What factors determine the economic sustainability of green hydrogen?
There are two variables that influence production costs: firstly, the cost of electricity. This is expected to decline over the next decade, mainly thanks to the contribution of renewables: there will increasingly be energy produced from renewables that will not find space on the market. The second variable is the availability of technologies, which substantially reduce the cost of the electrolysers needed to obtain hydrogen from the excess energy produced by photovoltaic or wind power plants. We expect that by 2030, thanks to the reduction in the price of excess energy from renewable sources and the lower cost of transformation, hydrogen could fall below 35 euros per MWh and therefore be competitive with other sources.
What visibility do you have on this potential drop in costs?
For this purpose, we have launched a pilot project that will help us fully understand the value chain of green hydrogen production and assess its impact on our infrastructure. In Sardinia, where we are laying a "digital native" network to methanize the island, we will analyze the possibility of mixing natural gas and hydrogen with the aim of distributing it to residential or industrial users. We will therefore produce green hydrogen and inject it into our "smart" grids. We will then test the pressure reduction stations and the entire control system. We already know that a mixture with 10-15% hydrogen does not present technical problems, but we want to directly check what happens as the proportion of hydrogen increases step by step. In the project, which we think will become fully operational by the end of 2021, we are in partnership with the Polytechnic of Turin and the CRS4 Center of Sardegna Ricerche, the research and innovation agency of the Autonomous Region of Sardinia, in order to have solid scientific support in managing the trial.
Is there a consensus on the future role of green hydrogen?
All the studies carried out, and the discussions in which I participated at the Italian and European level, converge in the belief that green hydrogen will be the predominant gas in the near future, once it has reached a competitive cost.
The future therefore offers a series of interesting opportunities for a gas distribution operator.
Does the scenario also present any challenges?
From my point of view, the number one challenge is being able to contain methane emissions. This aspect is also at the top of the European Commission's agenda. On this point we have set ourselves a goal: to reduce our CH4 emissions by 20% in the coming years, using the Picarro technology we have at our disposal. The other challenge is to adapt our infrastructure to the new gases. There is only one way to achieve this goal: to completely digitize the network. Only in this way we will be able to then use Artificial Intelligence and advanced "smart" tools. This is the path we took three years ago and which is already bringing us concrete benefits, as seen by the results achieved in the first nine months of 2020. Facing the heavy restrictions imposed by the Covid-19 emergency, it was essential to be able to count on remote monitoring of construction sites or on remote-controlled maintenance procedures, which was possible thanks to the level of digitalization already achieved.
Is an intelligent grid therefore necessary to transport the new gases?
It is essential: there is no transition without digitization. It will be essential to know in real time what type of gas, or mixture of gasses, is present in a specific pipeline. Precisely for this purpose, we are installing devices for gas analysis, the so-called "gas analyzer", which will allow us to know whether we are transporting CH4, or CH4 mixed with biogas and, in the future, also with hydrogen. Given the different calorific value of hydrogen, we will have to be able to provide the end customer with a mixture that always releases the same amount of energy. The investments we are making for the digitization of assets will allow us to introduce, and therefore distribute, different types of gas into the network. This is our response as an operator in the face of the need to facilitate the path towards a decarbonised economy.
Italgas operates in a regulated business. What view does the Regulator take on investments required to carry out this type of network transformation?
If we want to respond promptly and effectively to these new challenges, we must without doubt be able to move within a regulatory framework which is both fair and open to innovation. The Italian regulator has already shown in the past that it looks much further ahead than any other regulator in Europe: just think of the ambitious project to replace traditional meters with smart meters. If we consider the consultation document on innovation, we see that currently there is an intention to support development projects in new areas, which deal with the optimization of network management, the innovative use of existing infrastructures, as well as the technological and operational innovation of networks.
With this Plan to 2026, do you think Italgas has made the best tactical choices?
Italgas has the skills and resources to respond to these challenges, which are at the same time great opportunities. The investments already planned between now and 2026 show that we intend to strengthen and make our network even smarter and more intelligent, following the path of digital transformation to the end. A transformation that involves the whole company: not only the assets, but also the processes and people, with the latter involved in an intense re-skilling program. After all, having such a large amount of data available, it will be necessary to have people able to interpret and use it effectively.