GREEN HYDROGEN OPPORTUNITIES IN THE ENERGY SYSTEM

Luc Graré VICE PRESIDENT SALES AND MARKETING [email protected] Early Pioneers in Each Technology Field

2 Hydrogen is key to electrify the transport sector

Hydrogen as preferred future fuel alternative:

ERRY − True zero emission from production to use

TRAIN − Can beat fossil fuel applications on a TCO-

FASTF basis PASSENGER CAR PASSENGER − Low weight (compared to e.g. batteries), especially relevant in the heavy duty segment − Fast recharging (fueling) time − Long driving range

BUS − Low/no need for electric grid upgrades

TRUCK DELIVERY DELIVERY

CRUISE SHIP CRUISE − Not dependent on rare earth metals (e.g. cobalt, lithium) − Global standards for fueling established − Same quality fuel used for small to large applications

− Cleans the surrounding air

TRUCK

FORKLIFT CARFERRY

3 Fossil parity for mobility sector achievable in Norway today

Centralized production close to power or heat source enables business case • Regional hydrogen production, use of low cost renewable energy • Possible to integrate with central heating grid • Parity with taxed diesel possible already from 4-8 ton per day

0.40 NOK/kWh 25 NOK/kg + 13 NOK/kg + 11 NOK/kg = 50 NOK/kg Large scale Central production High pressure Efficient dispensing distribution As conventional 20 MW / 8 tons per day 1,000 – 1,500 kg fuels /truck

4 Cost of wind and solar has dropped by 69% and 88% during the last decade – renewable hydrogen following on the same path

Wind and solar is on a trajectory to become the cheapest form of electricity

1) Wind LCOE Solar PV LCOE • With falling LCOE of wind and solar Unsubsidised levelized cost of energy ($/MWh) 2) Unsubsidised levelized cost of energy ($/MWh)2) prices, renewable hydrogen follows the same path, as electrical power constitute $ 359 70-80% of the total cost of hydrogen

• Record low auction prices for solar PV and wind has seen prices as low as $ 248 $17.7/MWh and $17.86/MWh respectively (as of 2017) 3) $ 157 $ 135 $ 124 $ 125 • Prices are expected to drop further, $ 98 $ 79 LCOE of solar PV and onshore wind are $ 71$ 72 $ 70 $ 59 $ 55 $ 64 $ 55 $ 47 $ 45 $ 42 $ 50 $ 43 expected to fall by 71% and 58% respectively by 20504)

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 • At $50/MWh renewable hydrogen is becoming competitive with fossil fuels and at $30/MWh renewable hydrogen is Note: 1) LCOE = Levelised cost of energy, which is a way of calculating the total production cost of building and operating an electricitybecoming-generating plant competitive in most markets Source: 2) Lazard; Renewables Now, 3) IRENA (International Renewable Energy Agency); 4) BloombergNEF New Energy Outlook 2018 5 Decreasing cost of renewable hydrogen (and oxygen) opening up new business areas

• Wide variety of existing and new markets

where electrolysis can play a major role AMMONIA

REFINERY – Exchanging fossil hydrogen with METHANOL renewable hydrogen (f.ex fertilizer) – Exchanging coal with renewable hydrogen (f.ex steel manufacturing) – Oxygen & heat adds value

• Electrolysis “bridges the gap” between the

OXIDE

STEEL

POWER REMOTE REMOTE TITANIUM TITANIUM power and industry sector, increasing the value of electrons • Ability to adapt to diverse and intermittent renewable energy sources becoming

increasingly important

FARMING

EXPORT

ENERGY ENERGY

ISH

F GAS PIPELINES

6 Growth in renewable hydrogen will accelerate with reduced capex for electrolysers

Hydrogen production - capex price • SMR – “steam methane reforming” is dominating hydrogen production today, using natural gas and $/kW steam 800 • Nel is establishing a new manufacturing plant

700 targeting a >40% cost reduction Fossil parity • Expect to see further reduction in capex with increase 600 at $500/kW production volume, and further size scaling of products capex level 500 • Nel targets capex to drop below SMR over time • Electrolysis expected to be the preferred production 400 SMR w/o CCS – capex range method if opex (i.e. power prices) are low enough 300 (or at parity) with the alternative production methods 200 historic under construction future scale up With current ongoing Future large scale expansion (New products/ technology development) Large scale natural gas reformers Nel large scale alkaline electrolysis

Source: Nel 7 Nel Electrolysers CAPEX - Significant economy of scale

1.000 EURO/kW 900

800

700

600 400 500 EURO/kW

400

300

200

100 MW 0 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 91 94 97 100 9 Factory expansion will drive down Capex

New plant phase 2 + 360MW New plant phase 1 updated 360 Current – MW 40MW

Total Notoden site – Capacity 760MW