The shift to hydrogen is a topic often raised, also by the European Union. But the prospects for such projects lie in the long period
Now that Italy has got its regional elections behind it, discussion turns to investment plans. The conditions for European funding are driving Italy in the direction of long-period industrial strategies to get the economy moving again. At last the pressure is on for a systemic approach and ideas for the future of Italian society. Thus Europe is showing a capacity for leadership that relatively few expected. It is offering the world a model of sustainable growth, looking beyond the alternative between growth and climate and aiming to address social and environmental inequalities that can no longer be tolerated. This turning point pivots on the energy chain, to which 30 per cent of the funding will be dedicated. The digital revolution offers support for the use of renewable sources, accompanied by industrial research to produce less polluting gases (biogas, biomethane, green hydrogen), while the Commission’s new approach, proposed in the EU Hydrogen Strategy (8 July 2020) and reaffirmed in recent policy pointers, attributes a central role to hydrogen. The government’s response is not unanimous: for some it’s a solution – for example to address the crisis of Ilva – for others a chimera.
A new miracle?
For Italy the figures are stunning: a recent study presented at the Cernobbio Forum (“H2 Italy 2050”, The EU House Ambrosetti and Snam) finds that «hydrogen chain activities will be able to generate a total (direct and indirect activities) of 24 billion euros in 2030. The cumulative value for the 2020-2050 period would arrive at 1500 billion euros in a scenario of accelerated development (with a multiplier that would reach 3.2, rising to 3.7 on inserting the hydrogen chain within a model of structural interdependences)». The expected impact on employment would be «115 thousand jobs by 2030 and 540 thousand by 2050, corresponding to 13.6 per cent of Italy’s total number of workers in manufacturing». The “Proposal of an Integrated National Plan for Energy and Climate” (PNIEC) presented at Brussels is to be reviewed to dedicate due space to hydrogen. However, recent forecasts by the Bank of Italy damp down this optimism: the highest realistically conceived multiplier for public investments will not exceed two percentage points. Hydrogen will offer undoubtable advantages in the areas in which electrification fuelled by renewable sources with the use of batteries is more complicated – in heavy industries (steel, refineries and chemicals) and road haulage, but above all for aviation and shipping. It offers high energy density with the possibility of long-lasting accumulation of electricity.
Constructing the chain
Italy’s ability to construct a chain without the groundwork, and the expediency of doing so, call for careful consideration with a view to the long period. The entire hydrogen route remains to be constructed, from production to transport and consumption in a process that requires support for production and assistance in stimulating demand. However, Italy’s energy market has developed in another direction, in which Italy excels, spreading electrification from renewable sources and arranging the infrastructures necessary for the distribution of energy generated by local renewable sources. We are far further ahead with digital technology applied to the energy sector, such as the smart grids (open to remote control), and smart meters (with Italy as a European leader), holding promise of smart-home development and involvement of the population in ecological cities, already underway at the local level. On the other hand, hydrogen involves very high hurdles: to begin with, the technology, which still has quite a long way to go. Then there are the costs, and finally the infrastructures. The experimentation by Snam in Campania to carry blended gas (gas mixed with hydrogen) in its pipes is significant but limited: the hydrogen added comes to only 5 per cent and may possibly reach 10 per cent in the future projects. Much the same applies to the initial attempts – a far cry from the European scenarios – to convert the Marghera and Gela plants to hydrogen. Similar barriers to the spread of hydrogen are shared by most European countries. The costs call for considerable public financial support, but above all a high carbon price – around 80 euros – in the form of carbon tax or emission trading certificates (ETS), although the structure still needs revising since they are now quoted at around 20 euros on the market. So where is the recent pressure coming from that drove the European Union to embrace the new solution so emphatically?
The German model
It will help if we extend our view to the European and global market. There is a particularly high concentration of production in Europe: three big enterprises, including Linde and the French Air Liquide, cover about 85 per cent of the market. Together with France, Germany is clearly the world leader in the production of hydrogen. However, it’s an area that has recently seen Asia coming into play – first Japan, in 2017, with a strategic plan 1917, then South Korea in 2019, with Australia and, above all, China entering the arena in 2018. Naturally, Germany does not want to lose its leading position in the sector. Hence the inter-ministerial boards and studies that involved the German government and the Chancellor herself in 2019, on to the conclusion favouring transition to “blue hydrogen”, i.e. powered by fossil fuels, accompanied by a particularly costly process of carbon capture and storage (CCS). Thus Germany, too, has recognised that we still have a long way to go to arrive at green hydrogen, fuelled by renewable sources, while black hydrogen, powered by fossil fuels – coal, in particular – is out of the question, being far too polluting without carbon capture.
We must keep focused
So what is the solution for Italy? Research and some serious thinking about hydrogen are an option to be followed, but the economic projections urge caution and realistic choices for the long period. The funds allocated by the European Union in the new recovery plan cannot be disregarded, nor indeed the derogations from the strict rules on state aid, now creating leeway for major public interventions, in the crisis that has hit Italy’s steel industry, for example, and in aviation, with Alitalia. However, in terms of the cutting-edge initiatives behind the energy panorama in the transition Italy’s facing, it is the other strong points that are driving the country in the direction of sustainable growth. For Italy, the new interest shown by the EU in the hydrogen chain holds two lessons. Firstly, once the EU has defined priorities and allocated the relevant funds, the government and industry cannot act as bystanders when it comes to investments to exploit the possibilities opening up in this field.
The second lesson is less obvious: Italy must be fully focused when it comes to the formulation of Europe’s industrial strategies – it can follow the winning example of Germany, which has succeeded in concentrating EU strategy in the direction of hydrogen, in which the country excels.
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