Source: 2 X 4 X 10
By: Joshua Rosen, Esq. and Gregory Franklin, Esq.
Since the turn of the century, clean renewable energy in the United States has transitioned from being an unconventional novelty to an integral part of our country’s energy mix. Mainstream acceptance was primarily limited by the development of the infrastructure to get this type of energy to the masses. Across the United States, it is no longer unusual to see large-scale wind and solar farms, solar panels on homes, and electric vehicles on the road. As Americans debate our role in climate change, there is one undeniable truth—clean renewable energy is increasingly important to our nation’s energy security.
A burgeoning source of clean renewable energy is hydrogen power. Europe is on the forefront of the hydrogen energy revolution. Its commitment to battle climate change has led to innovations in harnessing the promise of hydrogen energy. Organizations in Europe, both public and private, have been very intentional in their approach to develop the infrastructure to support the generation, transportation, and storage of hydrogen fuel.
For the last 10 years, the European Union has been fostering innovation in the hydrogen sector. Improvements in fuel cells, particularly the development of lower cost Polymer Electrolyte Membrane (PEM) fuel cells, have allowed for the initiation of industrial scale renewable hydrogen (green hydrogen) production projects. Renewable hydrogen is hydrogen that has been produced through electrolysis without byproducts using renewable energy sources. The hydrogen produced at such projects can also be sold, providing an additional revenue stream. Such innovative projects require a great deal of thoughtful lawyering to deal with novel regulatory issues, public–private construction agreements, the protection of intellectual property, innovative financing solutions, and the maximization of government incentives.
Currently in Europe, hydrogen is already being used in transportation by fuel cell vehicles, as well as in industrial applications. When used in transportation, hydrogen can help improve local air quality, as the only emissions of fuel cell vehicles is water vapor reducing CO2 emissions from the transportation sector.
Using excess renewable energy to produce hydrogen is a great way to increase renewable energy production while also making carbon free transportation fuels. Power produced by wind, hydroelectric, or solar energy is often produced at times when demand is low. As a result, such power production is often wasted. For example, in California, renewable energy production is curtailed or wasted 350 days each year. This will only increase with a greater share of renewable electricity on the grid. Using fuel cells, such renewable power can be harnessed to produce green hydrogen. The excess renewable power production is transformed into hydrogen, which can be stored for later use, preserving power that would otherwise be wasted.
One way to increase the amount of renewable hydrogen available for transportation and other uses is to demonstrate the suitability of recently developed industrial scale PEM fuel cells. The European partner consortium of Shell, ITM Power, SINTEF, thinkstep, and Element Energy has secured 10 million euros (11.25 million dollars) in funding from the European “Fuel Cell Hydrogen Joint Undertaking” (FCHJU) to do just that. The project’s total investment, including integration into the refinery, is approximately 20 million euros (22.5 million dollars). Shell and ITM Power will build the world’s largest PEM hydrogen electrolysis plant at Rhineland refinery, Germany. With a peak capacity of ten megawatts, the hydrogen will be used for the processing and upgrading of products at the refinery’s Wesseling site as well as testing the technology and exploring application in other sectors. Dr. Graham Cooley, CEO, ITM Power PLC, pointed out that “The Rhineland 10MW system will be the largest PEM electrolyser in the world. It represents the maturing of PEM technology for large scale, industrial applications.”
Detailed technical planning and the approval process will now begin. The plant, named “Refhyne” is scheduled to be in operation in 2020 and will be the first industrial scale test of the polymer electrolyte membrane technology process. “This new unit at Rhineland enables hydrogen to be made from electricity rather than natural gas. A unit of this kind brings a flexibility that
can help the stability of the power grid, thereby facilitating more use of renewable electricity”, explains Lori Ryerkerk, Executive Vice President of Shell Manufacturing. “In addition, if powered by renewable electricity, the green hydrogen will help reduce the carbon intensity of the site – a key goal for us”.
The high pressure PEM electrolyzer will provide bulk quantities of green hydrogen to be used in the refinery’s operations, replacing a portion of the hydrogen currently produced using steam reforming of methane gas. Consumption of hydrogen by petroleum refineries has increased recently due to clean-fuels programs, which can require refineries to produce low-sulfur gasoline and ultralow-sulfur diesel fuel. Currently the Rhineland refinery, Germany’s largest, requires approximately 180,000 tons of hydrogen annually, which is produced by steam reforming from natural gas. The new facility will be able to produce an additional 1,300 tons of hydrogen per year, which can be fully integrated into the refinery processes, such as for the desulphurization of conventional fuels. Shell Rheinland Refinery General Manager Thomas Zengerly highlights: “We are pleased to be working collaboratively with the European Union and to assist in developing Europe’s future energy system by testing this technology at the Wesseling site. If successful there is potential for this technology to be expanded at our refinery.”
This project may also facilitate the development of other large scale renewable hydrogen production projects. Johannes Daum, Program Manager Power-Based Fuels, NOW National Organization Hydrogen and Fuel Cell Technology (of Germany), pointed out that “Major projects such as 10 MW PEM electrolysis are building on the success of technology promotion in the National Innovation Program Hydrogen and Fuel Cell Technology (NIP). They demonstrate the suitability for everyday use of processes on an industrial scale and improve the profitability of producing hydrogen. They are an important step in the integration of hydrogen into the energy system and make a decisive contribution to implementing the energy transition in all consumption sectors.”
It makes sense to closely watch this project to determine the suitability of the technology for institutional, industrial, and municipal uses in the United States. It appears that the environment in Europe for innovations in hydrogen production and use has been fertile for the last 10 years. There is no reason that projects in the United States cannot take advantage of the fruits of such efforts. By paying attention to such projects in Europe, we can advise clients about new revenue opportunities arising from renewable hydrogen production, including for industrial projects.
Innovation usually outpaces government regulations and challenges the status quo of doing business—this presents attorneys with additional opportunities to support their clients. For example, the introduction of innovative hydrogen development projects in the United States may create unique construction contract challenges. Understanding the contractual implications for hydrogen infrastructure construction will be paramount for developers, contractors, and financiers. While drafting the construction contract, attorneys should consider: (1) who owns the intellectual property when contractors come up with new ways to construct hydrogen energy infrastructure to meet the needs of the developers; (2) how will the contracting parties manage a dynamic regulatory environment that oftentimes lags behind industry needs and differs by jurisdiction; (3) whether the indemnification and force majeure clauses are drafted to address regulatory changes enacted while the project is underway; and (4) if tax credits are involved, how will funding be supplemented if the tax credits are prematurely extinguished.
The development of hydrogen energy infrastructure is still in its infancy; therefore, there are no true prescriptive answers to the aforementioned considerations. Thought-leaders in the legal profession will no doubt have an integral role to play by answering these questions as the development of hydrogen energy infrastructure matures. Nonetheless, attorneys involved in the industry should be proactive by addressing such questions in their clients’ hydrogen infrastructure construction contracts.
As projects like Refhyne continue to rollout globally, attorneys will play an indispensable role to help shape how the infrastructure is developed in the United States. But most importantly, attorneys working on such projects can be confident that they are developing a sustainable energy infrastructure for their children, which not only brings professional pride, but also leaves a precious legacy.
