Hydrogen’s potential in tackling critical energy challenges
The rapid emergence and growth of hydrogen has highlighted the unique opportunity that the world must make hydrogen an integral part of the energy future. In the 21st century, hydrogen is expected to become a vital component of the industrial fuel supply. It is like coal and oil in that it can serve as a primary source of energy. However, decarbonized hydrogen can be a game-changer in helping strengthen the energy transition and reducing greenhouse gas emissions. There is currently no comprehensive strategy to protect the nations that will drive the future energy demand. Because of the increasing importance of hydrogen, many countries are now trying to secure their own access to the value chains of this resource. The scramble to secure hydrogen could lead to an increase in global energy insecurity, hinder decarbonization, and create resource conflicts. It could also restrict the access of developing and underdeveloped nations to this important clean energy source.
Replacing Grey Hydrogen with Green Hydrogen
World Energy Council and PwC is promoting sustainable energy transitions by engaging with key industry players and policymakers. Despite the promising potential of green hydrogen, the economics of this promising technology are still challenging due to the varying availability and costs of renewable energy sources. Through a comprehensive analysis of the global green hydrogen market, PwC was able to identify the key factors that could drive its growth and provide policymakers with a framework for navigating the future.
Based on the findings of PwC the hydrogen demand growth will continue to be moderate until 2030. It will then accelerate in the years following 2030. By 2050, the global hydrogen demand may also vary from 150 to 500 millions metric tons annually depending on the various factors that affect its development. Some of these include the implementation of energy-efficiency measures, the use of carbon capture and storage, and direct electrification.
Most of the hydrogen that's produced in the world today is labeled as grey, which means it's extracted from natural gas. Unfortunately, this type of fuel is inexpensive and adds to the challenge of improving the environment. On the other hand, green hydrogen is powered by renewable electricity. Although green hydrogen is a more long-term solution to reducing greenhouse gas emissions, it is still more expensive than grey. Countries with abundant renewable resources such as Russia, Australia, the Middle East, and Africa are some of the most attractive regions for the production of green hydrogen. These regions can easily produce low-cost green hydrogen at around 3 to 5/kg. It is expected that its production costs will eventually decrease due to the various factors that affect its development. These include the improving cost of renewable energy, technological advancements, and the lessons from past projects.
Need of a comprehensive framework
A comprehensive framework is needed to ensure that the supply and demand of hydrogen are protected. This can be done through the establishment of rules that govern the various activities involved in the production, transport, storage, and use of this resource. Through the decarbonization of hydrogen, it can help industrial sectors such as steel, ammonia, and petrochemicals reduce their greenhouse gas emissions. It can also be used in the production of sustainable aviation fuels. After the increasing importance of hydrogen decarbonization, several countries have announced various strategies and partnerships. As of 2022, over 40 nations, including the European Union, have announced plans to develop policies and strategies related to hydrogen.
While in August 2022, 39 agreements for the development of decarbonised hydrogen were announced. These are focused on R&D, trade and collaboration, and value chain creation. Several multi-party partnerships have also been established. These are driven by the interests of various business groups in certain regions. The lack of a global framework for the development of decarbonised hydrogen is threatening the fragmentation of the supply chains and the uncertainty of rules related to its use.
In a decarbonized world, hydrogen would be available to all markets and industrial consumers, and at a reasonable price. It would also be acceptable as a fuel source. To ensure that the decarbonization process is carried out in a balanced manner, the Council on Energy, Environment and Water (CEEW) has proposed eight principles that would help develop a global framework for hydrogen. To ensure that the transition to a decarbonized society is carried out properly, hydrogen should be made available to all markets, at a reasonable price, and at scale to meet the needs of industrial and retail consumers. The eight principles proposed by the CEEW would help create a cooperative framework for the decarbonization of hydrogen. These principles aim to create an open and transparent trade and supply chain for decarbonized hydrogen. They also help establish a resilient and efficient ecosystem by establishing standards for the safety and operational interoperability of clean technologies. To ensure that the investments in the decarbonization process are protected from risk, the CEEW has proposed that the various parties involved in the supply chain should adopt a set of intellectual property (IP) norms.
The various issues related to the decarbonized hydrogen process can be addressed by various entities. The numerous multi-party and bilateral agreements that have been established indicate that countries are committed to collaboration. However, this collaboration could also be hindered by the implementation of inflexible mandates or bureaucratic charters. A rules-based architecture that addresses the various technological and supply-related risks associated with the decarbonization process is necessary to ensure that the benefits of this transition are fairly distributed.
Conclusion
Despite the growing capacities of hydrogen plants, currently under construction and operating are not able to provide enough electrolyser capacity to meet the needs of their customers. It can take many years to build the infrastructure needed for large-scale hydrogen use. This includes constructing pipelines, import terminals, and export facilities. Ideally, the necessary facilities should be in place by 2030 to meet the rising demand for hydrogen. The demand for hydrogen will increase significantly from 2030 to 2035. As the world moves toward a more sustainable climate, the planning for infrastructure must begin now. Because of the limited land availability in certain regions, they are not able to produce enough green electricity to meet the needs of their customers. Whereas, the large number of countries that have regions that are capable of producing both non-competitive and competitive hydrogen, such as Australia, China, Russia, and the US, they can potentially develop in-country trading. In view of that the development of export and import hubs will take place in different regions around the world. These will be similar to current gas and oil hubs. Meanwhile, to ensure that they have the necessary experience to effectively implement the necessary projects, countries should start implementing pilot programs right away. These projects will allow them to capitalize on the opportunities presented by the increasing demand for hydrogen. Besides the technical aspects of the plant, the regulatory framework also affects the operations and costs of the project. This can dramatically affect the financial performance of the project. Governments worldwide must create a regulatory environment that encourages the investment in hydrogen production equipment.
Pic Courtsey-Darren Halstead at unsplash.com
(The views expressed are those of the author and do not represent views of CESCUBE.)
