Mateusz Sołtysiak (SES Hydrogen Energy): Without implementing hydrogen, we will not be able to achieve decarbonization goals
SES Hydrogen Energy is a company dedicated to hydrogen technologies, aligning its efforts with current environmental requirements and global climate objectives, both in Poland and on a global scale. In August of this year, the company conducted functional trials of a prototype for an innovative hydrogen-oxygen boiler.
Mateusz Sołtysiak, the CEO of SES Hydrogen Energy, provided insights into the company’s technologies, innovations, and the hydrogen market.
What role do hydrogen technologies play in the energy transformation?
It is crucial to recognize that, especially in Poland, we are at the early stages of implementing hydrogen technologies and projects. The substantial potential of renewable hydrogen has been acknowledged by prominent economies such as the United States, China, Japan, Australia, and most importantly, the European Union. The EU views hydrogen as a vital tool for transforming its economy and achieving climate neutrality by 2050. This commitment is accompanied by actions, legislative proposals, and financial instruments aimed at galvanizing Member States, private companies, and investors to expedite and enhance the execution of large-scale hydrogen projects.
This perspective is hardly surprising, given that forecasts indicate that by 2050, Poland is expected to increase its electricity demand by 60%. Currently, over 70% of this energy is generated from coal, leading to substantial emissions. It’s predicted that emissions will come with a rising cost, potentially up to EUR 150 per tonne in 2024. Though this is the current expert prediction, the trend from the last two years suggests that rates may be even higher.
Without the implementation of hydrogen and its substitution for conventional fuels in various sectors, achieving decarbonization objectives and increasing the share of renewable energy in the energy mix, which is another significant EU requirement, will be challenging. By producing hydrogen from renewable energy sources, we can improve their efficiency by using surpluses where clean energy is not wasted. Additionally, island hydrogen production enables an expansion of the country’s energy capacity without overburdening the national power system and distribution networks. This is a unique advantage offered by hydrogen.
Considering the scale of activities planned within the EU and the deadlines for introducing further regulations, it is evident that as a country, we are already behind schedule. Meeting the requirements that will be imposed on us, possibly as early as 2025 or 2028, could have significant repercussions for businesses, particularly on financial fronts.
In which area does hydrogen have the greatest potential – in transport, industry or professional energy?
The potential of hydrogen is vast, and its utility spans across numerous sectors. It can function as an energy carrier, a storage medium, an industrial feedstock, and a fuel for various modes of transportation, including long-distance, heavy, maritime, and aviation. Hydrogen’s primary strengths lie in its high energy density and the fact that, when produced through electrolysis using renewable energy sources, it generates no emissions. I believe that hydrogen will have the most significant impact in sectors that are challenging to electrify for various reasons, whether due to cost, technical limitations, or impracticality.
Particularly, energy-intensive industries, such as metallurgy and heavy manufacturing, which rely heavily on gases and fuels in their processes, stand to gain significantly from hydrogen adoption. These industries are facing stringent regulations that require them to transition away from conventional fuels rapidly and seek low- and zero-emission alternatives to meet emission limits. This transition is not a distant prospect for 2050 but is rather an imminent challenge in the next few years, with direct implications for emission allowance costs.
At SES Hydrogen Energy, we also see substantial potential for hydrogen in decarbonizing district heating, industrial heating, and the building sector. The hydrogen-oxygen boiler, serving as a heat source for medium- and large-scale facilities and local heating nodes in residential areas and large-scale construction, plays a crucial role in this context. The increasing demand in these areas is driven by the prolonged lack of modernization and long-term modernization strategies. Moreover, regulations, particularly for combustion plants, along with rising emissions trading system (ETS) and fuel prices, influence tariff levels and heat prices for end users.
Hydrogen also presents an opportunity for investors who own or are constructing new renewable energy capacity. They increasingly encounter challenges related to grid connection, production variability, and network congestion. This is evident in the thousands of refusals to issue grid connection conditions for sources with a combined capacity exceeding 51 GW in 2022. With the necessity to expand renewable energy sources, the issue is expected to become more acute. The European Union acknowledges this challenge and is establishing regulations that tie the development of new hydrogen production capacities to new renewable energy capacities. This approach, focusing on dedicated hydrogen production facilities and hydrogen hub ecosystems, facilitates the growth of renewable energy without requiring a comprehensive overhaul of the energy system.
What is the development of these areas in Poland?
At this stage, as a country, we are too late to catch up before the regulatory requirements come into force
You’ve highlighted a critical point – Poland is still at the initial stages of its journey toward hydrogen technology implementation and is, therefore, not yet close to reaching the halfway mark. Indeed, back in 2021, there may have been expectations of more rapid progress, given initiatives like the Fit for 55 package, the goals outlined in the Polish hydrogen strategy, and the regulatory pressures from the EU. However, it has become increasingly evident that the process of implementing such investments is considerably longer than initially anticipated.
For instance, when an investor in Poland decides to embark on a project involving the production and utilization of electrolytic hydrogen, they must begin by crafting a comprehensive business plan. This plan requires analyses that validate the project’s profitability and identify the most effective and lucrative implementation model for the hydrogen hub. Subsequently, the investor needs to address environmental, legal, and planning documentation, along with developing the necessary concept and design documentation, land development plans, and more. This preliminary stage alone can span from several months to several years. Following this, the process involves obtaining an environmental decision, which, based on the average timeline for hydrogen projects in Poland, may take approximately 9-10 months.
One must consider the unique nature of hydrogen projects and the fact that direct regulations for hydrogen are still lacking in Poland. The subsequent months encompass securing development condition decisions, obtaining integrated permits, and acquiring other essential authorizations, including construction permits. Furthermore, due to the limited number of manufacturers, the lead time for electrolyzers and other components can extend up to 4 years. This is not to mention the actual construction phase. In summary, a decision to commence an investment in 2024 implies that its completion will occur at the earliest in 2028, and in many cases, it may be even later.
This leads to the conclusion that, at this stage, Poland is already behind schedule to catch up before the regulatory requirements come into full effect. The sooner decisions are made and actions are taken, the better the chances of avoiding a situation post-2030 where the regulations become exceedingly stringent. Moreover, there is a need for a unified hydrogen law to expedite these investments, and progress in this regard is slow. It is also essential to establish an informative policy for businesses and local governments, elucidating the impending regulatory changes they must adapt to. The public needs assurance that hydrogen projects are viable, effective, and safe, which emphasizes the importance of scaling up and pioneering initiatives that can pave the way, mitigate fears, and demonstrate the validity of hydrogen transformation in Poland. Such pioneering projects, including the proposed investment in the hydrogen estate in Śrem, where your hydrogen-oxygen boiler will be used, and the transition away from fossil fuels and gray hydrogen in industrial processes, metallurgy, refineries, and heating, are crucial and are being increasingly embraced by entities in the country.
How do we compare to Europe?
The development of the hydrogen economy in Europe varies from country to country, and one way to compare progress is by examining the state of their hydrogen transport infrastructure, which is currently the most advanced area for hydrogen. In 2021, there were around 200 hydrogen refueling stations in Europe. Germany has been a major player in this field, boasting 99 stations and a commitment to investing EUR 9 billion per year for their further development. However, it’s essential to note that not all European countries have significantly surpassed Poland in this race. Most countries currently have only a few to a dozen or so hydrogen refueling stations, but they are also announcing investments in this sector in accordance with their hydrogen strategies and the support provided by the AFIR regulation, which encourages the growth of hydrogen refueling stations within the European TEN-T network.
What stands out in Europe are the ambitious large-scale projects executed by consortia comprising several or even several dozen entities. One such project is the HyDeal Ambition integrated hydrogen system, spanning Spain, France, and Germany. This project envisions the installation of 67 GW of electrolyzer capacity, which could produce more than 3.6 million tonnes of hydrogen annually, accounting for over a third of the EU’s production target. The Dutch NortH2 project is another noteworthy endeavor, with plans for at least 10 GW of electrolysis capacity and annual hydrogen production of 1 million tonnes by 2040, including an installed capacity of 1 GW by 2027. There is also significant interest in the Puertollano Hydrogen Hub, an investment developed by Iberdrola, which will be one of the largest hydrogen production facilities for industrial purposes, primarily for green ammonia production. These examples represent just a fraction of the numerous hydrogen projects planned across Europe, with new projects being announced regularly.
What are the most important challenges and barriers related to the implementation of hydrogen technologies?
Cost is undoubtedly a central aspect of the hydrogen economy. While it may not have been initially expected for hydrogen to be competitive with conventional fuels, it is notable that during the energy crisis at the turn of 2021-2022, when gas and coal prices soared, hydrogen became significantly more competitive in many applications. However, the issue of higher initial costs is not unique to hydrogen; it’s a common characteristic of innovative technologies, especially those with limited supply. This is a typical phase in the development of emerging technologies. Forecasts indicate that as hydrogen and renewable energy technologies continue to progress, with increasing demand and economies of scale, hydrogen will gradually become as or more competitive than traditional fuels and other alternative energy sources. It’s worth noting that the hydrogen market is already being shaped by regulations, and substantial funds from EU financial instruments are earmarked for its development.
At SES Hydrogen Energy, we continuously analyze and model hydrogen hub projects. Our analyses demonstrate that selecting the appropriate infrastructure can yield prices that are attractive to investors even at this stage. We also believe it is crucial to bolster the number of technology producers in Europe and place a strong emphasis on developing Polish technologies based on domestic patents. Poland has a robust research and development sector, and with the right subsidies, investors would not need to rely solely on technology from foreign companies, which would expedite project implementation. The absence of a dedicated hydrogen law in Poland is another significant hurdle, and there is apprehension that ongoing projects may not align with future legislation, posing a substantial risk that hinders many investors.
Additionally, a critical but often overlooked challenge is gaining public acceptance of hydrogen. In the common consciousness, hydrogen is still seen as an explosive and dangerous fuel, which has repercussions for technology adoption. A notable example of this issue is the suspension of the pilot hydrogen estate project in Whitby, Great Britain, which resulted from a lack of public consultations between the government and residents and the ensuing rise in concerns. This illustrates the importance of educating society about hydrogen and safety, as well as the necessity of engaging in conversations and consultations. It is also essential to sensitize investors planning their projects to the importance of addressing these concerns and gaining public acceptance.
What technologies does SES Hydrogen Energy develop?
SES Hydrogen Energy focuses on developing alkaline (AWE) and anion exchange membrane (AEM) electrolyzers, in addition to an emission-free hydrogen-oxygen boiler. The company relies on patents created within the Polish Sescom Capital Group, to which it belongs. These technologies are intended for use in infrastructure projects, such as the hydrogen hubs mentioned earlier, which are ecosystems encompassing the production of renewable electrolytic hydrogen from renewable energy sources, its storage, distribution, and utilization for energy, industrial, or heating purposes.
It’s noteworthy that only a limited number of manufacturers worldwide are actively developing AEM electrolyzer technology. AEM technology is relatively young and combines the advantages of both alkaline and proton exchange membrane (PEM) technology. SES Hydrogen Energy’s objective is to facilitate the cooperation of both AEM and established alkaline technology with renewable energy sources, enhancing the efficiency and effectiveness of these installations. This approach aligns with the broader goal of increasing the green hydrogen production capacity, contributing to the growth of the hydrogen economy.
Will the hydrogen-oxygen boiler you recently tested be a gamechanger for the heating industry?
The use of hydrogen and pure oxygen eliminates not only the problem of CO2 emissions , but also other pollutants such as NOx, SOx compounds and dust
The boiler being developed by SES Hydrogen Energy distinguishes itself from other hydrogen heating devices by utilizing only pure hydrogen and pure oxygen in the combustion process, employing a specially designed closed system. The upcoming device, initially with a 0.5 MW capacity and the potential for scaling, is intended for applications in system energy, industrial and commercial heating, and residential construction. This represents an innovation in a market where current solutions primarily revolve around H2Ready boilers that operate using a mixture of hydrogen and natural gas or 100% hydrogen boilers, typically for small-scale applications in single-family heating.
The use of hydrogen and pure oxygen in this boiler eliminates not only carbon dioxide (CO2) emissions but also other pollutants like nitrogen oxides (NOx), sulfur oxides (SOx) compounds, and particulate matter, resulting in the generation of emission-free heat. The only byproducts of combustion are energy and water/steam. Consequently, this boiler ensures that companies can meet climate regulations not just in the short term by gradually reducing specific pollutants but, more importantly, in the long term by completely eliminating them right from the start. This addresses the need for comprehensive, long-term modernization strategies for Polish heating and buildings, which have traditionally relied on temporary emission reduction measures, which may become ineffective as regulations tighten and the cost of EU Emissions Trading System (ETS) allowances rises.
What is missing for full commercial implementation of this project?
The preliminary summary of functional tests for the boiler was successfully completed at the beginning of August this year, and these tests closely replicated the real operational conditions of the installation. The primary goal of these tests was to examine the burner and the operational performance within the combustion chamber. The outcomes of these tests affirmed the soundness of the design, the accuracy of its operation, and the overall safety of the device. Further research and certification processes lie ahead before the commercial implementation of the boiler, which is scheduled for the transition between 2024 and 2025.
Currently, we are engaged in a comprehensive analysis of the results obtained from the tests. We also have plans to continue testing within an open chamber and subsequently progress to conducting crucial research within a closed secondary circuit. These steps will enable us to refine the test unit and optimize the boiler’s functions. As part of our preparations, we are also gearing up to initiate the certification process, which is a pivotal step in bringing the boiler to the market.
Will hydrogen heating be profitable?
The question of the profitability of the hydrogen-based heating device has understandably arisen following the test results. While environmental concerns are undoubtedly important, it is always essential for every company, investor, or end-user to consider the economic aspect of any technology. As previously noted, the current cost of hydrogen production and, consequently, the price of heat derived from it, is higher than that of conventional fuels such as coal or gas. However, when we reflect on the volatility of the energy market that unfolded last year, it becomes clear that such a situation is far from certain. Fluctuations in fuel prices could potentially result in sudden and dynamic increases in heat and energy prices, destabilizing the sector, which may not be adequately prepared to cope with such fluctuations. Poland does not have sufficient domestic resources and will always depend on international market dynamics, geopolitical circumstances, and suppliers. Additionally, regulatory changes, like the modifications to the EU Emissions Trading System (EU-ETS), will also drive further heat price increases. Notably, the price of emissions allowances surpassed EUR 100 per ton for the first time in history at the beginning of this year, and it is projected to reach EUR 150 in 2024. When compared to prices from a few years ago, which ranged from several to a dozen euros, the magnitude of these changes becomes apparent.
In terms of the hydrogen boiler and its costs, SES Hydrogen Energy’s aim is to develop hub structures that can provide heat production at the most favorable price achievable. Our team of analysts consistently models these types of investments. Their analyses indicate that, for a hub with a properly configured power supply structure that can ensure production during peak consumption months, the price of hydrogen is approximately PLN 20 per kilogram, which translates to about PLN 150 per gigajoule (GJ) of heat. Depending on the extent of subsidies, it is possible to reduce the price, typically to around PLN 16 per kilogram. It’s crucial to understand that these costs will gradually decrease over time. Simultaneously, one should recognize that this approach offers a stable heat price that is less susceptible to market fluctuations and changing regulations. These are the benefits and reliability that modernization and hydrogen bring to the table, and they need to be emphasized more as they are often overlooked. We have a tendency to focus on the immediate future rather than considering the broader context of long-term changes.
What other projects are you developing in parallel?
Expanding beyond the development of hydrogen technologies, SES Hydrogen Energy has taken an active role in analytics, strategic consulting, and design services. The decision to create an internal team of analysts and a design office was driven by the observed demand and the need for such services within the hydrogen niche in Poland. Currently, the company is one of the few entities in the country that is actively involved in conceptualizing and providing in-depth analyses of hydrogen investment projects.
This approach allows SES Hydrogen Energy to support its partners from the early stages of investment planning. It equips them with a comprehensive understanding of the potential, scope, and costs right from the project’s inception and facilitates the modeling of infrastructure in the most effective and beneficial manner. Following these steps, the company then prepares investment documentation and ultimately delivers and integrates its technologies. This integrated approach streamlines most tasks within a single entity, reducing implementation time and cost. SES Hydrogen Energy’s aim is to expand these resources further in response to growing demand in the coming years.
How will the hydrogen estate in Śrem function?
The hydrogen estate project is a pioneering initiative, the first of its kind to be implemented in Poland. SES Hydrogen Energy is delighted to collaborate with the Śrem Social Housing Association and the City and Commune of Śrem on this innovative endeavor. In this project, SES Hydrogen Energy will provide its hydrogen-oxygen boiler technology for heating new apartments.
The project involves the construction of 195 apartments of various sizes on Farna Street in Śrem, along with a local boiler house. This boiler house will enable the sustainable utilization of urban areas that are currently underutilized or vacant. Hydrogen and oxygen for the boiler’s operation will be produced through water electrolysis, powered by electricity generated from photovoltaic installations located within the project area. The project is scheduled to commence in 2025.
What goals do you set for yourself in the coming years?
SES Hydrogen Energy has set several key development goals and milestones for the coming years:
- Bringing the 0.5 MW hydrogen boiler project to the production version by the end of the first half of 2024.
- Building a prototype of an AEM (Anion Exchange Membrane) and alkaline electrolyzer with capacities of 10 kW and 50 kW.
- Starting the preparation of a production line for these electrolyzer units.
In addition to these technological goals, SES Hydrogen Energy will also focus on developing a portfolio of infrastructure projects, which will position the company to take advantage of the expected increase in hydrogen investments in Poland, driven by legislation and planned financial instruments in the near future.