The potential for hydrogen in Italy

Hydrogen is a key green energy source to enable us to reach an ambitious 95% decarbonization target by 2050, because it can be generated from renewable energy sources and be transported, stored and used like a gas.

Snam with the analytical support of McKinsey has conducted a study on the potential role of hydrogen in the Italian energy system, which shows that Italy is particularly well-suited thanks to its excellent natural resources to generate renewable power, and its existing gas infrastructure network – including the connections to North Africa.

The key findings of the report are:

  • Hydrogen could provide almost one quarter of all energy in Italy by 2050. In a 95% decarbonization scenario (needed to reach the 1.5-degree threshold), hydrogen could supply as much as 23% of its total energy consumption by 2050 – more than today’s combined electricity share (20% in 2018) from renewable and fossil fuels. The biggest potential is in transport, buildings and industrial applications where some players use grey hydrogen today (e.g., refining, high-heat processes).
    - Long-haul trucking should become one of the first segments to make hydrogen economic. Hydrogen will achieve Total Cost of Ownership[1] parity with diesel by 2030, even without additional incentives.
    - Blending hydrogen in the grid (up to a 10-20% mix) for building heating is another area of wide possible adoption that could take place in the short- to mid-term.
    - Hydrogen will also integrate renewables into the electricity grid: it can provide flexibility, seasonal storage - in collaboration with other storage solution covering shorter balance need (e.g., batteries for intraday balancing) - and alternative energy transportation solutions to the grid.
  • Low-cost hydrogen to break-even before 2030 – earlier than other European markets. Given Italy's strong renewables endowment, "green hydrogen" from them will break even with "grey hydrogen[2]" from natural gas 5-10 years earlier than in many other countries, including Germany. This makes Italy the ideal place to begin the deployment and scale-up of electrolysis for industrial and other uses (especially in cases where breakeven should occur in the next decade).
  • Italy could import hydrogen from North Africa, at cost 14% below domestic production Italy could employ its existing pipelines to Northern Africa to put solar panels "where the sun shines" more, produce hydrogen locally, and then transport the hydrogen to Italy through the pipes. This could also provide hydrogen exports through Italy into Europe.
  • Italian gas infrastructure supports hydrogen’s potential: Its wide-ranging infrastructure can connect the renewables-rich South with the demand centers in the North, and make possible highly independent, fully-renewable energy systems on Italy's islands.
  • Reference case: Hydrogen in Sicily is a cost competitive way to start decarbonize industry that is hard to decarbonize in other way. 50MW of electrolyzer capacity could initially be built to produce renewable hydrogen leveraging wind and solar lower production costs, which could be transported in (existing) pipelines, used in a local refinery as well as for a hydrogen-fueled train and as part of the local gas grid for household heating. Future expansion could increase the scale of the project to include a 2 GW electrolyzer, the supply of two refineries and the replacement of a significant share of 10-20% of natural gas in household heating.
  • Reflections on Italian system: enablers for hydrogen value chain development. To start the deployment of hydrogen in Italy, industry and policymakers should work together to put a supporting regulatory framework in place and begin deployment. International co-operation will accelerate the uptake of hydrogen across the EU and create a single unified European hydrogen market in the future. Snam is ready and willing to support this transition leveraging its assets, experience, and capabilities to deliver the transition to a sustainable and competitive energy future in Italy.

[1] Total Cost of Ownership calculated including include initial investment cost (CapEx) and operating cost (OpEx).

[2] Grey Hydrogen is produced from natural gas or coal through gas reforming process.

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17 October 2019 - 19:59 CEST