases, but the devil is in the detail.

The challenges to overcome

> And why it might not work

The are many things we oversimplified in this blog. Perhaps you have already noticed some of the fallacies we might have made?

Firstly, there is a big difference between using hydrogen in petrochemical processes for refining, and using it as a feedstock. We more or less assumed 1 metric ton of hydrogen and CO2 magically provides you with 1 metric ton of ‘synthetic fuel’. This of course is not the case.

For methane it is close, as you would need 1 carbon atom and 4 hydrogen atoms, CH4. Diesel however typically contains between 9 and 25 carbon atoms per molecule, with roughly double the amount of hydrogen. So what does that mean to our business case? It might mean that you need about 9 to 25 times or even 50 times the amount of hydrogen and CO2 required. Technically it would still be possible, but economically? Not so much.

Secondly, there is that other elephant in the room. The energy requirement. We might need to double the currently installed power capacity in the Netherlands in the case 50 GW is required, which is mostly fossil fuel driven. Don’t get me wrong. From a technical standpoint, I believe we could actually do this. It is technically possible to install 60 GW of power capacity by means of a combination of offshore wind, floating solar and virtual power plants on land. With some quick calculations and gross generalizations, the kind I am fond of, you could argue you would only need about 4 to 10 projects the Size of IJmuiden Ver. One could argue the installation of offshore oil and gas platforms in the seventies, eighties and nineties (over 150 in the Netherlands alone) was more work. One could even argue the costs to construct this infrastructure might have actually been higher than the billions needed to build the windfarms and floating solar needed for green hydrogen. Nevertheless I do not believe a lot of people are willing to pay billions for windfarms in the Netherlands.

There you have it. We oversimplified many chemical processes and it could end up more than any of us is willing to pay. For some this might seem as an insurmountable challenge. For us, this sounds like fun. If you are like us, and willing to stop talking and start doing, join the discussion below and help us improve the concept by sharing your thoughts and comments.

**We can fix this!**

> Who are working on it despite the challenges?

The ideas proposed in this blog are nothing new. Far from it. Many industrious partners are exploring ways to make green hydrogen a reality. Some are actually producing green hydrogen or sustainable fuels as we speak! Below are listed some of the projects and initiatives that are know to us. Feel free to add to these in the comments below.

Ørsted (and friends)

As has been referenced many times in this blog, BP and Ørsted have partnered to develop zero-carbon ‘green hydrogen’ at BP’s Lingen Refinery in north-‎west Germany. Their experience in scaling up to a 500 MW plant to fully replace all of Lingen’s fossil fuel-based hydrogen can serve not only as a source of inspiration, but a benchmark. Luckily, Ørsted is just getting started in providing circular fuels and is taking the Netherlands by storm.

They recently announced plans to supply green hydrogen to the North Sea Port using offshore wind. This port, which consists of the combined powers of the Flushing, Terneuzen and Ghent ports, is a major hub in the distribution of chemicals as well. Ørsted is planning to build a 2GW wind farm to power a 1GW hydrogen factory in the Dutch province of Zealand. The plan is supported by Zealand Refinery Flushing, Dow Chemical in Terneuzen, the fertilizer factor of the Norwegian Yara in Sluiskil and ArcelorMittal in Ghent. If successful, this would be a major boost to decarbonizing heavy industry and will make Ørsted a frontrunner in providing green hydrogen in the Netherlands. Good to note that for this project, they aim to produce green ammonia which is similar to the plans of Saudi-Arabia.

Neste

Neste is focused on biofuels and allegedly produces the most sustainable amount of biofuels. They intend to increase their renewable products production capacity in Europe according to the company strategy, and have recently chosen Rotterdam over Finland as their preferred location. Apparently, while there are many positive drivers for both sites, the difference between the costs is significant in favor of Rotterdam. The criteria for site selection include current markets and regulatory framework supporting market growth, raw material sourcing opportunities, investment and operating costs, infrastructure and low carbon utilities as well as local synergies and incentives.

Neste aims for a final investment decision by the Board of Directors towards the end of 2021 or early 2022. In any case, the company is investing significantly in both Rotterdam and in the Porvoo site in Finland, driven by the commitment to reach carbon neutral production by 2035. Finland is, and continues to be, the company’s Research, Development and Innovation hub. Considering the technical know-how on biofuels and chemical products, their strong drive for sustainability and proven track record, Neste would be a prime candidate to facilitate a green hydrogen refinery in Rotterdam.

Shell

Shell is already working to create a green hydrogen hub in the port of Rotterdam. Apparently they aim to produce 60,000 kg of green hydrogen on the Tweede Maasvlakte using green electricity from offshore wind. This wind power will preferably come from the Hollandse Kust (noord) offshore wind farm which they are tendering for together with Eneco in a joint venture called CrossWind. Both companies have issued guarantees to CrossWind for investments in the construction and operation of Hollandse Kust (noord).

The hydrogen plant will initially have a capacity of around 200 MW with plans to scale to 2,000 MW. If the current plan will materialize - final investment decision has not yet been made - it will be built on a site especially on the Tweede Maasvlakte. Shell has even shown interest in developing a 4,000 MW facility in the North of the Netherlands, also called the Dutch hydrogen valley. This is still many years away however as Shell intends to start operations by 2023, producing about 50 to 60 metric tonnes of hydrogen per day. The hydrogen will initially be used at the Shell refinery in Pernis to partially decarbonize the production of fossil fuels. The legacy of Shell in Rotterdam and their extensive infrastructure certainly make it a perfect candidate for this job.

No more talking. Cleaning

Rotterdam, we can do this!

The energy transition might be one of the biggest engineering challenges we will face in the coming decades, we can do this. The challenge embodies the soul of Rotterdam, where the most important motto is “niet lullen maar poetsen”. Loosely translated it means “no more talking, cleaning”. It has to do with the can-do mentality of Rotterdam people that goes back hundreds of years. Despite all the change and transformation, the spirit of Rotterdam has remained the same.

The history of Rotterdam goes way back. Even the current infrastructure and extensive network of pipelines that transport crude oil to the refineries took several decades to complete. It is a living, breathing thing, transforming as we speak. And it needs to adept once more.

It took almost fifty years for the current size, shape and petrochemical industry to be created. We do not have fifty years to rebuild it this time. Then again, we have more knowledge available, more tools at our disposal and have certainly taken up more daunting challenges in the past and succeeded.

The first steps are already being made by companies and Rotterdam to transition to green hydrogen. How about we give them a hand, stop talking and start cleaning?

On the left we have Rotterdam’s past, on the right its future. The left figure shows the growth of the Rotterdam across the ages, starting several centuries ago. The current petrochemical industry was built up mostly from 1960 onwards, as oil grew more important after the second world war and the biggest gas reservoir in Europe was discovered in Groningen in 1959. Converting this behemoth of chemical industry to become fully sustainable, circular and fit to serve as a hydrogen backbone is not only extremely challenging, it should be every engineer’s dream to work on.

> Personal Note

All the usual disclaimers apply to this blog. I am not a chemist. I am not a systems engineer. I have limited to no experience in the production of hydrogen. In my current line of work, one could even argue I am virtually not an engineer anymore! Furthermore I am 100% certain that the numbers stated in this blog are incorrect, or that certain facts are missing. What I am also 100% certain of however, is that the fundamentals behind my assertions are sound.

You can argue whether you would need 4, 20 or 50 GW of installed capacity to replace all fossil feedstock in the Rotterdam port. You can argue about the specific chemical process to create fuel, whether to use the Fischer-Tropsch process or an alternative. You can argue about pretty much anything else, right down to whether you would use biomass or not. There is one thing we cannot argue about however. One way or the other, whether it is with a smile on our face or kicking and screaming, we will need green hydrogen. And lots of it.

Despite my personal objections against using hydrogen in some modes of transport, I believe one thing above all else. Green hydrogen truly is one of the keys in the energy transition. But, a lot of people are standing behind the wrong door.

I believe that in the future, we will need hydrogen primarily as feedstock for the (chemical) industry. Virtually everything, including shipping and long-term energy storage, will be electrified and decentralized. I do realize that somehow, despite the extravagantly high costs involved, hydrogen has a certain… Appeal. And again, who am I to judge something that I know so little about. All I know is that we need to change, fast. We need to decarbonize society and even if it is by means of something I personally feel is inefficient, let it be so.

After all, I am not a hydrogen engineer, merely a passionate enthusiast.