Summary

There is currently a lot of political and economic pressure in Denmark to invest in Power-to-X, and internationally there is a lot of hype about the possibilities of creating a new hydrogen economy. In this note, the Green Transition Denmark assesses what Power-to-X can be used for, and what it should not be used for. To what extent will it make sense in terms of energy and economics to produce green hydrogen produced from renewable energy sources, and what should be avoided?

In terms of energy economics, the most efficient solution is to electrify industry, transport and the heating sector, as this can save up to 40 percent of our total energy consumption.[1] However, in some areas, Power-to-X is an inefficient and “necessary evil”: If we are to ensure climate neutrality and decarbonize our economy, there will also be a need to produce e-fuels for long-distance maritime and aviation, and hydrogen will be needed as a raw material for, among other things, the production of plastics, chemicals and fertilizers. It may also be necessary in parts of heavy industry that may otherwise prove difficult to electrify.

In short, PtX can be viewed as a kind of “energy champagne” that should only be used where electrification is not possible.

The socio-economic framework surrounding the development and scaling up of PtX will be greatly influenced by industrial and labor market policy, international competition, and whether there are actors with a high willingness to pay and invest. In the aviation and maritime industries, for example, there appears to be a willingness to pay a higher price per ton of CO2 reduction than in other sectors.

Thanks to its enormous amounts of cheap offshore wind in the North Sea, our energy system with a high degree of renewable energy in the power supply and widespread use of district heating for heating, Denmark has a good starting point for optimizing the interaction between Power-to-X and the development of an energy system that is increasingly based on fluctuating energy production from renewable energy. In addition, it can be emphasized that both the aviation and maritime industries are far behind other sectors, and there is a need to develop green PtX fuels as quickly as possible.

However, PtX is limited by a number of factors: Today, less than 1 GW of green hydrogen is produced globally, and many electrolysis plants are only small prototypes, which is why it may be difficult to scale up production as much as the industry envisions. It is also crucial to ensure sufficient green electricity for the upcoming PtX plants, so that hydrogen is not produced with fossil energy with a large climate footprint. Private investors and consortia have already made ambitious plans for new PtX plants, but the expansion of onshore and offshore wind and solar cells in Denmark is still far too slow. The decision to stop a number of offshore wind farms that were otherwise ready in the open-door scheme has not improved matters. In the longer term, there may also be a significant challenge in obtaining sufficient carbon to produce the new e-fuels, which needs to be addressed in time.

According to the Danish Energy Agency, PtX can lead to a sharp increase in demand for green electricity, and it is therefore important that a more comprehensive energy plan is politically put in place that can address the complex challenges in a timely manner. Strong business lobby groups and investors have long pushed hard to quickly increase the level of ambition. But it is important to make a critical and independent analysis of the different scenarios for future demand for hydrogen and PtX, with a focus on achieving the greatest possible climate effects for the least possible money. If a new hydrogen infrastructure with large hydrogen pipes to Germany and other European countries is over-dimensioned, it can create an investment “lock-in” that removes money from other possible investments that have a greater climate benefit.

The future demand for green hydrogen depends both on technological developments (including electrical alternatives) and how consumption patterns develop. It is not a given that the transition to PtX will mean business as usual in, for example, the number of business trips and the consumption of fertilizer. For example, if people can change their behavior and fly less, it will reduce the need for e-kerosene. And if agriculture can be made to reduce the consumption of chemical fertilizers through regulations – where there are also serious environmental problems today with excessive leaching of nutrients – it will change the demand for the new generation of e-ammonia produced with green hydrogen.

PtX products can reduce air pollution from the burning of fossil fuels, and will be better for the climate than fossil business as usual, but they must also be dosed correctly. Large amounts of energy should not be wasted on PtX, where it is both better and cheaper to electrify. This applies, for example, to road transport or the heating sector. The less PtX we can make do with, the fewer wind turbines, cables and raw materials we can manage with in the future. The question of sufficiency should not be left out of the debate on PtX.

Instead of being caught up in hype and overly optimistic future forecasts, Denmark should focus on realism and energy economic responsibility. For example, PtX requires enormous amounts of very clean water, so access to water will also be a critical factor that must be included in energy planning[2]. There is still considerable uncertainty about how large amounts of hydrogen will actually be needed in the energy system of the future. Even in a socio-economic business as usual scenario, it may turn out that the need for green hydrogen in 2030 in Europe is up to 5 times smaller than the European Commission otherwise projects. Before embarking on a massive scale-up with green hydrogen in Denmark and the EU, there is a need for more thorough analyses of future energy needs, taking into account increased energy efficiency and electrification in, among other things, road transport and industry.

There is also great uncertainty about the risk of hydrogen leakage. Hydrogen is a volatile molecule that is difficult to store. Hydrogen has an indirect warming effect, and it will be crucial to ensure that the upcoming expansion of the entire hydrogen value chain is secured against leakage.

Why Power-to-X?

Denmark must transition to climate neutrality by 2040 at the latest, and it is therefore necessary to phase out the use of coal, oil, gas and biomass as soon as possible. This requires, first and foremost, a much more aggressive focus on energy efficiency improvements and a lightning-fast expansion of clean renewable energy such as solar cells, wind energy and geothermal energy. Fossil fuels still account for 53 percent of Denmark's gross energy consumption, and if we are to create a climate-neutral or even climate-positive society, phasing out and stopping the use of fossil fuels can only be too slow. However, there are still major unresolved challenges in phasing out oil in the transport sector and in parts of heavy industry, because electrification in Denmark is going far too slowly. In addition, there is the use of hydrocarbons in chemicals, plastics and other carbon-containing products. It is in these hard-to-decarbonize sectors that synthetic oil products produced with green electricity (e-fuels) via Power-to-X (PtX) can be used to phase out the use of fossil fuels, fossil fertilizers and fossil hydrogen in a number of raw materials.

This note outlines a number of perspectives for the development and sustainable scaling up of Power-to-X in Denmark.

The limitations of hydrogen

There is a lot of political attention and a considerable amount of hype about hydrogen and Power-to-X. This attention is to some extent justified, as PtX can play an important role in the green transition of aircraft, ships and in the decarbonization of parts of heavy industry. But at the same time, there is reason to keep our mouths shut.

The electrolysis process, where renewable energy is converted into green hydrogen, which is then used to produce e-fuels, is fundamentally an expensive and inefficient process because there are very large energy losses along the way. To ensure a cost- and climate-efficient transition, it is therefore absolutely essential that PtX is limited to those sectors where there are no other sensible solutions. Inflating PtX production too much can lead to an enormous waste of expensive renewable energy. Hydrogen and PtX should be kept out of cars, trucks and home heating completely, where more efficient alternatives already exist. Progress in the direct electrification of heavy industry also means that one should be cautious about introducing hydrogen, as investments in infrastructure and production equipment can lock industries into indirect electrification and thus delay more efficient direct electrification.

The previous government's Strategy for Power-to-X[3] states that Denmark will have 2030-4 GW of PtX capacity in 6, so that green hydrogen can be produced using renewable energy for e-fuels for shipping, aviation, parts of heavy industry and for the production of chemicals, plastics, etc. This is a very ambitious plan, but private investors are developing PtX projects with around twice as much capacity. Denmark is not the only country where there is talk of a major scale-up with green hydrogen, and the European Commission has set a target of producing 2030 million tonnes of green hydrogen in the EU by 10, while importing a further 10 million tonnes. However, globally less than 1GW or just over 0,1 million tonnes of green hydrogen is currently being produced, and many of the projects are smaller plants and prototypes that have yet to be scaled up.

99 percent of the world's hydrogen production is currently produced using fossil fuels, and their total greenhouse gas emissions are roughly equivalent to the emissions from the world's aviation industry. It is therefore also important to decarbonize the world's hydrogen production. Globally, up to 120 million tons of hydrogen or hydrogen in combination with other gases are produced.[4] 42 percent of this is used in refineries to remove sulfur from gasoline and diesel (which limits acid rain), 37 percent is used to make fertilizer, and the rest is used to produce methanol, chemicals, plastics, and in industrial processes.[5]

In the transition, it should not be overlooked that hydrogen itself also has a significant warming effect when leaked into the atmosphere, as it functions as an indirect greenhouse gas. This happens when hydrogen rises into the atmosphere and troposphere and combines with free radicals, thereby extending the lifetime of other greenhouse gases. There is still scientific disagreement about the level of warming and calculation methods, because hydrogen has a very large immediate effect, but at the same time has a relatively short lifetime in the atmosphere. A study published in Nature estimates the warming to be more than 11 times as harmful to the climate as CO2 over 100 years[6]. Other studies have shown that hydrogen over 20 years can be between 19-38 times more harmful than CO2.[7] If the transition from fossil fuels to a hydrogen-based economy is not to have an inappropriate side, requirements should be made for minimal leakage and thorough control along the entire value chain[8]. However, this is challenged by the fact that current sensor systems for detecting leakage are not capable of detecting smaller leaks, and it will therefore be necessary to develop new equipment and new safety procedures to prevent hydrogen leaks.[9]

Hydrogen is also flammable and explosive and safety considerations must be taken into account in both production, distribution and use. It is crucial that strict safety requirements are set by the authorities. Safety risks and leakage can be minimized by limiting the use of hydrogen to large-scale facilities such as the production of e-ammonia and e-kerosene. If hydrogen is used in sectors with many point sources such as road transport or heating homes, the risk of leakage increases.

Power-to-x in transportation

Road transport accounts for the vast majority of the transport sector's climate impact, and here the most efficient and advantageous option – from both a climate and economic perspective – is to electrify directly via electric cars and electric trucks, cf. Figure 1. Danish and European legislation also greatly supports the transition from combustion engines to battery-electric vehicles.

For long-distance sea and aviation, however, it is not possible to switch to battery-electric vessels, as batteries are simply too large and heavy. The problem can be illustrated by the fact that Maersk's cargo ships would have to fill the containers exclusively with batteries instead of goods if they were to sail battery-electric. It will often not be possible to use hydrogen directly, as it takes up too much space, but instead the hydrogen can be upgraded to other fuels such as ammonia for sea transport and e-kerosene for aviation.

Biofuels also play a role in the transition of shipping and aviation, but the amount of truly sustainable biofuels is very limited, and will be far from meeting the needs of either shipping or aviation. The Maersk Mc-Kinney Møller Center for Zero Carbon Shipping has shown that there will be significant competition for a limited amount of sustainable bioresources[10] – globally, around 50-100 EJ of sustainable biomass is expected to be available in 2050, while the total demand from ships, aircraft, plastic, cement, etc. is estimated at 190-430 EJ. This makes Power-to-X a technology that can be scaled to implement a transition to 100% green shipping and aviation.

Both aviation and shipping are sectors that, in the big picture, have not yet begun a real green transition, and here it is urgent to do something if the global climate agreement from Paris is to be respected. The transition in shipping in particular is burdened by a massive fossil lock-in. Each new ship without the capacity to sail on green fuels will emit greenhouse gases for decades and without a massive and rapid scale-up of PtX, shipping companies will continue to order new fossil-powered ships. But even though the order for green ships today is marginal, the challenge remains on the fuel side, for example, the Maersk Center for Zero Carbon Shipping has pointed out that far more ships that can sail on e-methanol have been ordered than the expected production can supply. Within the next decade, shipping could be short of up to 20 million tons of green fuels[11].

To put it bluntly, it can be pointed out that if Denmark succeeds in accelerating the conversion of global air and sea transport by a single day, it will, according to RGO's own calculations, save the atmosphere 5,5 Mt CO2 - one week's accelerated conversion will result in CO2 savings of slightly less than Denmark's annual emissions.

Power-to-X in the energy sector and industry

In the energy sector, it is expected that a large part of the combined heat and power plants will be gradually phased out towards 2040, and the Danish Energy Agency expects their capacity to be halved[12]. This reduction in controllable production capacity is obviously a challenge, the greater the share of renewable energy in the electricity supply. Here, hydrogen can play a role as an additional energy storage.

According to the Danish Climate Council, security of supply can be maintained with a Danish and European electricity system that is largely based on clean renewable energy from the sun and wind, if it is supplemented by a smaller, controllable capacity via gas turbines. The gas turbines could run on biogas or hydrogen, where their consumption is expected to be limited, as they are only expected to be in operation for a few hours over a number of years to ensure power during weather and transmission shocks.[13]

Due to the massive energy loss, hydrogen should not play any direct role in the heat supply, as heat pumps, for example, are much more efficient. This is illustrated by Figure 2, which shows that almost 6 times as much renewable energy will be needed to produce heat for homes in England if hydrogen is chosen over heat pumps. However, there will be a significant amount of surplus heat from the production of green fuels, which will be included in the district heating supply. According to COWI, up to 20% of the Danish district heating demand can be covered by surplus heat from PtX production, which will also reduce the overall production price of hydrogen[14].

The sectoral coupling between hydrogen production and district heating is made difficult by the distance between the production of renewable energy in coastal areas along the North Sea and on Lolland and Falster and the district heating networks in the large cities. This is therefore an important planning task that should be handled centrally, as individual companies and municipalities are not able to find the socially optimal locations for PtX production when taking into account access to renewable energy, district heating networks, hydrogen infrastructure, biogenic CO2, and sufficient amounts of water.

For industry, it is often argued that it is not possible to achieve high-temperature heat without burning fossil fuels, biogas or hydrogen. However, changes in processes and technological breakthroughs mean that even for temperatures above 1.500°C it is possible to electrify directly, as long as there is a stable electricity supply.[15]

The reasons for opting out of direct electrification are often complex, as timing, depreciation of production equipment, knowledge and regulation can push a company towards continued fossil consumption or indirect electrification in the next investment cycle. Over the coming years, there are good opportunities for the vast majority – if not virtually all – industrial companies in Denmark to electrify directly and thereby reduce the need for hydrogen. Rockwool has already built a full-scale electric factory in Moss, Norway to produce stone wool. In the same way, electrification of, for example, the German steel industry can significantly reduce the export potential for hydrogen. The reasons for opting out of direct electrification are often complex, as timing, depreciation of production equipment, knowledge and regulation can push a company towards continued fossil consumption or indirect electrification in the next investment cycle. Over the coming years, there are good opportunities for the vast majority – if not virtually all – industrial companies in Denmark to electrify directly and thus reduce the need for hydrogen. Rockwool has already built a full-scale electric factory in Moss, Norway to produce stone wool. Similarly, electrification of, for example, the German steel industry could significantly reduce the export potential for hydrogen.

How much capacity will we need?

After the invasion of Ukraine, the EU has adjusted the targets for European consumption and production of green hydrogen and PtX. With the RePowerEU plan, Brussels has set a target for the EU to produce 2030 million tonnes of green hydrogen (equivalent to 10 TWh) in 330 and to import an additional 2030 million tonnes from third countries. Several Member States have also set targets for electrolysis capacity in 10, and there is an internal competition between Member States to “be the first” to scale up PtX capacity and win market shares and jobs. As mentioned, Denmark is aiming for an electrolysis capacity of 2030-4 GW in 6, or approx. 2030-0,5 million tonnes of hydrogen, and thus our PtX ambitions are in line with significantly larger countries such as the UK, Italy (both of which have targets of 0,7 GW in 5) and France (2030 GW in 6,5).

It is therefore important to keep in mind that the development of PtX production cannot be separated from economic, energy and industrial policy priorities. For example, the CIP Foundation has advocated that Denmark should become a “major exporter” of green hydrogen in order to reduce our neighboring countries’ CO2 emissions. The CIP Foundation estimates Denmark’s total PtX export potential with full and timely development of current, known and screened renewable energy areas to be around DKK 100 billion annually. [16]

However, as mentioned, there are large uncertainties in projections of the need for green hydrogen, as the need in industry, for example, may be overestimated due to better opportunities for direct electrification, while there will be a sharply decreasing need for hydrogen for desulphurisation of oil and petrol. According to the German think tank, Agora, we can reduce our total hydrogen need in the EU to 4 million tonnes, i.e. 20% of the current target in RePowerEU, with increased focus on energy efficiency and electrification.[17] In addition to the large uncertainty even in a BAU scenario, hydrogen cannot be an excuse for simply continuing as before. The most effective approach to limiting greenhouse gas emissions from, for example, transport is to limit the volume of transport.

A critical factor in making forecasts for the future market for green hydrogen is also whether economic growth will continue, or whether the climate and biodiversity crisis will lead to a new political breakthrough, where more people will call for alternatives to the growth-based society. At the European Parliament's "Beyond Growth" conference on May 15-17, 2023, for example, there were significant voices advocating for "sufficiency" and quality of life as alternatives to the old mainstream focus on growth in gross domestic product.

More knowledge and research

A lot of progress has been made in research within PtX, and it has also received additional funding over the past 5 years. In Denmark alone, 600+ million DKK is being invested in research into green fuels via the Inno-missions (Figure 3), and the follow-up groups are talking about major improvements compared to existing technology. Denmark's leading research position in terms of knowledge about integrating renewable energy into the electricity grid is, for example, a crucial parameter in terms of the production of green hydrogen. In addition, there are research strengths within both catalysis processes, sector coupling and balancing of energy systems, all of which give Denmark great advantages in terms of developing efficient green hydrogen production.[18] The research strengths are further emphasized by the fact that TotalEnergies chose to establish a "Centre of Excellence" in 2022 with a focus on research and education within offshore wind, hybrid systems and the production of green hydrogen at DTU Risø in collaboration with DTU Wind and Energy Systems. [19]

The research has shown, among other things, that it is important to think in terms of sector coupling and balancing the energy system, which is important in relation to the physical location of PtX plants. Here there is a great need for central control and planning, so that plants are located where they can be connected to the district heating network, have access to sufficient amounts of "ultrapure" water, renewable energy and biogenic CO2, and PtX infrastructure.

Finally, there is the consideration of citizens, who can quickly turn against the location of large industrial complexes in their immediate area. All in all, this creates a complex planning task, which today is largely outsourced to municipalities, which do not necessarily have the right technical skills to make the right assessments. At the same time, municipalities experience cross-pressure in the form of competition that lies in the opportunity to become part of “the next wind turbine adventure”.

One must avoid being locked into expensive and inefficient infrastructure and PtX production facilities – either because one has overinvested at a premature stage, or because one has not taken into account in the planning the benefits that may be in the form of flexible consumption, utilization of surplus heat, etc. For this reason too, it is very important that thorough analyses are made of the real future hydrogen demand and the optimal locations of PtX facilities in terms of society and resources. These considerations must be balanced with the need to get the emerging PtX industry up and running quickly, so that the industrial and research strengths are utilized in the best possible way.

Do we have enough green electricity?

Scaling up PtX capacity will require the expansion of large amounts of new green power over the next decades. Table 1 shows that full direct (battery electric) and indirect (PtX) electrification of Denmark's transport sector would result in an energy demand equivalent to 12,3 GW. This is a scenario where Denmark produces 300% more PtX fuels for shipping than is currently refueled in Denmark, as Denmark is well positioned to supply green fuels for shipping in the North Sea and the Baltic Sea.

Taking into account the expected increase in transport work towards 2050, the total need increases to 15,2 GW. In a scenario where transport work falls by 7,5%, the total energy consumption is adjusted to 12,0 GW. Any limitation of transport work (as well as energy efficiency improvements per kilometer) will make it easier to solve the challenge of ensuring enough renewable energy. For example, it can be mentioned that several global companies (PwC, Pfizer, etc.) have set goals to reduce work-related travel by 50% or more compared to pre-COVID. An upcoming CO2 tax on shipping and aviation may also limit the expected increase in transport work. Outside the transport sector, a reduction in the consumption of ammonia as fertilizer (in the future e-ammonia) may also have a beneficial effect in reducing the level of PtX demand.

But all in all, the transition from fossil to PtX-based feedstocks (energy and raw materials) across sectors and the ambition to export PtX products abroad means that over the next few decades a significantly greater expansion of PtX can be expected than the need to convert the transport sector. For example, the Danish Energy Agency expects energy consumption for PtX to be around 125 TWh per year on PtX in 2050. In 2022, Denmark's total electricity consumption was 35 TWh.

It is therefore absolutely necessary to plan a faster expansion of clean renewable energy, so that Denmark not only has enough green power to electrify transport, industry and the heating sector, but also gets enough green power for the new PtX factories that are being planned around the country. It is crucial that the expansion of PtX does not lead to increased consumption of fossil energy sources in the electricity sector, even during a transitional period.

Denmark's total renewable energy capacity was 2022 GW in 10, but there is broad political support for a massive scale-up of renewable energy (Figure 4), and there is strong agreement that the potential for renewable energy in Denmark is massive. For example, the Danish Climate Council estimates an immediate renewable energy potential of at least 32-83 GW, while the Climate Partnership for the Energy and Utilities Sector estimates a total technical maximum potential of around 180 GW for offshore wind alone.

Denmark has a unique potential to produce clean renewable energy through large quantities of offshore and onshore wind turbines, and we can expand much faster with solar cells. A critical prerequisite, however, is that the capacity of the electricity grid is significantly expanded, which requires large investments of billions in both the distribution and transmission grid. It is crucial to secure the necessary funds to expand the electricity grid so that the green infrastructure is made ready to ensure a faster scale-up with renewable energy.

Unfortunately, there is currently a significant risk that the production of PtX in the short term could trigger additional fossil fuel consumption in the energy sector, because the expansion of solar and wind energy is still far too slow. As shown in Figure 5, Denmark's energy consumption up to 2030 already exceeds the expected renewable energy production, and the expected 20 The projections of Denmark's electricity consumption in this section are based on adopted policies for the electrification of road transport and the combined heat and power sector. RGO recommends accelerated electrification of these sectors, e.g. stopping the sale of fossil-fuel cars by 2025 at the latest, and that PtX production in 2030 increases the gap between expected consumption and renewable energy production[20].

But there is considerable political scope for scaling up the production of renewable energy by and towards 2030. Figure 5 illustrates well how important it is to maintain a high expansion rate. Here it is extra problematic that the energy islands appear to be delayed, and a solution has not been found for the open-door scheme, which could otherwise potentially deliver 23 GW in 2030.

There is therefore a very significant risk that expanding PtX production and meeting the Danish target of 4-6 GW electrolysis capacity could mean that Denmark could end up having to increase its imports of electricity from our neighbouring countries. Since this electricity is not 100% renewable, it could also trigger additional fossil fuel consumption in the energy sector. Politicians have a great responsibility to ensure that PtX production does not “run away”, especially in relation to electrolysis plants in operation before 2028, which are exempt from EU rules on financing additional renewable energy. Green Transition Denmark assesses that an electrolysis capacity in excess of 6 GW significantly increases the risk of additional fossil fuel consumption in the energy sector.

Politicians have a major responsibility to ensure that this green energy shortage situation does not arise. This is also why they should do everything they can to accelerate the expansion of renewable energy, including in particular solar energy and onshore wind. This will also be necessary to fulfill Denmark's ambition to be a net exporter of green energy by 2030.

In the longer term, the Danish Climate Council estimates that it is “less likely that expansion with Power-to-X will lead to increased global emissions” as the expansion of renewable energy during the 2030s is expected to catch up with energy consumption. In light of the recent delays in the expansion of offshore wind, this seems a bit too optimistic an assessment. On the contrary, there is a risk that the PtX factories will lead to a faster expansion of electricity consumption than the corresponding expansion with renewable energy. And at the same time, there are still significant amounts of fossil energy in the heating sector, transport, industry and agriculture, which must be converted and run with electricity from renewable energy. This may create a systemic backlog. On the other hand, scaling up PtX production will create increased demand for electricity, and this may indirectly give more market players incentives to invest in more renewable energy. Increasing demand for green electricity will, all else being equal, ensure a higher price, especially during times when electricity is cheap (as this is when there will be the greatest incentive to produce PtX fuels).

Displacement of CO2

PtX is never greener than the building blocks it is assembled from, and it is important to consider what is the most efficient way to remove CO2. The use of green electricity in other sectors thus often has a greater direct CO2 displacement effect than the displacement resulting from PtX production.

Green Transition Denmark has therefore made a number of calculations based on the national emission factors, as shown in Table 2 below. For example, by far the largest direct CO2 displacement per GJ is achieved in heat pumps (up to 375 kg/GJ), followed by electric cars instead of cars with combustion engines (up to 148 kg/GJ), while PtX for marine fuel only displaces 47 kg/GJ. Therefore, it is a key point that the expansion of PtX production must not undermine the electrification of the CHP sector, road transport, etc. However, as stated above, this can be offset by ensuring sufficient expansion of renewable energy. In addition, there are a number of factors that are relevant to consider.

In a national context, sufficient supply of green electricity is currently often not the decisive bottleneck in the transformation of, among other things, the combined heat and power sector and road transport, where electrification is limited, for example, by the hesitant replacement of cars with combustion engines with electric cars. At the same time, PtX will play an important role in handling fluctuations in renewable energy production by taking power when the wind blows more than Denmark can consume nationally and export to our neighboring countries. In terms of price, it should be encouraged that PtX production is arranged flexibly and produces to the greatest extent possible when there is a surplus of power and is adjusted down when there is a power shortage. Since further processing of hydrogen to, for example, e-ammonia and e-kerosene is more energy and time-consuming to switch on and off than the electrolysis itself, these processes should run more stably, while hydrogen production is made flexible.

In addition, it is important to see PtX in Denmark in a European and global context. Internationally, Denmark is well positioned to develop and scale up PtX, as we have access to massive wind resources in the North Sea, know-how from leading companies and research strengths (Topsoe, Ørsted, DTU, etc.), investment capital (pension funds, CIP, etc.) and players in relevant sectors (aviation and shipping) with a high willingness to pay for PtX fuels.

As a pioneer country, Denmark can thus contribute to kick-starting an urgent green transition in maritime and aviation (in the long term, there will probably be lower costs for large-scale PTX production from solar energy in, among others, Australia and several North African countries, but according to the CIP Foundation, Denmark can produce hydrogen 5-10% cheaper than the other North Sea countries).

If we see Danish PtX as a piece in a larger puzzle that is to ensure global climate neutrality, it therefore makes sense to include considerations other than the marginal effect per kilowatt hour. This is also emphasized by the IPCC pointing out the need for deep reductions in all sectors and the UN Secretary-General Antonio Guterres' call for climate action on all fronts: "Everything everywhere all at once".

EU regulation of PtX and renewable energy

Power-to-X in Denmark should be seen as part of the development on the European market. And EU regulation will determine overall guidelines for the production, distribution and use of PtX products in Denmark. The EU Commission has established a number of criteria for when hydrogen and hydrogen-based fuels can be classified as green. In popular terms, PtX must be produced when and where the wind blows or the sun shines. And PtX producers must pay for the expansion of new additional renewable energy, i.e. in addition to what is built for the general electricity grid. This is to prevent the production of PtX from drawing green power from the general electricity grid and thus resulting in additional fossil fuel consumption in electricity production. In practice, however, capital is not the only limiting factor, as available raw materials, labor and land are also limited, and it can therefore be difficult to ensure absolute additionality. At the same time, it is clear that PtX has significant practical, economic and energy system limitations. It is crucial to ensure that use is limited to sectors without alternatives – strong incentives should also be ensured to promote high energy efficiency in the PtX industry. Considering the size of the projected PtX production, it is clear that even marginal efficiency improvements will have a major impact on the total electricity consumption for PtX.

Denmark can play an important role as a pioneer in the development and scaling up of production and use of green PtX fuels in maritime and aviation, but it is important to be wise, to use energy wisely and to set high safety requirements so that new climate and environmental damage is not created as a result of, for example, leakage. Denmark must compete on high standards and exploit its industrial strengths. Both maritime and aviation are far behind in the green transition, and Denmark can, among other things, based on large wind resources in the North Sea and experience in wind energy, play an important global role in testing and developing new value chains and business models.

Do we have enough green carbon?

Hydrogen is often not practical to use as a direct propellant in long-distance maritime and aviation, primarily due to hydrogen's low energy density, which means that it takes up too much space. Therefore, it will often be necessary to upgrade the green hydrogen to, for example, e-kerosene for aviation or e-methanol for maritime transport[21]. Both e-kerosene and e-methanol require the addition of carbon, just as carbon will be needed to replace fossil raw materials in the plastics and chemical industries. Overall, the Danish Climate Council estimates a total need for carbon in the form of CO2 of between 20 and 38 Mt in a climate-neutral Denmark.

As CO2 sources are phased out from the CHP sector, finding sustainable sources of CO2 will become an increasing challenge. According to the Danish Climate Council, Denmark has a budget of 6 Mt of sustainable biogenic CO2, less than a third of the low estimate for the need for CO2 (20 Mt). The Danish Climate Council's estimates are consistent with a study from Aarhus University, which predicts a total Danish CO2 need of 23 Mt and a sustainable biogenic potential of 7 Mt. [22]

Given the future shortage of sustainable CO2, carbon-containing PtX fuels and products should be prioritized for sectors and processes that do not have access to available alternatives. This applies to aviation fuel and plastics, for example, while shipping should focus on carbon-free fuels such as e-ammonia. In addition, the need for CCS should be minimized as much and as soon as possible by implementing rapid and comprehensive reductions in greenhouse gas emissions in all sectors, as every ton of CO2 stored will not be available for PtX production.

Since PtX is likely to remain part of the future climate-neutral energy system, it should be considered to what extent increased incentives for CCS of biogenic carbon undermine access to the same biogenic carbon for PtX (CCU). It would be problematic if PtX production starts to use fossil carbon and thus prolongs the life of fossil energy. RGO therefore recommends that biogenic carbon be prioritized for CCU over CCS. Even if carbon consumption is limited as much as possible and prioritized for CCU, there will still be a need for carbon in a climate-neutral Denmark and the EU.

The report is published in August 2023.

Prepared by Rasmus Bjerring Larsen & Jens Dahlstrom Iversen.

Green Transition Denmark is an independent non-profit environmental organization that has advised on the green transformation for more than three decades. Like a green solution tank we will deliver concrete, realizable and ambitious solutions that can accelerate the transition to an absolutely sustainable society.