BP Steps Up Green Drive With Hydrogen Deal

By Sarah McFarlane 

LONDON -- BP PLC is partnering with renewable energy giant Ørsted A/S to produce hydrogen from wind power, the oil major's first big project in a sector that it -- and the wider industry -- believe will play a key role in the transition to low-carbon energy.

Using renewable power such as wind and solar to produce hydrogen, instead of fossil fuels such as gas or coal, is expected to be important for reducing global carbon emissions -- although it remains a more expensive option. While hydrogen only makes up a small amount of the world's energy use -- mostly for refining and chemical production -- it is responsible for significant emissions.

Under the deal announced Tuesday, BP said it would use wind energy from Ørsted's North Sea wind farm to produce hydrogen for its Lingen refinery in northwest Germany. The two companies intend to build a 50 megawatt electrolyser, powered by wind, to split water into hydrogen and oxygen gases without generating carbon emissions.

The partnership is part of a broader plan BP detailed in September to cut its oil and gas production by 40%, while increasing spending in low-carbon energy, including green hydrogen. It is targeting a 10% market share of hydrogen produced using renewables -- or natural gas in cases where the emissions have been captured and stored -- within the next decade.

Other oil companies also have plans to reduce emissions from hydrogen. Royal Dutch Shell PLC plans to increase its green hydrogen production 10-fold at its Rhineland refinery in Germany by 2030. Earlier this year, Repsol SA said it would build a fuel plant, which uses green hydrogen in Northern Spain.

Advocates say that as well as reducing emissions, green hydrogen could help address the storage issues facing renewable energy, which is typically generated when the wind blows or the sun shines, regardless of whether there is demand for the power. By using excess renewable power to produce hydrogen, the energy could be stored for later use.

One challenge remains, however, cost. Producing hydrogen using renewable energy is more expensive than that using fossil fuels, and analysts say government support will be key to its adoption. While the costs of electrolysers and renewable electricity have been coming down, green hydrogen still doesn't compete with natural-gas based hydrogen.

To support the project in Germany, BP and Ørsted have applied for funding from a European Union innovation fund that focuses on projects aimed at reducing emissions.

The companies said they plan to make a final investment decision in early 2022, and anticipate the project could be operational by 2024. BP didn't disclose financial details of the project.

"Renewable hydrogen has to become cost competitive with fossil-based hydrogen, and for that we need projects such as this," said Dev Sanyal, BP's executive vice president for gas and low carbon energy, adding that the project would demonstrate the technology at a large scale.

Write to Sarah McFarlane at [e-mail]

(END) Dow Jones Newswires

November 10, 2020 07:13 ET (12:13 GMT)

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