Hello. Good afternoon or good morning, everybody, depending on where you're connecting from, and welcome to Verdola's webinar on green hydrogen. My name is Diego Moron. I head the Investor Relations department of the group, and I will be your host today. First of all, we sincerely hope you're all in good health and keeping safe.
In today's session, we would like to share the view of our company on green hydrogen, the technology, the prospects, the business opportunities and our plans to make it an avenue of growth in the coming years. For that purpose, I'm delighted to be joined today by three of the people that are leading our efforts in this field: Austine Delgado, our Innovation Sustainability and Quality Director Mijan Garcia Tola, our Hydrogen Unit Director and Diego Diaz Pilas, our Head of Ventures and Technology. After the presentations, we will give you the opportunity to ask questions to our panel of experts. In order to give as many people as possible the opportunity to participate, we would kindly request that you ask a maximum of two questions. Also, and as a reminder, you can only ask questions through the phone and not through the webcast.
And now without further ado, I will leave the virtual floor to my colleagues. Please, Agustin, the floor is yours.
Thank you, Diego, for this kind introduction. And thank you all of you for attending this seminar today about hydrogen. I will try to explain in this first part what are the challenges, our vision and the opportunities that the hydrogen economy could bring to Iberdrola. So technology ambition first. Well, I assume that most of you already know who Iberdrola is.
But just as a quick reminder, we're a company with more than 52 megawatts of installed capacity. More than that, more than 62% of that is emission free, providing energy to over 100,000,000 people, more than 330,000 employees and one of the top three worldwide utilities. And with a very global footprint, Europe, Brazil, U. S, Mexico, United Kingdom and new businesses in Australia, Japan and Sweden. And as you already know, we have a heavy investment plan for the next period of twenty twenty, twenty twenty five of €75,000,000,000 Well, as you are aware, the evolution of the technology is being driven by the decarbonization challenge.
We strongly believe that this decarbonization challenge is going to be met mostly by the decarbonization of the electricity system plus the capability of the system, the networks and the storage to incorporate all this electricity into the energy system. And this is very important for this decade in which we are entering the end use of the energy that we use in our daily life. And we strongly believe that most of the uses of energy can be electrified very much in a very intense way in this coming decade and could be up to 80% of the demand. This goes from mobility to heat and cooling to industrial processes and so on. But the truth, it is that electricity is not going to be able to meet all the energy uses.
And we will need another energy carrier for those uses. And this energy carrier for sure is hydrogen, green hydrogen, and this is the scope of the meeting that we have today. So as I said, what are those opportunities for hydrogen, for green hydrogen to be as an energy carrier and industrial feedstock in the future? Well, we think that green hydrogen is going to play a key role for those heart of aid sectors. And there will be like, from our understanding, two different steps in this hydrogen economy adoption.
First, it is the current opportunities that hydrogen that green hydrogen can take and it is about the industrial feedstock that hydrogen is used today. As industrial feedstock in the refinery, in the chemical industries, in the fertilizers industry. And in the future, there will be those hard to reach sectors like maritime transportation, air transportation or high temperature industries that probably will use in an intensive way hydrogen. As I said, hydrogen is being produced today, but mostly it is being produced with fossil fuels. 75% is being produced through a steam reforming of oil and mostly natural gas.
24% is still today being produced by gasification of coal and this is emitting a lot of CO2 to the atmosphere. And less than 1% is being produced through electrolysis. In total, 80,000,000 tons of hydrogen being produced worldwide with a range of prices between €1 to €2 per kilogram and with emissions similar to a country like Germany, right? If we want to electrify all this current hydrogen production today, the increase in the power demand worldwide would be 3,000 terawatts per year. That is close to 10% of the power demand of the world today.
And in total, Europe, it's 10% of that, 8,300,000 tons of hydrogen. And Spain, it's close to 500,000 tons of hydrogen. As you know, there are and I mentioned before, there are like different types of hydrogen. And for those types of hydrogen, industry has assigned different colors. Gray hydrogen, it is the hydrogen that is being produced today with fossil fuels, mostly through steam reform or through gasification.
And it emits CO2. Then we have blue hydrogen. Blue hydrogen, it is the hydrogen that is being produced with fossil fuels, also with the steam reforming or gasification, but with carbon capture. So all the CO2 that is being produced, close to 90% of the CO2 that is being produced, would be captured and stored underground, so to produce, let's say, cleaner hydrogen. And then we have green hydrogen.
This is the hydrogen that is being produced through electrolysis, splitting the water molecule into hydrogen and oxygen, being produced with renewable electricity and that is this way of production is consistent with the net zero route that is going to be needed in 2015. You will also hear about other colors of hydrogen like turquoise hydrogen with paralysis of natural gas, pink hydrogen, purple hydrogen and so forth. But I think they are much less interesting, and we will focus on blue and green hydrogen to explain it further. So why green hydrogen we think is going to be the winner? If we have in the left hand side of the presentation, you have gray hydrogen and the amount of CO2 that it produces with per every kilogram of hydrogen.
If you use blue hydrogen, you can capture close to eight kilogram of CO2. For sure, you have to store it somewhere. And this is not that easy. And it adds cost to the process. And you have green hydrogen that doesn't have any kind of direct CO2 emissions.
So gray hydrogen is not an option because of emissions. Blue hydrogen is perceived as an option in the short term, but still, it has 10% emissions. Still, you need to manage eight kilograms of CO2 per kilogram of hydrogen. So it's not that easy to store that amount of CO2 underground. And when green hydrogen becomes cheaper, that we think it can happen at the end of the decade, then you will find yourself with stranded assets that capture all the CO2 and put it into the ground.
So we think that green hydrogen is the option, is the winner, is more suitable for co located production and use, the same way as hydrogen is being produced today. And given the lower final cost, it's going to be the most competitive source of hydrogen by 2,030. So strongly believe green hydrogen is the only environmental and economically viable option for the future. There are two different technologies to produce this green hydrogen, alkaline and product exchange membrane technology. Both of them are commercial, although alkaline is more mature.
Alkaline is a technology that is much more mature. It has been providing hydrogen and oxygen to many industrial processes so far. And it has lower CapEx today, but a bigger footprint and limited dynamical operation. So if you want to accelerate or decelerate or you have more renewables at some point or less renewables at some point, Alkaline will answer in a more difficult way than PEM. Efficiency range, a bit better than PEM today.
PEM, it's commercial, but also it's improving very much, thanks to the development of fuel cells. So it has higher CapEx today because it has platinum electrodes and low duration of membrane. You can have a high output pressure and it's better suited for flexible operations. PEM strain membrane, it is my colleague, Miguel, will talk about that later on. It's the technology that we have chosen for our first demonstration project in Puertollano because of the footprint that is smaller than the alkaline one.
Both technologies, I think, are well placed and will have a role to play in the future, but both need volume to improve cost and performance. So going down the learning curve will be very needed and volume will help to drive to write down this learning curve. Today, gray hydrogen, for sure, is cheaper. As I said, it's one to two kilograms per hydrogen. And green hydrogen is much more expensive, close to €5 €6 per kilogram in standard conditions.
But we strongly think that this cost could go down in this decade to a range of €3 to €2 per kilogram. Why is that? Three factors have to be need to be taken into account: the cost of electricity that we supply the electrolyzer the number of hours that we have this cheap renewable electricity and the CapEx of the electrolyzers. How are those factors going to evolve in the coming years? We expect that we are going to have cheaper and cheaper renewable electricity.
And you know these figures, solar photovoltaics probably will expand the capacity four times in this decade and decrease the cost another 40%, onshore wind three times decreased cost another 30%. And offshore wind, seven times 50% decrease in cost. And we are going to have electricity systems with a high percentage of renewables. Beside, we're going to have increasing load factors from renewables. That will mean that we will have a cheap electricity for the electrolyzers during more time.
So this is the third factor I was mentioning before. And if we look at the cost of electrolyzers, we can see in these two graphs how it's going to be the learning curve. Today, can think about €1,000 per kilowatt installed and we think it's feasible to think about €400 per kilowatt installed of electrolyzer at the end of the decade. And this will help very much to produce this green hydrogen in the range of €2 to €3 per kilogram and to be able to supply this industrial consumption, ammonia and refineries at the end of the decade in a competitive way with the gray hydrogen. Not mentioning blue hydrogen, but as I said before, I don't think it's an option.
So as a recall, the conclusions, electricity cost, electrolyzer CapEx, electrolyzer load factor, all of them together will help us to achieve those €2 to €3 per kilogram, and it will make it competitive with the gray hydrogen if we add to the gray hydrogen the CO2 cost that probably they will increase. If we look at the targets for 02/1930, we can see that the European Union has set up a target of 40 gigawatts of electrolyzers in the European Union. And so far, there have been many countries that has issued their strategies. And we are close to 25 gigawatts of targets from specific countries of the European Union to achieve this goal. It is not only the European Union.
We can see that there are also some other countries like Australia, like South Korea, like Japan, like China, Russia, Morocco but also setting their strategies. So we strongly believe that hydrogen production is going to be a reality in this decade. That is going to be an opportunity for the development of renewables. And we need to develop the hydrogen value change to make it real. And I think the first step that we have to take, it is to be able to produce this cheap green hydrogen.
And why I'm saying that? Because there are some issues still with storage and transportation of the hydrogen. So if we want to store 20% of the annual hydrogen demand, we would need to build 14,000 salt caverns, which would cost a huge amount of money. So anything around storing seasonal energy into hydrogen to somehow flat the renewable production is something that is going to be very, very far in the future because of the cost of storing hydrogen in a proper way, right? The same is applicable to the hydrogen transportation.
To transport hydrogen, it's very expensive. Hydrogen is a very small molecule. And to transport it, you need to compress it at very high pressures. You need to liquefy it or you need to transform it into something like ammonia or something. So transporting hydrogen at cost to hydrogen.
And that's the reason why most of the current hydrogen facilities today are co located to the man sites that are using this hydrogen. And this is what we try to do, to produce cheap hydrogen very close to the demand facility that is going to use this hydrogen because of the cost because of the cost of the transportation and because of the cost of storing this hydrogen. And then we can also talk about future uses of hydrogen apart from being an industrial feed feedstock. So fuel cell electric vehicles that are today very expensive, they should be in the world like 7,000 fuel cell electric vehicles compared to millions of electric vehicles battery electric vehicles. And the reason for that, it is that a part of they are more expensive.
It is that they are much less efficient. If we make analysis of weld to tank and tank to wheel of efficiency in the use of energy of different vehicles, we can see that for battery electric vehicles, we have an efficiency close to 70%, but for fuel cell electric vehicles, we have an efficiency of around 25%. And the reason it is that we have to convert electricity into hydrogen and then back hydrogen into electricity. And all these conversions steal efficiency from your process. So we strongly think that hydrogen will not play a relevant role in light transportation, But it will play a role in the decarbonization of long distance heavy transportation like margin, probably in the form of ammonia or some other forms of transportation like very long distance heavy duty vehicles.
But I don't think we will see light duty vehicles running on hydrogen and they will be running on batteries. And if we talk about residential heating, to produce hydrogen that it is very high added value product and then burn it, it's a shame. It's a pity because it has so lower efficiency compared to a heat pump that we don't think is going to be competitive neither today nor in the future. Hard yen to be served at homes would require so high investment in gas networks
in
adaptation. And apart from that, the total cost of ownership of a system like this wouldn't have high efficiency and the cost wouldn't make it viable. So we strongly believe that blending hydrogen with natural gas is not the solution, is not a route or a path for net zero. And to convert the whole gas infrastructure into hydrogen is too much expensive and it's not that efficient at all. So we don't think this is going to be a bright future for hydrogen applications.
And so far, so good. I will leave the floor to my colleague, Miguel, who will explain our plans as a company.
Thank you very much, Agustin. Always a pleasure to hear you. Very interesting. Now let's move on to the next chapter of the agenda. Please, Miguel, now the floor is yours.
Thank you.
View of what's our forecast for hydrogen in the future. So first of all, we we have to say that we see hydrogen as a global opportunity to follow and help the growing of the company all over the world in renewables. Don't forget that green hydrogen needs green electricity, needs renewables to make real the production of hydrogen. So we think that this is a global opportunity for a global business. You know, following the words that Agustin said, that the European Union has made has a clear view of their goals to decarbonize the industry to 2,050.
So in this process of decarbonization, they believe that the integration of renewable hydrogen into the energy system is a main key to achieve this goal. So they are they believe that there are new facilities of green hydrogen production to be built. And there is an intermediate goal of six gigawatt in 2024 40 gigawatts of electrolyzers in 02/1930. But this is not going to be possible, as our team said, due to the level of cost that right now exists on the hydrogen production if there is no support from the European community. So involved in this financial determination that the community has developed, there are some funds that will help to level the price of the production of green hydrogen, as you can see in the slides.
So where is Iberdrola's business focus? Aligned with everything that Agustin said, we think that the first and absolutely real today use and option for green hydrogen is to replace all the as much gray hydrogen that right now the industry is using. And it's important to say that, as Agustin explained before, this replacement is more effective if you do that on-site close to the customer because all the transportation costs and the storage costs. So we think that for this amount of gray hydrogen that is produced right now in the world, there are some niches that I don't like to call them niches because there's a lot of hydrogen produced in the world. So there are some sectors that needs an argent decarbonization, an argent replacement of gray hydrogen with green hydrogen.
These industries are the fertilizers, the petrochemicals and other niches like glass producers and, for example, hydrogen fat sectors. Don't forget that gray hydrogen is responsible the production of gray hydrogen with methods the that Agustin said, irresponsible for the 2% of the CO2 emissions all over the world.
And what else?
There is some kind of being absolutely agree with Agustin, we need to think that hydrogen is only going to be a solution in those places or those sectors where electricity is not possible or is not efficient. And we think and we are seeing because of the industries demanding it that there are some movements around all of those transportation and mobility where electrification, as I said, is not the best option. I mean, of course, trains, don't forget that in Europe, there are more than 80,000 kilometers of railways without electrification or trains excuse me, ports and airports, captive floats that they don't have time to refuel the battery. So there are some niches that because of mainly the time of recharge or the long distances that they have some kind of opportunity to grow with hydrogen. And we have been seeing this in some places, like I'm going to explain you later.
And later on, I'm sure that we will see some solution for maritime transport be ammonia, could be and planes. And in the very long term, we could see a substitution of natural gas in the production of energy or in the high temperature industry. But it's hard to believe that the costs of producing green hydrogen should level the costs of natural gas. So this only should be possible if the carbon taxes rise up to €150 per ton. So what's our planning figures?
We think that we need to move fast, grow fast, but with small ambition because what needs the market right now is too impulsive, to start moving and to do things. So as you can see in this slide, we only have an ambitious for us, it's it's very ambitious, but our goal is to build 600 megawatts of fertilizer in 2025 with 15,000 tons per year of hydrogen and helping the development of 1,000 megawatts of photovoltaic capacity. But to be absolutely clear, our contribution to the EBITDA of the company is going to be absolutely symbolic. This is we are thinking of hydrogen in a long term business, not a short term business. I have to I bring with me two cases.
They're not cases. In fact, they're realities because as you I'm sure that you know, we have been developing since summer the first phase of Portollano project. Portollano is a fertilizer plant that is that belongs to Fertibaria. Fertibaria is the main fertilizer company in Spain. They produce in this plant in Puertollano, which is in the middle of in the center of Spain and Palos, which is at the South Of Spain.
They produce ammonia for fertilizers. So we together, Fertiberia and Iberdrola made a plan for transforming this. They, of course, they use gray hydrogen for their production. And we made a plan, a long term plan until 2027 to transform this gray hydrogen and gray ammonia production for gray or not green fertilizers to green hydrogen, green ammonia and green fertilizers. We made a four steps plan in both sites.
And we are going to start with a small project, but it's going to be should be I'm almost sure that it's going to be the biggest real project in Europe. We're going to start 20 megawatts of electrolyzer in Puertollano that has the supply of photovoltaic dedicated plant with the support of a battery, and we are going to produce more than 1,000 tons per year of green hydrogen and also oxygen that could help to Fertibaria to be the to produce the green ammonia. So if all this plant does that, as I said at the beginning of my speech, needs, of course, the help of the administration. It's going to make Spain the first country with 100% of the production of green ammonia. Next real project that I would like to share with you is that we won recently, a few weeks ago, the Barcelona Metropolitan Transport Tender.
It consists of Barcelona Metropolitan Transport is going to buy from today to 2030 up to 60 hydrogen 60 fuel cells buses, and they tendered the construction and operation and supply of all the hydrogen green hydrogen for the 60 buses. So we have been awarded with this tender a few weeks ago. And what makes this tender is to strengthen the position of Iberdrola as a benchmark for urban electricity mobility because we are I'm not going say the best, but we are the best in electrical mobility, and we are very competitive in hydrogen mobility as this tender shows. And that's all from my side.
Thank you
very much for your attention, and I pass the floor to Diego.
Thank you very much, Miguel. Very, very clear. And now last but not least, Diego Diaz Pilas will cover the third part of our agenda. Please, Diego, the floor is yours.
Thank you. Thank you very much, Diego. Good afternoon, everyone. After Agustin has set the scene with the vision and Mian has explained in detail our plans, I'm going to talk briefly about Iberdrolisor, which is the electrolyzer company that we announced a few weeks ago and that you have probably read about. So the first is why Iberdrola is actually embarking in a project like this one.
So we've been talking about plans to hydrogen between 2020 and 02/1930, but the reality is that when we look at the number of, let's say, operational projects of, let's say, Power 2x or hydrogen or whatever you want to call that, of green hydrogen, reality is that there are very few projects operational in the world. As Miguel was describing, our twenty twenty one, 20 megawatt project in Porto Llano is going be the largest in Europe just next year. So that gives you an idea of the type of projects that are operational today. So we see less than 100 projects active today with less than 100 megawatts, and that gives you an average of, let's say, one megawatt per project. There are some largest ones.
But in reality, what we have seen when we have analyzed the value chain is that there are strong players that are growing. But for the growth that we are foreseeing, we believe that this value chain needs to be boosted. And that's one of the key reasons for us to actually start working in this area. Second reason is and both Mian and Agustin touched briefly on the ambitions of Europe to actually become a champion worldwide in relation to green hydrogen. This ambition has been made clear both at the European level and also at the Spanish level or Iberian level for Spain and Portugal.
But we see a brief, let's say, difference here. So Europe does not only want to be a champion in green hydrogen when we talk about projects, but also when we talk about technology and industrialization. So let's say that in the past, for instance, if we take the example of PV photovoltaics, Europe has been, let's say, a champion in growth of the technology, but perhaps the continent and several countries have lagged behind other geographies in technology development and industrialization, right? So the perception here and we believe based on the let's say, on all the statements that have been done at both European and Spanish levels that this is not an error that anyone is willing to make again. So we believe that in order to actually get the support that the projects need, we perceive, let's say, a strong push towards the development of the value chain and the industrialization of Europe regarding hydrogen.
And this is the second reason why we have decided to get into the civilizer project that I will give you a bit more color later in the presentation. And the third reason is related to Iberia, right? So there is a rationale. You know that Iberdrola is a global company. Like Miguel was explaining, our ambitions in relation to hydrogen are global.
But why somehow Spain comes first? Well, one of the reasons why Spain or Iberia comes first is related to the renewable resource. So we've seen in Agustin's presentation that the cost of green hydrogen is going to be and is already very tied to the renewable resource. And we believe that Iberia, both Spain and Portugal, are very well suited with a great solar resource and a very good wind resource to actually be one of the most competitive areas in the world in relation to the production of green hydrogen. And in parallel to that availability of resource, there is, let's say, as we have briefly seen in the previous presentations, an ambitious and coordinated effort between both Spanish and Portuguese governments that together add to a goal of six gigawatts of electrolyzers, let's say, on the ground by 2030 and several hundreds on the ground by 2024, which is one of the most ambitious and short term plans in the world.
So with this combined effort, which is adds together more than 15% of the whole European Union target, somehow we believe that Iberia is really on the verge of becoming a renewable hydrogen hub. And this is why, let's say, we are focusing on developing electrolysis, why Europe and specifically, why Iberia. So and then how we plan on doing that, right? So we've talked briefly about the whys. And now we'd like to share with you a bit on the how are we going to do this.
So we've been working with technology companies for more than ten years through our ventures program, and we've been working with them to channel innovation from these emerging companies and startups towards the business of Iberdrola in the form of minority investments, in the form of piloting technologies, in the form of challenges of technologies. And we are ready now to take I realize it's the first example in this program, we are ready now to take a step forward, which is we are detecting need for innovation in the market, like I was describing on the previous slides. And we believe that we can, through Perseo Venture Builder, which is the unit that we recently launched, we can contribute to the launch of transforming internal innovation and knowledge into new businesses, specifically in technologies that are focused on supporting electrification and technologies that are focused in decarbonizing hard to abate sectors. So we've touched briefly based on the whys. This is the tool that we are using.
And now we're ready to give you a bit of more detail on what is Civilizer about, what are the shareholders, what are the partners and what are its ambitions somehow. So the mission of the company is to provide large scale electrolyzer systems to large customers with strong hydrogen demand. As Milan was saying, Iberdrola is focusing first in decarbonizing current hydrogen production. We believe that's really helping go down in costs, and Agustin has also briefed touch based on that. And that's going to be the main focus for Iberdrolaiser as its mission.
So two companies are forming Iberdrola at this point. The first one is Iberdrola, and you know our plans by the previous presentation. And the second one is IngeTim. IngeTim is an international technology group with presence in more than 20 countries, focused on power and control electronics integration and manufacturing of all sorts of electric machines. So we believe it's the right partner to fulfill the goal and the mission that we have set for Iberlizer.
So what are the resources and the main targets that we have in the company? So we have the goal of integrating more than 200 megawatts of electrolyzers by 2023, and we are investing all together with the partners and the different entities more than EUR 100,000,000 in these years and creating more than 150 direct jobs. So this is somehow the mission, but we have already moved since we have created the company. And beyond the current shareholding, we have reached our first agreement with NEL, one of the leading manufacturer of electrolyzers in the world, to further developing the technology value chain in Iberia, which we described was somehow one of the main goals here. So all in all, what we want is for Iberdlyser to fulfill a market need somehow in the same way as Gamesa did in the early days of the wind industry.
So this is not so much for Iberdrola to become a manufacturer. This is not the goal of the company, but more so for helping boosting the value chain and for helping boosting the industrialization of the areas that we believe are needed in order to support the growth of the business, which is the main goal here, and Milan has very detailed described in his presentation. So in all, that's the vision that we have for Riverlizer. And before we wrap up and we have time for questions, since I'm speaking, I will be briefly wrapping up everything we've seen today. So regarding technology ambition, our vision from Iberdrola is that for decarbonizing, the first thing we need to do is electrify as much as possible and as many final energy use as possible.
We have the technology to do so, and we need to really grow that. There are roughly 15%, 16% of final energy demand that is going to be challenging to electrify. We believe that hydrogen can play a very, very pivotal role for decarbonizing that 16%. But if we want green hydrogen to be competitive, we really need to grow the number of projects. And to grow the number of projects, we need to focus in whatever is demand today.
And as Milan was describing, this is current gray hydrogen consumption. So if we focus in the short term on that, then we will be able to lower down cost so that in the midterm, we are able to, let's say, tackle those hard to abate sectors. So why green hydrogen? I think that was made pretty clear by Agustin. Today, it's perhaps a little bit less competitive than other options, specifically with current CO2 prices and current technology cost.
We foresee a reduction a very strong reduction in renewable cost to 2,030 and an increased capacity factor. So that's going to along with the development of the value chain that we were describing before, that's bringing down the cost of green hydrogen so that we believe that's the clear winner. And any other investment is most likely going to become a stranded asset in the midterm. So that's why we are betting our strategy towards green hydrogen. And then on Iberdrola plans and summarizing Milan's presentation, we will have the largest project in Europe only a year from now.
And we have an ambitious plan to 2025 and beyond that has already been described. This business unit is global, So we are not focusing on Iberia or anything, although the first step for the reasons that we explained is going to be focused in Spain. And lastly, but very importantly, in order to, let's say, commit and get the business to develop at the pace that it needs, We are fully committed with the development of the value chain, and that's why we have launched the Iberlizer project that we have briefly described. So with this, I have finished my presentation, and thank you very much.
Well, thank you very much, Diego. And now I think that we can just open the Q and A session. Please, operator, first question.
Thank you. The first question comes from Harry Wyburt from Bank of America. Please go ahead.
Hi, good afternoon, everyone, and thanks very much for the presentation. So I'll just keep myself to two questions. Firstly, on cost. I think you mentioned on, I think, on Slide 23 that you'd need CO2 prices to go to about EUR 150 a tonne in order to make green hydrogen viable for some of the usage cases. I wondered if have you done any analysis on what that would actually mean for the cost to the end user?
And what I'm trying to get a measure for here is if you are a trained company or an ammonia producer or steelmaker, how expensive is it going to be to convert your operations to hydrogen? And then what ultimately is that going to mean for the prices of these products in the end market, just to get a sense of the viability of passing on some of the cost of this to end consumers who buy steel and train tickets and so on? So that's the first one. And then the second one, just on the scale here. I thought it was interesting you mentioned on Slide seven that it's going to be 3,000 terawatt hours of output needed just to convert the current hydrogen consumption industry.
I mean, that's roughly equivalent to the entire power consumption of Europe. And this is just the early steps, right, in the sort of stages of hydrogen. And I guess we get a lot of debate from investors about, oh, is there too much competition in renewables and big oil going to come in and crash returns? But I was wondering, could it actually be the other way around? I mean is it really technically and physically feasible to build enough renewables to actually produce this much power?
So just interested to know if you've kind of done that analysis at a European or global level. And is it really feasible to make this much renewable capacity to produce all this hydrogen in a sort of reasonable time frame? Thank you.
Okay. Thank you for the questions. Well, starting for the M. Well, I think that we have enough renewable resources in Europe and worldwide to produce as much electricity and power as needed. So I don't think there is a lack of resources and there is a limitation on resources.
There could be limitations in specific places or locations like it could be perhaps U. K. Or some specific places, but I don't think there is a limit for the renewable expansion, right? As I said, worldwide, there is more than enough renewable resources. And it's true that this 3,000 terawatt hour, that it's this 10% or even more than 10% of the electricity consumption today is a huge amount, and that's why we see this as a big opportunity for the renewable industry and the utility industry as a global to increase our demand and to be able to provide that.
So no concerns about the capacity of the industry and the renewable resources to provide that hydrogen. So also regarding the question about the cost of CO2 and competitiveness of hydrogen, green hydrogen and so forth, well, it's true that CO2 cost will help very much the competitiveness of green hydrogen production. Our estimation, it is that every €10 per CO per tons of CO2 will add a cost of around €0.1 per kilogram of hydrogen. So with these variables, you can make the calculations. And the truth is that there are some sectors that will arrive to this competitiveness before others.
For example, those industries that are using compressed hydrogen, they will arrive to this to the competitiveness before because of the cost of transportation. Those industries like refineries and fertilizers, ammonia producers, as Mian was mentioning before, they will need a lot of support at the very beginning and then they will struggle to get competitiveness at the end of the decade, but we think it could be somehow achieved. Those uses that you were mentioning before, like steel or cement or these high temperature industries and so on, Okay, this is going to be difficult and probably some kind of regulations will help very much on this competitiveness. But I think that we are in a very exciting decade in which technology will help us to achieve a feasible and technological achievable solution. And then probably we'll be able to make the cost through regulations, through CO2 cost, through decreased cost of the technology and so on, we will try to make and probably will make this technology competitive.
Okay. Thank you very much, Augustine. Operator, next question please.
The next question comes from James Brandt from Deutsche Bank. Please go ahead.
Hello. Thank you for the presentation. It's really interesting. I
had primarily
questions just trying to understand a little bit better the conclusions you have come to around residential heating and
some
of the estimates for costs that you've put out on Slide 18. I'm just trying to understand a little bit better what's going into your hydrogen future best cost estimates. And in particular, you made some comments that you saw hydrogen as being very inefficient compared to natural gas, and you have included your efficiency estimates, so you can contain some boiler being pretty close to 100%. So I was wondering what efficiency estimate you were using there for hydrogen as a particular point. And then if you were able to describe more broadly what assumptions have gone into that future best scenario in terms of maybe electrolyzer cost or overall hydrogen cost to dollars or euros a kilogram.
And I was also wondering whether that slide included an estimate for carbon pricing. I guess that's been quite a few questions, but particularly the efficiency point I'd be interested in your view. And then there's also a comment later on around huge potential storage costs if you wanted to store hydrogen. It was 14,000 sort of cabins and six thirty seven billion dollars investment. Is that European is that a global number or European number?
And I was kind of curious, it sounds huge in terms of the numbers, why it's so much bigger in terms of capacity than we have in the current gas storage networks. And then finally, I was interested if we can circle back to residential heating. If you don't think that hydrogen is going to be a technology for residential heating, what technology do you think we'll be using biomethane to supplement electric heat pumps? Because I don't think many people think that electric heat pumps are going to be enough on their own to be able to deal with the peaks. Thank you very much.
Thank you. So thank you for the question. I think it's a the residential heating one is a very interesting question. So I will start by elaborating a bit more on the hypothesis somehow as per your question that are behind Slide 18. So regarding the efficiency, hydrogen efficiency for heating is the same as roughly as natural gas efficiency for heating.
We are talking about 100%. So that's not we are not, let's say, penalizing, if you want to call it, or we are not saying that hydrogen is going to have a worse efficiency than natural gas for heating. The main difference in terms of hypothesis is related with the difference of efficiency versus electricity. So when you are talking about residential electricity with a heat pump, you see efficiencies on a seasonal basis above 300%. And that's why the OpEx of heat pumps is really way lower than that of hydrogen today and in the future.
Additionally, to this slide, this is not factoring in any upgrade costs that would be required in the gas grid in order to carry hydrogen. So we are only factoring in this hydrogen today figure. We are factoring in, let's say, the wholesale cost of hydrogen plus the actual or the spread today between wholesale and retail for natural gas. So that's only today. And the future vest, we are being, let's say, aggressive in the cost reduction for producing hydrogen in the estimations based on the cost reductions that we see for green hydrogen and adding only that, let's say, spread between wholesale and retail, the same as we are doing in the today case.
So we believe that all in all, numbers are conservative in relation to electricity and very positive in relation to hydrogen. And even with those hypotheses, we believe that in order to cover the residential heating demand, the winner technology is the heat pumps. Additionally, to let's say, additional technologies, we don't see that other technologies like biomethane in terms of the available resource can play a role here. We are talking about huge amounts of energy. And we believe that the technology that is best suited is heat pumps.
Specifically, we are talking about cold climates. There will be some times in which heat pumps will be less efficiency. But overall, in colder climates, you use the heat pump long. And since the OpEx is the main advantage, we see that they are even more competitive. Lastly, to the question on storage, and I think that was just a comment, it's 20% of global hydrogen current production.
So that's the figure where it's coming from.
Okay. Thank you very much, Diego. Operator, please, next question.
Thank you. The next question comes from Javier Suarez from Mediobanca. Please go ahead.
Many thanks all for the presentation from me as well. It has been very interesting. Two or three questions. The first one is a follow-up from one of the previous question on the relative competitiveness of hydrogen versus natural gas down the road. And this mentioned to €150 per ton of CO2 as a sweet factor.
So I was wondering to what price for natural gas you are comparing hydrogen to? Because our calculation is that that swing factor could be at a lower level. So I would be interested in that comparison what you are assuming as cost for natural gas and also what you are assuming for the CapEx to build the electrolyzer at the levelized cost of energy and so on and so forth? Because again, it looks to me €150 per ton too high as a price for that swing to happen. That is the first question.
The second question is on the electrolyzer itself. You have made interesting comments on the different technologies available alkaline versus pen. So you can help us to understand what is in Iberdrola's view the technology that is likely to be the winner or the difference in utilization between both technologies. That would be very, very helpful as well. And the third question is on the structure of the market itself.
So the question would be in the hydrogen value change, what do you think Iberdrola should position itself? It should be a company providing with renewable energy electricity to the electrolyzer? Or is a company that is also going to invest through the whole value chain and is going to deal with the final commodity. And therefore, is going to make use of the electrolysis to produce a new commodity called hydrogen that is going to be commercialized in a liberalized market. Many thanks.
Okay, Javier. I'm going to answer you the to answer to your first question. If we say that we need we would need €150 per ton of CO2 taxes is because we made this exercise with a real client that we are trying to do some test. Of course, this is not it's a pilot. It's not a big scale.
But even with a pilot, even with a small amount of hydrogen injected directly into their engines to produce electricity, we are not going to achieve that breakeven point until we get if we don't get this level of carbon taxes. So I'm sorry to be so pessimistic, but that's the figure that we get.
Yes. Well, regarding the question about the technologies of the electrolyzers, we think that for now on, both technologies are going to live together. We will see and we will wait to see if there is any clear winner. As I said, our client electrolyzers are today cheaper, are today best suited for a steady production and a steady flow of hydrogen. So for industries that need this steady flow of hydrogen, probably our client would provide a better performance on price balance.
For sure, you need to provide electricity to electrolyzer for these steady hours. And this is a challenge that we are facing with our mix of supply of green electricity that we can provide to electrolyzer. So alkalines for those industries needing this steady flow of hydrogen. For those industries that has somehow requirements on a smaller footprint or requirements on needs for higher or lower production of hydrogen depending on the renewable source and so on, then proton exchange membrane would be best suited. And we evaluate in our projects both technologies and then choose any or other.
For the future, the perspective. Well, we have seen very cheap prices, at least nominally, in alkaline electrolysis today. And we have seen a very steep decline on cost of pen electrolyzers and with very good perspectives. So we remain open to both of them. And in the presentation that Diego mentioned about and how we are going to manufacture electrolyzers and so on, or we are going to help the promotion of the company that is going to manufacture electrolyzers, we will be open to both delays because we think both of them will be well suited for different applications.
Last question was about where Iberdrola think it could be positioned itself in the whole value chain. And for sure, I can assure you that we want to provide green electricity to the electrolysis system, but we also want to install and operate electrolysis system and being producer of the commodity, of the hydrogen commodity to final consumers. So I think it is clear our goal of adding hydrogen to the portfolio of products are commodities that we are selling. Beside and to help to develop the value chain the supply chain, we have set up this venture of Iverlizer that somehow will help to develop this supply chain and the offer of electrolyzer systems that will be available for our projects.
Well, thank you very much to the three of you. And the next question please, operator.
The next question comes from Arthur Sitbon from Morgan Stanley. Please go ahead.
Yes. Thank you for taking my questions. The first one is you mentioned the difficulties to make hydrogen green hydrogen a viable option for heating, especially due to the investment required in the gas grid. And I was wondering in that case, how do you think the question of inter seasonal storage will be addressed in a fully electrified model, especially for heating? So that's my first question.
And the second one is we've seen quite ambitious targets at the European level for the green hydrogen industry. I was wondering, in your view, what are at the moment, at this stage, the main bottlenecks to achieve those ambitions? Well,
first question about heating. Well, we have to bear in mind that, for sure, if we want electricity to become the main energy carrier for heating, location matters and different countries will have different requirements. So if we look at countries like Spain, France, Italy and most of the countries where people worldwide lives, we think that heat pumps can cover a very high percentage of the heating needs, right? So I think we have the opportunity to really decarbonize a sector that was before very hard to abate, and now we have the technology to do so. So it's true that for some countries, like it could be U.
K, it could be Norway, it could be some others, maybe you need to have an additional source of energy for those very cold winters in which maybe your electricity network is not going to be able to supply you with energy. For that to think that for those specific situations or those specific climate conditions and so on, you are going to build a whole hydrogen infrastructure because of that with the losses of efficiency that you have, I think it's very premature. So I would say, as many countries are doing, I would go to the easy to the long hanging fruit that it is to trying to electrify as much as possible and to remove as much as possible fossil fuels for our heating system. And then with those, let's say, hard to abate or hard to electrify locations and systems, then we will figure out what solutions can be done. But truly speaking, I think we have the opportunity to remove with cheap energy, renewable electricity, most of the heating needs residential ones worldwide today.
So regarding the bottlenecks, which is a fair question when you when one sees, let's say, ambitions like the 40 gigawatt electrolyzers. So the first bottlenecks on how to reach that level is demand. So right now and that's the main reason why we are focusing on existing demand because existing demand is the only, let's say, large enough volume of demand that can allow to reach those targets and at the same time, removing CO2 emissions. So the first bottleneck that I would probably refer to is demand because future demand only fits 15% of final AE demand is huge, but it's not there yet. The only demand that is there yet is the current industrial feedstock demand, and that's why we are focusing on that one.
And that will be kind of the first, let's say, bottleneck. The second one is to serve that demand that is there. There is, let's say, breach that needs to be made in terms of competitiveness. And both Augustine and Milan briefly touched based on that. Like, okay, we have the demand that is the one that is large enough so that we need to focus on it.
But still, green hydrogen needs some support to actually be competitive with gray hydrogen in the short term. So probably competitiveness is the second bottleneck. In parallel, regulation is probably the third one, so that if we want to tackle that existing demand, that support needs to be also in the form of better regulation and the same for the mid and long term for the hard to abate sectors so that green hydrogen is a more competitive solution. And that's why we've been discussing during the presentation CO2 prices and so on. And probably the last one is also the last part of our presentation, which is the value chain, right?
So we need the value chain to grow quickly enough from 100 megawatt operational projects in twenty twenty to 40 gigawatts only in Europe operational by 02/1930. So that's, let's say, a huge challenge in terms of the value chain, and that's why from Iberdrola, we are pushing in that specific area. So to sum up, I would say demand, we need demand, and the only one that is there today is existing demand. We need a boost of competitiveness in the form of support for green hydrogen to serve that demand, the same for the future demand. And in parallel, we need to, let's say, further develop the value chain so that we are able to make this, let's say, two orders of magnitude growth in terms of what the industry is able to serve.
Another thank you from my side. On behalf of the audience, please, operator, next question.
Thank you. The next question comes from Elcin Mamatov from Bloomberg Intelligence. Please go ahead.
Hi there. I have two questions, please. My first question is on the competition. I mean, utilities are and pure play developers of wind and solar are the main owners and operators of these assets today. There are also intra funds and oil and gas companies that are entering the space.
Who do you see to be the main owners and operators of the hydrogen production facilities come 02/1930? Is it gonna be utilities, oil companies? And as a part of that question, do you see oil companies as a partner for you or as a competitor for you? We've seen a lot of projects where they actually partner up with utilities on some hydrogen clusters. So wanted to hear your view.
And the second question is on your hydrogen business overall. I remember you IPO ed and then later on delisted Iberdrola Renovableis. Are you considering a similar thing for your hydrogen business given that it's not going to contribute to EBITDA anytime soon?
Okay. As we said through the presentation, we hope to become a hydrogen supplier for the industry, but for the other uses of hydrogen in the future. So we want to own electrolyzer assets. And I think that we will have we have today one or two of the keys for competitiveness of this hydrogen. First, it is to have access to a wide portfolio of cheap renewables.
And second, I think, to have the possibility to mix our electricity supplies to provide high load factors for the electrolysis systems. So I think a company like Ebertrola will have in one of the best positions to have a green hydrogen a competitive green hydrogen. So the answer to the question is yes, we will have we own the assets. We will have some competitors for sure. And but we think we will be very competitive in this regard.
Second question about an IPO of the business or something, I think it's very premature. We have just launched this unit this year. I will leave the floor to Miguel if he wants to explain further. IGNACIO Absolutely agree with you, Augustine. It's too premature.
We are right now, we
are in the moment to move this business, to start the business, to make things happen, and we will have time to think about profitability. Thank you very much.
Thank you. Please, operator, next question.
Your next question comes from Jorge Jimaray from JB Capital. Please go ahead.
Hi, good afternoon. Thank you for the presentation and for taking my question. Firstly, on the and take a step back on the electrolytes themselves. As of today, what is the how many for each kilogram of hydrogen? How many megawatt hours of electricity are needed?
So what is the the effective the the conversion ratio? And how do you expect it to evolve until 02/1930? And the second one would be, what is the lifetime of electrolyzer? Is it comparable to a solar panel or at the let's say, in ten years' time, one needs to replace electrolyzer and spend the CapEx again? Thank you very much.
Okay. Thank you very much for your question. There's a thumb rule that is easy to remember is that you need 60 megawatts hour of electricity to produce one ton of hydrogen. That's the common figure right now. I think, I presume that and I'm sure that Alejandro will know better than me that there's some kind of improvement in this area.
But as today, 60 megawatts hour per kilogram per ton. And your second question is how long do the electrolyzer exist? The main the bottleneck of an electrolyzer is the stack. The stack is some kind is something that you can change during the whole life of the electrolyzer. So we are thinking and we have been buying electrolyzer with twenty five years of lifetime, but I'm sure that giving them the right maintenance and change in the stacks, it will last as much as they will be competitive.
Thank you very much.
Thank you very much, Miguel. And I think that we're going for the last question, operator.
Thank you. The next question comes from Miguel Medina from KC Capital. Please go ahead.
Buenos Aires, just one question on the Puertellano project. Who is going to cover the cost differential between the gray hydrogen that Fertibaria is currently using and the green hydrogen? And if that's like a state funding or EU funding, is that subject to some sort of state aid test? Thank you very much.
This is the innovation fund. We hope that this project should be awarded with funds. And of the rest of the steps, we need to have some kind of that level the price of the green hydrogen with gray hydrogen. That's true. If we don't get that funds or that help that we need to levelize the price, the project should
ARAMBARRI:]
be very hard to realize. Thank you very much. Thank you, Milan. And this was the last question of today's session. Thank you so much to Augustine, to Milan, to they both have to rush, to Diego as well for their time today.
And thank you, all of you, for attending to this session. Before saying goodbye, just we would like you to wish you a Merry Christmas. Please stay safe, and we really hope to see you all in 2021. Bye now.