Klima-, Energi- og Forsyningsudvalget 2024-25
KEF Alm.del Bilag 47
Offentligt
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OVERCOMING THE
RENEWABLE ENERGY
STALEMATE IN DENMARK:
Unlocking Denmark’s renewable energy potential through
the lower 7 hydrogen pipeline infrastructure anchored by
Njordkraft
23 September 2024
H2 Energy Esbjerg APS
Borgergade 38, 1. 6700 Esbjerg, Denmark
 KEF, Alm.del - 2024-25 - Bilag 47: Præsentationsmateriale fra H2 Energy Europes foretræde den 24/10-24 og rapporten "Overcoming the renewable stalemate in Denmark"
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CONTENTS
1.
2.
3.
4.
EXECUTIVE SUMMARY
THE PROBLEM: DEFINING THE IMPASSE
THE OPPORTUNITY : GERMANY’S HYDROGEN DEMAND SIGNALS
OUR PROPOSAL: AN INVESTIBLE PROPOSITION FOR THE LOWER 7 PIPELINE
NETWORK ANCHORED BY NJORDKRAFT
THE CONCLUSION & OUR ASK
PROJECT SUMMARY AND COMPANY OVERVIEW
ABOUT NJORDKRAFT
ABOUT H2 ENERGY EUROPE
ABOUT TRAFIGURA
3
3
5
6
9
10
10
10
10
5.
6.
6.1
6.2
6.3
7.
SOURCES
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1.
EXECUTIVE SUMMARY
•
Denmark has a
unique opportunity
to capture a significant share of
Germany’s hydrogen
import requirement of 45-90 TWh per year
(1.4 to 2.8 million tonnes p.a., equivalent to
10-20 GW of electrolysis capacity)
starting from 2028
due to its abundant offshore wind
resources and existing pipeline connectivity to northern Germany
The conversion of the 'Lower 7' hydrogen pipeline,
connecting Esbjerg to Ellund on the
German border, is the
most logical, lowest-risk and lowest-cost
step to capture this
opportunity before competing sources appear in the market
With a total project cost of EUR 1.8 billion,
the 1 GW Njordkraft electrolyser
project in
Southwest Jutland represents an investment by H2Energy Europe (part of Trafigura group) of
nearly
4x the expected cost to Energinet of implementing the Lower 7 hydrogen pipeline
Njordkraft is the most advanced project in Denmark and the only one
ready to commit to up
to 709 MW H2 HHV (i.e. c.600 MW H2 LHV) of pipeline capacity by late 2028.
This
commitment represents ca. EUR 30 million in annual payments and
covers more than 75%
of the pipeline's estimated annual costs and capital recovery
The 25% shortfall in revenues represents a maximum
cumulative deficit projected at less
than EUR 30 million.
By 2033, as utilisation ramps up after Njordkraft comes online, the
pipeline will begin generating surplus revenue, reaching a fully positive financial position by
2034 - only six years into operation
•
•
•
•
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THE PROBLEM: DEFINING THE IMPASSE
Denmark possesses significant potential for offshore wind energy, bolstered by the North Sea’s exceptional
wind resources and seabed conditions. To harness this potential, Denmark has launched several large-scale
offshore wind projects, including a tender in 2024, the country's largest to date, which aims to add at least 6
GW of new capacity across six wind farms. This capacity could potentially reach over 10 GW through
overplanting synergies. However, there is a major obstacle: Denmark’s current electricity grid cannot
accommodate this surge in energy, and grid upgrades would be prohibitively expensive.
The solution lies in transforming surplus wind energy into hydrogen and exporting it via dedicated hydrogen
pipelines. However, this presents a "chicken and egg" dilemma:
•
•
Wind developers
are hesitant to bid aggressively on projects without the certainty of a hydrogen
pipeline to facilitate grid integration of new generation capacity.
The Danish government
is reluctant to commit to developing hydrogen infrastructure without clear
demand signals from hydrogen end users. By contrast, Germany’s
Import Strategy for Hydrogen and
Hydrogen Derivatives
published in July 2024 focuses on hydrogen infrastructure readiness,
anticipating that German industries will rely on hydrogen imports from Denmark before the end of
this decade.
This impasse risks delaying the development of wind projects, stalling the construction of Power-to-X (PtX)
plants, and missing the economic opportunities available to Denmark in a future energy landscape
dominated by renewables in Northwest Europe. Without resolution, Denmark's energy transition ambitions
could be severely hindered. The 2022 Energinet report,
Pathways Towards a Robust Future Energy System
,
emphasises the need for a hydrogen system that is co-optimised with the electricity grid to fully realise the
renewable energy potential of the North Sea.
Denmark’s future energy system will require seamless integration across electricity, gas, and hydrogen
infrastructures. By 2030, Denmark’s offshore wind potential could reach 35 GW, making a hydrogen pipeline
network essential for leveraging this renewable energy and connecting Denmark to the broader European
hydrogen backbone. Without a robust hydrogen network, Denmark risks losing its competitive edge in
renewable energy and hydrogen production.
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2.
THE OPPORTUNITY: GERMANY’S HYDROGEN DEMAND SIGNALS
Germany has laid out ambitious plans to establish an integrated hydrogen production and distribution system
in the North Sea region, positioning itself as a key hub for hydrogen imports and consumption. Germany’s
hydrogen strategy plays a pivotal role in enabling the buildout of a dedicated hydrogen pipeline network.
Germany’s “Wasserstoff-Kernnetz” foresees the construction of a hydrogen grid of nearly 9,700 km, which
would entail 60% converted gas pipelines and 40% newly-built connections. Investment costs are estimated
at €19.7 billion. By offering tax rebates and state-backed contracts-for-difference support for hydrogen
pipeline investments until 2055, the scheme provides certainty to hydrogen Transmission System Operators
(TSOs) and accelerates the development of critical hydrogen infrastructure.
The
German Import Strategy for Hydrogen and Hydrogen Derivatives
outlines plans for a cross-border
hydrogen pipeline linking Denmark and Germany, with operations of pivotal hydrogen pipeline sections in
North Germany commencing by 2028/29. German industrial users—such as those in the steel, refinery, and
ammonia sectors—are counting on hydrogen supplies from Denmark to meet their decarbonisation targets
by 2028.
Delays in Denmark’s hydrogen infrastructure could make Danish projects less competitive in German
hydrogen tenders, jeopardising
contracts worth up to EUR 1.5 billion in annual revenues from 10-year
supply agreements with German industrial customers.
Specifically, tenders are currently underway with
steel producers and oil refineries that are backed by state subsidies or policy tools designed to incentivise
the uptake of renewable hydrogen in bulk volumes to meet decarbonisation mandates set out in EU’s
Renewable Energy Directive. Thus, delays in implementing hydrogen infrastructure in Denmark presents a
major risk of losing these opportunities to competitors. Imported hydrogen volumes via waterborne cargoes
from other low-cost production regions such as the Iberian Peninsula, North Africa, North America and the
Middle East could increase geopolitical risks and create vulnerabilities in energy security, particularly for
North West Europe, as it moves away from Russian natural gas. As an early mover, Denmark is well-
positioned to cement its lead in long term supply of renewable hydrogen to European consumers who are
grappling with uncertainties caused by delays in the implementation of the Delta Rhine Corridor network
originating in the Netherlands. Repurposing existing natural gas pipelines for hydrogen, as recommended by
policymakers and industry experts, would be more cost-effective and efficient than building new ones. This
strategy would not only accelerate hydrogen integration but also enhance Denmark’s renewable energy
capacity.
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3.
OUR PROPOSAL: AN INVESTIBLE PROPOSITION FOR THE LOWER 7 PIPELINE
NETWORK ANCHORED BY NJORDKRAFT
To resolve the impasse, we propose an investible solution, anchored by Njordkraft’s commitment to long-
term pipeline transport capacity. This proposal focuses on developing the
Lower 7 Hydrogen Pipeline
Network—infrastructure
connecting
Esbjerg
to
Ellund
in southern West Jutland, which will transport
hydrogen from Denmark to Germany.
Key aspects of the proposal:
•
Lower 7 Pipeline Network:
A 150 km hydrogen pipeline system consisting of:
o
o
57 km east-west corridor from Endrup to Egtved (new hydrogen pipeline).
90 km north-south section spanning from Egtved to the German border at Ellund
(repurposed pipeline).
This network provides the highest value-for-money investment for Denmark’s hydrogen infrastructure,
supported by long-term user commitments, including Njordkraft’s advanced discussions with German off-
takers.
•
Initial Hydrogen Production:
The Lower 7 pipeline will have an initial capacity of 3,000 MW of
hydrogen production, enabling distribution capacity for up to 670,000 tonnes of hydrogen annually.
Njordkraft proposes to contract 130,000 tonnes of annual hydrogen supply, covering a large
proportion of estimated pipeline investment, capital recovery and ongoing maintenance and
operations. Similarly, other large scale PtX projects under development near Esbjerg by seasoned
developers present a high likelihood of becoming significant customers for contracting additional
pipeline transport capacity. Collectively, these projects are poised to contribute to the long-term
utilisation of Denmark’s hydrogen infrastructure.
•
Njordkraft’s Role:
Njordkraft’s 1 GW electrolyser plant in Esbjerg, Jutland, has cleared key
development milestones, including completion of Front-End Engineering Design (FEED), securing
grid connection, building and environmental permits. Njordkraft is designed to operate reliably over
7,500 full load hours (FLHs) while fully complying with the EU's Delegated Act for Renewable Fuels of
Non-Biological Origin (RFNBO) hydrogen.
To substantiate an investable business case for the Lower 7 pipeline, key assumptions and cost
drivers were triangulated from publicly available information from Energinet and other European
TSOs and data from comparable power and utilities infrastructure investments in Europe. Early
modelling suggests that the annual recovery amount associated with capital depreciation, regulated
returns and operations and maintenance would amount to EUR 37 million annually over the asset's
useful lifespan. By comparison, Njordkraft is projected to generate EUR 28m – 30m annually in
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pipeline transport capacity payments, thereby establishing a strong business case for the DKK 3.8
billion (approximately EUR 500m) investment required to develop the Lower 7 pipeline.
•
Economic Analysis and Tariff Model:
According to information published by Energinet in September
2024, the capacity tariff model for the Lower 7 pipeline is expected to closely mirror the current tariff
structure of the Danish methane transmission network. The entry-exit split for booked pipeline
capacity, along with a uniform cost allocation method, has been adopted in the economic evaluation
of the Lower 7. During the initial period, the pipeline’s economics will be anchored by Njordkraft’s
volumes.
All figures in EUR m
37.41
28.45
37.41
28.45
37.41
28.45
42.67
37.41
56.90
56.90
Annual recovery amount
37.41
37.41
19.48
19.48
Capacity tariff revenue
5.26
17.33
Net Surplus / Deficit - Capacity tariff
revenue less Annual recovery amount
2029
(8.97)
2030
(8.97)
2031
(8.97)
2032
2033
2034
Net Surplus / Deficit - Cumulative
(26.90)
Long-term capacity commitments from Njordkraft, which will inject 18 tonnes of hydrogen per hour
(709 MWh H2 HHV per hour), are expected to generate approximately EUR 28.4 million annually. As
further electrolyser capacity comes online, the proceeds from capacity bookings are anticipated to
increase. Advanced projects, from credible developers intending to utilise the Lower 7 pipeline,
represent over 2 GW of electrolysis capacity by the end of the decade. However, in the accompanying
chart, a modest ramp-up in capacity bookings is assumed, with 2 GW of capacity projected to be
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online by no earlier than 2033. Implementing the Lower 7 as a priority will significantly enhance the
value for money of public funds committed to the development of the Danish Hydrogen Backbone
network, particularly during the early years of demand maturation.
The projected annual revenue required to cover capital expenditures, operating costs and the
regulated return on capital, is estimated to amount to approximately EUR 37 million. This
corresponds to capacity revenue of around 24 tonnes of hydrogen per hour (945 MWh H2 HHV per
hour).
The analysis assumes a capacity tariff for multi-year firm entry and exit bookings respectively of EUR
20/kWh/h on an annual basis, aligned with tariff methodologies used by other relevant TSOs in the
European Hydrogen Backbone, such as Fluxys in Belgium and Gasunie in the Netherlands. While
tariffs are subject to inflation and potential changes over time, future adjustments could be based on
an optional market participation mechanism with market growth and maturity. The utilization of 945
MWh H2 HHV per hour, represents one-third of the pipeline’s overall design capacity of 3000 MWh
H2 HHV per hour. Over time, increased usage of the pipeline is expected to result in tariff
rationalisation such that tariffs align closer to the current methane transmission network rates,
which range from EUR 5 to EUR 7 kWh/h annually for firm capacity bookings with a one-year runtime.
It is projected that in the early years of the pipeline’s operation, income from capacity tariffs will be
lower than the projected annual cost drivers, resulting in an estimated peak cumulative net deficit
(under-recovery) of approximately EUR 27 million by 2031—the third full year of the pipeline's
availability, which begins in 2029. However, as utilisation increases, the pipeline is projected to
achieve surplus collections (over-recovery) from as early as 2033. By 2034, which marks the sixth full
year of pipeline operation, the accumulated under-recoveries could be fully recouped, with the
pipeline entering a positive financial position. Investing in a wider network – such as the “Lower T”,
the “Backbone to Holstebro” or “the fully developed Danish Hydrogen Backbone” as presented in the
Information Package 2 from Energinet – will be accompanied by a larger recovery deficit and a longer
time window to achieve positive financial position (revenue from capacity charges exceed annual
recovery amount). This may largely be attributed to higher investments and uncertainties associated
with capacity utilisation of the wider network.
In comparison, the German government is supporting the construction of a 9,700-kilometre
hydrogen pipeline network, requiring investments of EUR 19.8 billion by 2032. However, operators'
revenues from hydrogen transportation are expected to increase only gradually. To support these
investments, Germany plans to establish an "amortisation account" to cap grid fees for users, with
the expectation that targetted utilisation rates will be achieved no earlier than 2055. This implies a
25+ year time window for achieving positive financial position. By contrast, the analysis indicates the
tangible possibility of reaching financial sustainability within just six years for the Lower 7 pipeline
system when the accumulated deficit of early years could be fully recouped.
•
Expansion Potential:
With compression, pipeline capacity could increase to 7,000–10,000 MWh H2
HHV per hour, further enhancing Denmark’s ability to supply hydrogen to Germany.
By endorsing this proposal and allowing Energinet to proceed with the Lower 7 development, the Danish
government can give wind developers the certainty they need to bid confidently, thereby unlocking Denmark’s
full renewable energy potential.
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4.
THE CONCLUSION & OUR ASK
Denmark stands at a crucial crossroads. The country has a unique opportunity to lead in renewable energy
and hydrogen production and make a meaningful contribution to Europe’s decarbonisation and energy
sovereignty. However, to capitalise on this, the Danish government needs to act decisively by committing to
the Lower 7 pipeline, underpinned by Njordkraft’s long-term capacity commitments. We anticipate a rapid
expansion of the PtX industry once Njordkraft has proven the viability of a model underpinned by hydrogen
exports to Germany with 3+ GW of PtX projects expected to reach Final Investment Decision (FID) between
2025 and 2028. This will unlock a range of benefits, including enabling wind developers to bid in upcoming
tenders and ensuring Denmark's competitiveness in the emerging hydrogen economy.
We ask the Danish government to:
1.
Endorse the construction of the Lower 7 hydrogen pipeline
as a national priority, supported by
Njordkraft’s long-term capacity commitments.
2.
Provide time-bound financial and regulatory support
to facilitate Njordkraft’s collaboration with
Energinet in refining this investible proposition for the Lower 7 network. Such collaboration will
involve joint work on formulating financing solutions that present highest value for money for the
Danish state and also lead to reduced reliance on public funds.
3.
Establish a roadmap for the timely commissioning of the Lower 7 pipeline network
by the end of
2028.
By taking these steps, Denmark can break the current stalemate, secure its role as a key hydrogen supplier to
Germany and Northern Europe and lay the foundation for long-term success in the global energy transition.
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5.
PROJECT SUMMARY AND COMPANY OVERVIEW
5.1
ABOUT NJORDKRAFT
Njordkraft is a large-scale renewable hydrogen production project in Esbjerg, Denmark, developed by H2
Energy Esbjerg ApS, a subsidiary of the Trafigura Group. The project features a 1 GW PEM electrolyser facility,
aiming to produce up to 135,000 tonnes of green hydrogen annually, avoiding 1.1 million tonnes of CO2
emissions each year. It supports the establishment of a cross-border hydrogen market between Denmark
and Northwest European countries. The construction of Njordkraft is aligned with Denmark's offshore wind
farms and its strategic hydrogen pipeline plans. Subject to the certainty of the planned hydrogen pipeline
infrastructure in Denmark, the final investment decision (FID) is expected in 2025, with the plant scheduled
to begin operations by as early as 2028.
Key development milestones include the selection of advanced technology, securing 1 GW electricity grid
connection, completing Front-End Engineering Design (FEED), and making significant progress with export
credit agencies and project financiers. With an investment plan exceeding EUR 1.8 billion, Njordkraft is set to
play a critical role in integrating North Sea renewable resources and promoting cost-competitive hydrogen
production and distribution across Europe.
5.2
ABOUT H2 ENERGY EUROPE
In 2020, Trafigura, a global leader in the commodities industry, announced its investment in H2 Energy. In
2021, Trafigura formed a joint venture with H2 Energy, H2 Energy Europe, to develop large-scale green
hydrogen ecosystems across Europe. In October 2023, Trafigura became the majority owner of H2 Energy
Europe. Major planned projects include a 1GW green hydrogen initiative in Esbjerg, Denmark, converting
offshore wind power, and a 20MW green hydrogen project in Milford Haven, South Wales. H2 Energy Europe
is also advancing a network of hydrogen filling stations along key transport routes in Germany as part of its
strategy to build a comprehensive European green hydrogen ecosystem.
Visit:
https://h2eeurope.com
5.3
ABOUT TRAFIGURA
Trafigura is a leading commodities group, owned by its employees and founded over 30 years ago. At the
heart of global supply, Trafigura connects vital resources to power and build the world. We deploy
infrastructure, market expertise and our worldwide logistics network to move oil and petroleum products,
metals and minerals, gas and power from where they are produced to where they are needed, forming strong
relationships that make supply chains more efficient, secure and sustainable. We invest in renewable energy
projects and technologies to facilitate the transition to a low-carbon economy, including through H2 Energy
Europe and joint venture Nala Renewables.
The Trafigura Group also comprises industrial assets and operating businesses including multi-metals
producer Nyrstar, fuel storage and distribution company Puma Energy, the Impala Terminals joint venture
and Greenergy, supplier and distributor of transportation fuels and biofuels. The Group employs over 12,000
people, of which over 1,400 are shareholders and is active in 156 countries.
Visit:
http://www.trafigura.com
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6.
SOURCES
1.
Energinet (2022).
Pathways Towards a Robust Future Energy System
. Retrieved from
https://energinet.dk/media/y5rhoqjy/pathways-towards-a-robust-future-energy-system_energinet-2023-01-
23.pdf
Energinet (2023).
Hydrogen Transmission Infrastructure Feasibility Study
. Retrieved from
https://en.energinet.dk/media/vggfrlgi/results-of-the-feasibility-study.pdf
FNB Gas eV. (2024).
Hydrogen Core Network Application
. Retrieved from
https://fnb-gas.de/wasserstoffnetz-
wasserstoff-kernnetz/
Federal Ministry for Economic Affairs and Climate Action (BMWK). (2024).
Import Strategy for Hydrogen and
Hydrogen Derivatives
. Retrieved from
https://www.bmwk.de/Redaktion/EN/Pressemitteilungen/2024/07/20240724-import-strategy-hydrogen.html
TotalEnergies. (2023).
Decarbonizing Refining: TotalEnergies Launches Call for Tenders for 500,000 Tonnes of
Green Hydrogen
. Retrieved from
https://totalenergies.com/media/news/press-releases/decarbonizing-
refining-totalenergies-launches-call-tenders-supply-500000
Thyssenkrupp Steel. (2024).
Call for Tenders for Supplying Hydrogen to Direct Reduction Plant in Duisburg.
Retrieved from
https://www.thyssenkrupp.com/en/newsroom/press-releases/pressdetailpage/thyssenkrupp-
steel-is-intensively-pushing-ahead-with-developing-the-hydrogen-economy:-call-for-tenders-for-supplying-
hydrogen-to-the-first-direct-reduction-plant-at-the-duisburg-location-251160
Salzgitter AG. (2023).
Tender for Hydrogen Requirements for SALCOS® Transformation Program
. Retrieved from
https://salcos.salzgitter-ag.com/de/h2tender
2.
3.
4.
5.
6.
7.
8.
Fluxys. (2021).
Non-Discriminatory Tariff Structure for Hydrogen Clusters and Connections
. Retrieved from
https://www.fluxys.com/-/media/project/fluxys/public/corporate/fluxyscom/documents/energy-
transition/h2/2021-12-14----information-memorandum-h2-main---december-21.pdf
9.
Energinet. (2024, September).
Information Package 2 – Danish Hydrogen Backbone
.
Retrieved from
https://en.energinet.dk/media/sktb5frk/information-package-2-september-2024.pdf
10.
Fluxys. (2024)
Natural Gas Tariffs for Firm Entry and Exit Capacity Bookings with a Runtime of One Year.
Retrieved from
https://www.fluxys.com/en/natural-gas-and-biomethane/empowering-
you/tariffs/tariff_fluxys_tenp
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11.
12