Power to Gas – a promising solution to integrate large quantities of fluctuating renewable power

1. Power to Gas – a promising solution to integrate large quantities of fluctuating renewable power Dr. Andreas Kopp E.ON Innovation Center Energy Storage H2 in the economy – the strongest link in the energy chain?, DG Energy, European Commission Brussels, 26.04.2013

2. Reasons for energy storage Variable generation Fluctuating demand households, industry wind power, solar power • Problem • Sometimes deficit in generation • Sometimes grid congestion • = Curtailment of RES& Conventional Generation Energy storage delivers balance and flexibility

3. Energy storage technologies Proven Technology - Potential for improvement - New Technology Availability, Specification, Cost Effectiveness, Acceptance, Dimension Battery (A) CAES Capacitor Pumped Storage P. Power to Gas to Gridor to Caverns or to Power Fly wheel Heat

4. Example: E.ON Power to Gas Pilot "Falkenhagen" Key Parameters • Power: 2 MWel • Hydrogen production: 360 m³/h • Fed into the local gas grid (ONTRAS) • Planned start of operation Q3/2013 • Owner is E.ON Gas Storage pipelineconnection Low voltage supply Control Power supply Goals • Demonstration of the process chain • Optimize operational concept (fluctuating power from wind vs. changing gas feed) • Gain experience in technology, costs, consenting Metering Electrolysis

5. Building steps Groundbreaking ceremony 16thOctober 2012 January 2013 March 2013

6. Example: Power to Gas „Hamburg-Reitbrook“ Key Parameters M&R • Power: 1 MWel (Stack) • Hydrogen production: 265 m³/h • Fed into the local gas grid (Hamburg Netz GmbH) • Project lifetime: 3 years (11/2012–10/2015) • Project volume: 13,5 Mio. € PEM-Electrolysis EMSR Power supply Visitore centre Goals Funding and Partners • Development PEM-Technology • Field test und within E.ON energy infrastructure • Development of business model

7. Hydrogen tolerance of the natural gas grid Source: DVGW-Project G1-07-10 „Energiespeicherkonzepte“ / DVGW G260

8. Hydrogen market structure in Germany TWhH2 66 9% 48% 59% Co-Located 60 90% Steam reforming Refining 45 Captive 36% 30 26% By-Product Ammonia 15 Chloralkali- electrolysis Chemicals 11% 5% Metals 11% Coal gasification Remote other < 4% 0 1% Technology Application Distribution Quellen: IHIS, SRI, DWV, ECON Analysis • A large part of the existing applications is feasible for the integration of renewable hydrogen

9. Willingness-to-pay and costs €/kWh 0,50 Criterias for willingsness to pay Criterias for production costs • Application • Opportunity costs • Regulatory framework • Power price • Investment costs • Interest on capital • Depreciation • Tax, etc. • Operating hours (power price driven, demand driven) • Power efficiency 0,40 0,30 H2 customer price demo fuel stations Production costs H2 H2 produced from biomethane (1. Gen.) 0,20 Customer price Ethanol (1. Gen.) Customer price Biomethane (1. Gen.) H2 produced from CO2-neutral nat. gas 0,10 Customer price CO2-neut. natural gas Hydrogen produced from nat. gas (average market price 2010) 0 NCG spotmarket price nat. gas 9

10. Customer Interest • E.ON and an international gas wholesaler have signed an LoI to jointly cooperate to develop the PtG plant in Falkenhagen • The system is realized to deliver renewable gas to multiple applications via the gas grid Less CO2 emitted Less fossile gas used Certificate Gas Power Industry Mobility Electrolysis + kWh - kWh …. Natural gas grid Natural gas grid H2 Heating Certificate Power

11. European Directives Basis • Directive 2009/28/EC (the "Renewable Energy Directive") targets for 2020: • 20% overall share of renewable energy in the EU • 10% share for renewable energy in the transport sector. • Directive 98/70/EG („("the Fuel Quality Directive") targets for 2020: • 6% reduction of life cycle greenhouse gas emissions • Increase biofuel sustainability with respect to indirect land-use change (ILUC) • Proposalmadebythe Comission 17.10.2012 (COM(2012) 595 final • Amendments to Directive 2009/28/EC, Article 3, paragraph 4 (iii) : “renewable liquid and gaseous fuels of non-biological origin shall be considered to be four times their energy content”. • Pre-requisite for the contribution of PtG towards the targets is the full accountability (of renewable hydrogen) • This would give PtG a chance to mature and thus to integrate large quantities of renewable fluctuating energy 11

12. Estimating the contribution of renewable hydrogen Member States in theNational Renewable Energy Action Plans estimated the contribution of the different forms of energy (electricity, biomethane, etc.) towards the 10% target share for renewable energy in the transportsector (Directive2009/28/EC): Source: Communication totheCommissionon communicating outcome of the Impact Assessment related to requirements of Article 3(4) ofDirective 2009/28/EC, http://ec.europa.eu, SWD(2012) 262 final • ES Conclusion: no need for action since negligible contribution • But this is a Chicken-and-Egg problem: without action, no contribution • Industry is ready for a significant contribution 12

13. Summary • The Falkenhagen project will demonstrate the technology to the public and identify hurdels for the implementation of power to gas • PtG is one solution in the merit order of flexibility to integrate large quantities of fluctuating renewable power • PtG offers renewable gas for industry, mobility, heating, and power generation • Efficiency when using hydrogen in the industry can be >60% • Customers show interest in renewable hydrogen • Artificial economic burdens should be relieved • A regulatory framework should be adapted to allow PtG to contribute to the 10% target share for renewable energy in the transport sector.

14. Innovation Energy Storage E.ON Innovation Center Energy Storage Dr. Andreas Kopp T  +49 201 94614 - 547M +49 151 14 07 42 71E-Mail: Andreas.Kopp@eon-gas-storage.com