Q&A - Topsoe: Power to X is a subsidies game

Topsoe is a Danish company that focuses on decarbonisation solutions for the hard-to-abate sectors, including steel, cement, chemicals, shipping, and aviation. Topsoe's solutions produce fuels, including green hydrogen, green ammonia, eMethanol, and eFuels.

inspiratia speaks to Sundus Cordelia Ramli, chief commercial officer of Power to X (PtX) at Topsoe. Sundus has been working in the renewables industry for over a decade and highlights the similarities between the burgeoning PtX sector and the renewables market a decade ago. She makes the case that, like solar and wind a decade ago, green hydrogen and PtX are in need of a strong subsidy regime to get initial projects off the ground.

Where would you say the hydrogen economy is right now? 

For context, I began in the renewable energy space, in solar and wind, where we did a lot of different things in order to get costs down and improve the performance of the turbines. All in order to get the business case ready, because, at the time, it was very much a subsidy game. The levelised cost of electricity from renewable energy at that point in time was very high compared to oil and gas. 

But within the decade that I have been working in the industry, the costs for solar and wind power have come down very fast because we knew we had to squeeze the costs down and also improve performance. I believe that this is where we are in the hydrogen economy as well. So, we are at the very start of the Power to X industry.  

We need to get more projects out there. Whether it's small scale or large scale, the faster we have data, the faster the supply chain understands improves, the faster we will go down that cost journey. Because at the end of the day, we want to make green products competitive compared to grey hydrogen, so that we can solve climate change much faster. 

How does PtX technology work? 

PtX is essentially how you use renewable energy for things that you cannot electrify. When we look at the challenge of decarbonising the world, we can't decarbonise all of it by electrifying, as there's a very large percentage where you need to use molecules, like green steel, shipping, aviation, fertilisers, and many others. So PtX involves converting renewable energy into a molecule, green hydrogen, which can then be utilised and converted into different types of chemicals and fuels that you can apply in these different industries.  

So, for us, we contribute towards decarbonisation by focusing on hard-to-abate sectors, such as shipping, maritime, aviation, fertiliser, etc.  

What are your thoughts on using hydrogen in land transportation, like trucks and cars? 

There is room for hydrogen in transportation, but there are challenges. For example, it is super easy to get regulators aligned with sustainable aviation because there's only one fuel. There's not much debate on what fuel should be used. But when you look at transportation, it is quite split. And transportation ranges everything from trucks, cars, ships, trains, etc. You could use ammonia, methanol, hydrogen, you could electrify. So it is not clear cut today. 

But for us, I think the most efficient usage right now is to utilise ammonia and methanol in shipping. So ammonia will be used more long term, while methanol will be used in the short term for shipping. For aviation, there is very clear-cut sustainable aviation fuel. Then, for long-haul trucks, it really depends on where the source of the feedstock comes from. Where are the trucks being kept? Is it somewhere where there is no grid? Is it somewhere with it where you can just electrify faster? So, I think you have to look at it on a case-to-case basis. 

Where do you see the biggest growth potential? 

So, hydrogen itself will need to go into steel, which is a hard-to-abate sector. The other uses are in refineries, and then the last part is in pipelines, where you upgrade the natural gas pipelines and inject hydrogen directly. 

If you look at the derivatives - ammonia is very versatile. For us, the end game is essentially about ammonia. So unless you put hydrogen directly into the different sources, ammonia is the most resilient fuel and chemical you will ever have. With methanol and sustainable aviation fuel, you still need CO₂ as an input. In the future, if we can utilise ammonia for most things, then all you need is water, a source of electricity like the sun, and nitrogen: that's all free. So, it is super resilient as a product. 

Are there specific regions where you are particularly interested in expanding the hydrogen and PtX industry? 

We look at projects globally, but certain regions take longer to develop. But when we talk about the most mature markets that we are focusing on right now, it is two markets: the EU and the US. These are the markets that have regulations in place or are about to have regulations in place. Because let's not kid ourselves - this is a subsidy game. There is no way anyone can go out there and have zero subsidies for producing green hydrogen or green ammonia. We're not there yet. So it has to be subsidised.  

It doesn't mean that the product will then be utilised within the country. Ammonia can be exported and transported very easily. So this could go anywhere, like Korea, to be combusted in power plants. Or it will go to Morocco to be utilised as fertilisers. So for the production, we are now focusing on two markets, but we are not forgetting about the rest of the world.  

The point about subsidies goes back to how you compared it to the renewables industry a decade ago… 

Exactly. Subsidies are really important. It's not about saying that we need subsidies forever. This is about subsidy in order to get things going and get the cost parity better. 

And let's not forget that when we're comparing the cost of green hydrogen and its derivatives of green ammonia, etc, we are comparing it to fossil fuel products that are still subsidised today. So when we are benchmarking, we're not really benchmarking properly, and that's a bit frustrating. I'm not saying that we should remove all the subsidies from fossil fuels. But let's have a very open conversation when you're talking about the competitiveness of green hydrogen. While it is not competitive today, you're also not measuring it against the right number. So yes, we need subsidies. 

Within Europe, are there any countries where hydrogen is growing really well? 

For the EU, in general, it all has the same policies. The UK has also started the contracts for difference mechanisms. 

The projects that, for us at least, are taking off the ground faster are actually in Sweden, and that's because of the local government and how they can make the projects go faster. So permitting becomes very important. 

The project we are constructing now in North Sweden for green methanol took less than 11 months to get the permit in place. Sweden was very proactive compared to other countries, where it takes much longer, and they're not prioritising it. Permitting is a huge issue within the renewable energy industry, but also in energy transition in general. We need to cut that timeline. Projects that receive their permits faster are able to reach financial investment decisions sooner.  

Looking at the subsidies required, what would you like to see from governments to make hydrogen more commercially viable? 

If you look at subsidies, there are two parts of the supply chain that would benefit from making projects move faster. Subsidies are there to de-risk certain things you can perceive but can not quantify. So that's to do with when you spend on the CapEx and the OpEx sides. 

So, if you look at the US, the US has the Inflation Reduction Act and its production tax credit that subsidises the OpEx. So, the cost of hydrogen that they're going to sell will then be subsidised. In Europe, they are actually looking at a combination of the two. They are also looking at subsidising the capex, so giving a grant which makes it easy to take the decision to go into operations. So, for us, you need to have both because, in reality, if you do only the OpEx side, there is still a risk of nobody taking an investment decision because they believe that CapEx is too high. 

From our side, because we are manufacturers, it is a very high cost to build a manufacturing plant and get it ready for the market because we produce electrolysers. And we took an investment decision one year ago to build a very large plant. Having subsidies means that producers like us are able to take more risks and get more investment from outside.

Lastly, research and development grants are always great to have because they accelerate the pathways to more innovation.