# DNV Report on Offshore Hydrogen: Unpacking the Assumptions
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Chapter 1: Overview of DNV's Findings
Recently, I explored a DNV report that examines the production of hydrogen using electricity generated from offshore wind farms. The headline encapsulates the main takeaway: "Offshore Hydrogen Would Be 10x Cost Of Already Expensive LNG, Yet Europe Is Serious About It." The report suggests a price of €3.21 per kilogram for green offshore hydrogen in its most optimistic scenario, rendering many of its conclusions questionable. However, it’s intriguing to delve into the peculiar assumptions underpinning the claim that offshore hydrogen production could be the most economical option.
The report posits several assumptions, some of which I highlighted earlier. These led me to scrutinize the metrics used to assert that offshore production of hydrogen would be the cheapest method in the future, advocating for Europe to invest heavily in it. These assumptions include viewing hydrogen primarily as an energy carrier rather than an industrial feedstock, utilizing megawatt-hours and gigawatt-hours as measurement units for hydrogen, and suggesting a demand for hydrogen that is seven to twelve times higher than expected, even as major consumption areas are predicted to decline.
A particularly striking assertion was the claim that transporting molecules via pipelines is more efficient than using high-voltage direct current (HVDC) systems. The report indicates that HVDC losses over distances of 1,000 km are between 3% to 3.5%, yet on page 68, it states that losses over 150 km for HVDC transmission are 6.5%. This contrasts sharply with the established figures in the transmission industry. In comparison, the report claims that the total losses associated with hydrogen pipelines and compressors are only 1.5%.
"This disparity is largely attributed to the more compact structure of pipelines relative to cables and the purported higher efficiency of offshore electrolysis, as less electricity would be lost during transit, eliminating the need for long-distance electricity cables."
Given that the lead authors have backgrounds in oil, gas, and hydrogen sectors, one might question whether their vested interests are influencing their conclusions, particularly regarding HVDC technology, which is increasingly viewed as a modern alternative to pipelines.
They further assert that pipelines—large steel tubes requiring concrete foundations—occupy less space than HVDC cables. This claim echoes the nuclear industry’s peculiar arguments about space requirements, suggesting a misunderstanding of the actual space needed for electrical substations and pipeline landing areas.
Section 1.1: Cost Comparisons
The report also claims that underwater pipelines are more economical to construct and maintain than HVDC lines on a per kilometer per megawatt basis. According to the DNV report, the capital costs for an underwater hydrogen pipeline range from €500 to €615 per MW per km, while HVDC lines are priced at €800. Furthermore, HVDC conversion stations are estimated to cost €885,000 per MW, in stark contrast to the €15,000 per MW associated with hydrogen compression.
An additional point of contention arises regarding operational expenses. Surprisingly, the report states that maintaining HVDC cables, which have no moving parts and require minimal inspections, is more costly than operating pipelines, which involve numerous moving parts, compressors, and extensive inspection protocols. The report estimates total operational expenses for HVDC at 6.8% of capital costs annually, while pipelines, including offshore platforms, are pegged at only 5.5%. Given the higher capital costs assigned to HVDC systems, the discrepancy in operational expenses becomes even more significant.
It's worth noting that the report does not mention staffing requirements. The offshore platform, which includes desalination, electrolysis, and compression, functions as an industrial-scale chemical facility that would necessitate a 24/7 workforce. In contrast, an offshore wind farm with HVDC connections does not require permanent staffing. Yet, the DNV report favors the more complex, staffed operation located 100 km offshore.
Section 1.2: Questionable Assumptions
Is this analysis accurate? The lack of referenced sources for the figures presented on page 68 raises concerns about their validity. Despite extensive research, I could not find external validation for these numbers. The only referenced document, the DNV Energy Transition Outlook, contains none of the metrics discussed. It seems as though the data on page 68 was generated to support the conclusion that offshore production is the most efficient method for green hydrogen production.
The report also claims that onshore solar-to-hydrogen electrolysis is the most expensive option across all modeling scenarios, positioning offshore wind-to-hydrogen as the most cost-effective solution in the future. This assertion raises questions about its basis. It cites offshore wind capacity factors of 57% and an MWh cost of €32.12 by 2030, which is purportedly lower than both onshore wind and solar.
While offshore wind energy is indeed promising and boasts high capacity factors, the average for offshore installations is typically below 50%. It's difficult to see how it would be more affordable per MWh than onshore alternatives. This claim serves to justify the rationale for generating hydrogen far from shore.
Chapter 2: The Hydrogen Pipeline Vision
The bulk of the report focuses on the ambitious yet improbable vision of a European hydrogen backbone, consisting of extensive pipelines designed to transport hydrogen across the continent to various industrial and transportation hubs. Eight pages discuss the need for a significant increase in hydrogen demand, while eleven pages dismiss all hydrogen production methods except for offshore systems adjacent to wind energy. Five pages detail the potential for offshore hydrogen production, necessitating vast new pipeline networks.
Additionally, nineteen pages are dedicated to the envisioned hydrogen pipeline backbone, which remains largely speculative.
As previously noted, claims that hydrogen pipelines are significantly cheaper per MW than HVDC lines often stem from faulty assumptions and flawed system boundaries. This situation is exacerbated by the biases of those conducting the studies.
To highlight this point:
"The study was commissioned by GASCADE and Fluxys, a consortium of pipeline operators eager to promote Europe's energy transition and enhance energy security."
Thus, it appears that DNV, despite its reputation for quality research, produced a report favorable to pipeline operators, staffed with individuals inclined to support the use of hydrogen as an energy source. It raises the question of whether European policymakers are fully aware of the report's origins and motivations, even if they consider it credible for their purposes.
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