Hydrogen – a flexible power source – can help address numerous significant energy concerns. Currently, hydrogen production requires non-renewable energy sources such as natural gas and coal, which emit a material amount of greenhouse gases each year, primarily in the refinery and chemical industries. Carbon capture from non-renewable or green energy sources, combined with green hydrogen production, can assist in decarbonizing emission-intensive industries, such as iron & steel and transportation, where eliminating GHG emissions has proved challenging. Hydrogen has a lot of growth potential, and the hydrogen initiatives embraced by more than 40 nations have raised the low emission aspirations even more. Of these countries, nine nations, responsible for about one-third of the total carbon emissions from the energy industry, have unveiled their domestic strategies for enhanced hydrogen use between 2021 and 2022.
Nonetheless, more agile efforts are necessary to prop up the demand for clean hydrogen, which makes up only 1% of hydrogen produced and used globally. By 2030, the demand for clean hydrogen will likely have to be ramped up over 100x (vs 2020 demand) to reach net-zero by mid-century. It is also important to attract funding to speed up green hydrogen manufacturing and lower the cost of production, as well as adopt advanced technologies such as fuel cell technology, electrolysers and carbon-capturing methods of production.
Source: International Energy Agency Analysis
The number of green-hydrogen-generating plants is growing significantly; by 2030, the yearly production of green hydrogen is expected to cross 35 Mt if every declared project is completed by that time. This projection assumes that around 72% will be produced through electrolysis and low-carbon power and the remaining 28% through fossil fuels and the Carbon Capturing, Utilization and Storage (CCUS) process. Only 1.4 Mt of this potential production has reached the final investment decision phase. A promising clean energy source, hydrogen brings several benefits, which can speed up global decarbonization. Characteristics of green hydrogen include:
- Zero-carbon energy carrier, facilitating its use in multiple applications, such as energy cells, combustion machines, turbines, and boilers.
- Ability to complement and integrate with other renewable energy sources (wind and solar), providing flexibility to power grids and enhancing their trust ability.
- Ability to create new sources of value and profitable development, especially for regions with abundant renewable sources and implicit hydrogen demand.
Despite the above benefits, hydrogen faces many challenges in production and distribution. Government funding for hydrogen projects has dropped because of altered initial cost projections brought by supply chain interruptions, fluctuations in natural gas costs and the following challenges:
- Considerable production costs: Producing hydrogen from low-carbon energy is more expensive than producing other forms of hydrogen, including grey hydrogen (generated from fossil fuels without carbon capture) and blue hydrogen (derived from fossil fuels with carbon capture), attributable largely to the high capital costs of electrolysers and low application rates of renewable power sources.
- Demand-supply limitations: The demand for green hydrogen is still low, compared to fossil-based hydrogen supply, which is cheaper and more extensively available. This reduces the urge to invest in green hydrogen infrastructure and creates a competitive market.
- Regulatory bottlenecks and lack of norms: Current regulations limit the development of clean hydrogen by confining the blending of hydrogen into natural gas channels or applying high levies on electricity used for electrolysis, among others. There is a need to establish common norms and standards to ensure the quality and safety of green hydrogen.
- Technical and logistic challenges: The development of hydrogen production facilities is slow and holding back wide relinquishment, as it requires new or upgraded channels, storehouses, refueling stations, and end-use equipment. Moreover, hydrogen is prone to high energy losses during transmission and distribution and has safety issues given its flammable properties and low density.
- Investment conditions: Significant investments are needed in the establishment and development of hydrogen infrastructure, such as electrolysers, channels, storehouses, and refueling stations.
These challenges call for considerable investments, inventions, and collaboration among the stakeholders (such as governments, businesses and consumers) to help realize hydrogen’s full potential as a sustainable source of energy. Autonomous intergovernmental organizations, such as the International Energy Agency, are providing programmatic and practical policy recommendations, analysis and data to governments and global industries to accelerate the growth of green hydrogen.
