Introduction
The economic rebound after COVID-19 has led to changes in the dynamics of the energy sector and has triggered price spikes for the commodities such as oil, gas, among others. The ongoing conflict between Russia and Ukraine has led to supply chain disruptions and has led to even further increases in energy prices and energy security concerns among the countries. However, this challenge has opened the door for the world to move towards low-carbon, sustainable, and clean energy sources hydrogen and other renewable energy sources to secure their energy needs and be independent in terms of reliance on the need to import energy.
Another aspect of the rapid shift in the energy landscape could be the growing need to decarbonize the sectors due to the climate change scenario. Governments and businesses focus on steep decarbonization targets to meet the net-zero goal. Going forward, the energy mix is projected to shift towards renewables and clean energies like hydrogen. By 2050, the electricity demand is projected to triple, in which hydrogen and hydrogen-based fuels are expected to increase their market share due to increased demand and decarbonization.
The global energy demand is expected to grow by 25% to 30% by 2040. The coal and fossil fuel dependant economies will emit more CO2, making it worse for the climate change situation. But decarbonizing the planet suggests a different scenario by 2050, where energy is more sustainable,affordable and efficient, driven by clean energies like Green Hydrogen.
Types of Hydrogen
The classification of hydrogen can vary depending on the production methods, resulting in categories such as grey, blue, green, and occasionally unconventional colors such as pink, yellow, or turquoise. However, it is important to note that the specific naming conventions may differ between countries and may evolve over time.
Green hydrogen stands out as the only type of hydrogen produced through climate-neutral means, making it a crucial player in global endeavors to achieve a net-zero emissions target by 2050.
What is Green Hydrogen, How 'It's Stored and Challenges Associated with Green Hydrogen?
Green hydrogen refers to hydrogen obtained without the generation of pollutant emissions, signifying its sustainability. It is considered a pivotal energy vector in pursuing global decarbonization and meeting the commitments set for 2050 to combat climate change. Green Hydrogen currently makes up about 0.1% of overall hydrogen production, but this is expected to rise as renewable energy costs continue to fall.
Hydrogen is obtained through an electrolysis process that separates hydrogen and oxygen in the water. The term green hydrogen means the electricity used to power the electric arc furnace for the electrolysis process comes from 100% renewable sources, like wind or solar, etc.
Hydrogen can be physically stored either as a gas or a liquid. Storing hydrogen as a gas usually necessitates high-pressure tanks, with tank pressures ranging from 350 to 700 bar (5,000 to 10,000 psi). Conversely, storing hydrogen as a liquid mandates cryogenic temperatures, as its boiling point at atmospheric pressure is −252.8°C. Another method of hydrogen storage involves its adsorption onto the surfaces of solids or absorption within solids.
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There are some challenges associated with green hydrogen production. The major challenge is the electrolyzers that are used to produce hydrogen are short in supply as of now, and most of the renewable still comes at a significant price. As compared to traditional production processes, electrolysis is expensive, and the market for electrolyzers is still compact.
Importance of Green Hydrogen in the Energy Transition
Promoting green hydrogen is of utmost importance to achieve the climate commitments outlined in the Paris Agreement and address the urgent need for zero-emission targets in response to the climate emergency. In Europe, initiatives across the entire hydrogen value chain are already underway. These include the development of more competitive electrolyzers, the establishment of an efficient transportation network, and the deployment of hydrogen infrastructure to support road transport.
According to a report by the International Renewable Energy Agency (IRENA), there is a potential for significant cost reduction in hydrogen installations, ranging from 40% to 80% in the long term. This, is combined with the anticipated decline in renewable energy prices, indicates that green hydrogen has the potential to become economically viable and profitable by 2030.
The Emergence of Green Hydrogen
By the year 2050, green hydrogen has the potential to meet around 25% of the world's energy requirements and emerge as a market with an addressable value of US$10 trillion. Investments in green hydrogen are skyrocketing among significant oil and gas firms. Europe plans to make hydrogen a major part of its highly valued Green Deal Package.
In 2020, the demand for hydrogen reached an estimated 87 million metric tons (MT), and it is projected to witness substantial growth, reaching a range of 500-680 million MT by 2050. The hydrogen production market, valued at $130 billion from 2020 to 2021, is expected to experience a steady annual growth rate of up to 9.2% through 2030. However, a significant hurdle exists: the overwhelming majority (over 95%) of current hydrogen production relies on fossil fuels, with only a minimal portion considered "green". Approximately 6% of global natural gas and 2% of global coal contribute to hydrogen production.
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Green hydrogen production technologies are experiencing a resurgence of interest due to the expanding range of applications across various sectors. These sectors encompass power generation, manufacturing processes in industries such as steelmaking and cement production, fuel cells for electric vehicles, heavy transport such as shipping, green ammonia production for fertilizers, cleaning products, refrigeration, and electricity grid stabilization.
Production Outlook and Demand for Green Hydrogen
The crucial step of expanding the production of green hydrogen is indispensable in assisting global economies to attain net zero emissions by 2050 and curbing the increase in global temperatures to 1.5°C. By 2023, annual investments in green hydrogen production are projected to surpass $1 billion. This trend is driven by the decreasing costs of renewable power and electrolyzer technology, coupled with the implementation of supportive policies by governments. Notably, there is already a substantial pipeline of 23 GW in electrolysis projects, representing a significant increase from the current capacity of merely 82 MW.
Despite the increasing capacities of current hydrogen projects under construction and in operation, they primarily remain in the pre-commercial phase and possess limited electrolyzer capacities, typically below 50 MW. In contrast, proposed plants demonstrate larger electrolyzer capacities of 100 MW or more, although they still pale compared to the scale of existing grey hydrogen production facilities. Additionally, developing infrastructure to support extensive hydrogen utilization, such as pipelines or import/export terminals, is a time-consuming process that can take several years. Ideally, establishing the necessary infrastructure should occur concurrently with the growing demand for hydrogen, ensuring its cost-effectiveness and facilitating adequate trade and transportation of hydrogen by 2030. Medium and high-ambition scenarios predict a surge in hydrogen demand from 2030 onwards, followed by another significant increase starting in 2035. To align with the targets set in the Paris Agreement, it is imperative to initiate infrastructure planning without delay.
After 2035, the adoption of hydrogen in economically challenging sectors, such as aviation and maritime industries, could be propelled by commitments from both the private and public sectors. These sectors are expected to embrace hydrogen-derived fuels such as synthetic kerosene and ammonia as viable alternatives. By 2035, the composition of the hydrogen supply is anticipated to undergo a significant transformation. The proportion of grey hydrogen, which currently accounts for nearly 100% of the supply, is projected to decrease to 55%-60%%. Declining costs and the supportive stance of policymakers toward the adoption of hydrogen technology drive this shift. As a result, clean production methods are expected to gain prominence in the hydrogen sector.
Most hydrogen demand will be from transport and new industrial uses by 2035. But beyond 2035, hydrogen is projected to scale up across all the sectors of the energy economy
Some of the key enablers that might be needed to support the development of the hydrogen economy may be-
- Infrastructure and supply chain
- Technological advancement and scaling up the manufacturing
- Government support and policies
Costs and Pricing of Hydrogen
Currently, the production of hydrogen from low-carbon energy sources incurs substantial costs. However, according to an analysis conducted by the International Energy Agency (IEA), the cost of producing hydrogen from renewable electricity is anticipated to decrease by 30% by 2030. This reduction can be attributed to the declining costs of renewable energy technologies and the increased scale of hydrogen production. Furthermore, mass manufacturing has the potential to benefit fuel cells, refueling equipment, and electrolyzers, which are crucial components in the production and utilization of hydrogen generated from electricity and water.
The average production cost of Green Hydrogen currently is around $6/Kg, but by 2030 it is expected to go down by $2.3/Kg. The CAPEX is expected to increase by 30% by 2030, owing to the decarbonization targets. Certain experts have proposed that green hydrogen production could serve as a means to utilize surplus renewable energy capacity from major production hubs, such as Europe's offshore wind farms. However, due to the persistently high costs associated with electrolyzers, it raises doubts as to whether developers of green hydrogen projects would be willing to keep their electrolyzers idle until renewable energy prices reach a specific threshold.
A more probable approach, which is already being contemplated by companies such as Lightsource BP and Shell, involves the construction of dedicated green hydrogen production facilities in regions abundant with renewable energy resources. These facilities would be integrated with dedicated renewable energy generation assets, ensuring a consistent and reliable renewable energy source for green hydrogen production.
Applications of Green Hydrogen
Green Hydrogen in Heavy Industry-Hydrogen is a fundamental raw material in various industries. In the chemical sector, it is utilized to produce ammonia and fertilizers. The petrochemical industry relies on hydrogen for petroleum refining, while metallurgy employs it to obtain steel.
However, using hydrogen in these industries leads to substantial carbon dioxide emissions. For instance, steel manufacturing alone contributes to 6 to 7% of global CO₂ emissions, surpassing the emissions from the entire global aviation sector by two to three times. An important step to address the pressing need for decarbonization in these industries would be to adopt green hydrogen as a raw material. By doing so, it becomes possible to produce emissions-free steel, marking a significant milestone in the urgent decarbonization efforts required in these sectors.
Green Hydrogen for Energy Storage-Green hydrogen possesses the potential to function as an energy storage solution, comparable to the strategic reserves of oil or natural gas that we currently utilize. By leveraging its substantial volume and extended lifespan, we can establish reserves of renewable hydrogen to bolster the stability and reliability of the electricity grid.
Green Hydrogen as Fuel- The utilization of green hydrogen as a fuel will play a crucial role in the decarbonization of the transportation sector, particularly in long-haul and air transport. Typically, maritime transport relies on inexpensive yet highly polluting fuels. However, green hydrogen provides a pivotal alternative for long-haul vessels, offering a compelling solution to reduce emissions. In the aviation industry, green hydrogen can serve as a foundation for synthetic fuels that significantly mitigate emissions within this sector. Furthermore, its importance extends to other modes of transportation, such as rail and heavy-duty road transport, where green hydrogen will be essential in driving sustainable and environmentally friendly practices.
Green Hydrogen for Domestic Use- Green hydrogen possesses the unique capability to attain temperatures that are challenging to achieve through other clean processes. Consequently, one of the most promising applications of green hydrogen lies in its utilization for electricity generation and residential heating.
Global Hydrogen Outlook
The regional uptake of hydrogen will exhibit significant variations, primarily influenced by policy considerations. Europe leads the way, with hydrogen expected to comprise 11% of the energy mix by 2050, owing to the implementation of enabling policies that promote both the expansion of hydrogen production and its utilization. In the OECD Pacific region, hydrogen is projected to account for 8% of the energy mix by 2050, supported by strategies, targets, and funding initiatives that focus on the supply side.
Similarly, North America aims for hydrogen to represent 7% of its energy mix, although it has comparatively lower carbon prices and less definitive targets and policies. Greater China follows closely with a target of 6% hydrogen in the energy mix. Notably, Greater China has recently provided more clarity on funding mechanisms and hydrogen prospects leading up to 2035, accompanied by the establishment of a growing national emissions trading scheme. These four regions are anticipated to consume approximately two-thirds of the global hydrogen demand for energy by 2050.
Drivers for Green Hydrogen
In the past, hydrogen has garnered significant attention in multiple waves of interest. These waves were primarily motivated by factors such as oil price shocks, apprehensions regarding peak oil demand, concerns about air pollution, and explorations into alternative fuel research. By serving as an additional energy carrier with distinct supply chains, producers, and markets, hydrogen has the potential to contribute to energy security. This energy mix diversification can enhance the overall system's resilience.
Some of the Key Drivers for Green Hydrogen Include-
- Low Solar and Wind Energy Cost- The primary factor influencing the cost of green hydrogen is the price of electricity. Over the past decade, there has been a substantial decrease in the cost of electricity obtained from solar photovoltaic (PV) and onshore wind power plants. In 2018, the global average price for contracted solar energy was USD 56/MWh, a significant reduction from USD 250/MWh in 2010. Similarly, onshore wind prices also experienced a decline, dropping from USD 75/MWh in 2010 to USD 48/MWh in 2018 (IRENA). As the costs of solar PV and wind electricity continue to decrease, the production of green hydrogen becomes increasingly economically appealing.
- Governments Aiming to Create Net-Zero Energy Systems- As of mid-2020, legislative measures implementing net-zero greenhouse gas (GHG) emission targets were already in place in seven countries, while an additional 15 countries had proposed similar legislation or policy documents. The total number of countries that have announced net-zero emission goals exceeds 120 (WEF, 2020). Notably, China, the largest emitter of GHGs, has recently committed to achieve net-zero carbon emissions within 40 years. Although these net-zero commitments still need to be translated into tangible actions, they will necessitate reductions in emissions within the "hard-to-abate" sectors, where green hydrogen can play a significant role.
- Benefits for the Power Sector- With the increasing adoption of solar and wind power, also known as variable renewable energy (VRE), in various global markets, the power systems will require enhanced flexibility. Electrolysers, which are utilized to produce green hydrogen, can be designed as adaptable resources capable of swiftly adjusting their output to compensate for fluctuations in VRE production. Green hydrogen can be stored for extended periods and utilized during times when VRE is unavailable for power generation. It can be employed in stationary fuel cells or hydrogen-ready gas turbines. Green hydrogen is suitable for long-term and seasonal energy storage, effectively complementing pumped-storage hydropower plants. Green hydrogen enhances system efficiency and cost-effectiveness by facilitating the integration of higher shares of VRE into the grid.
- Advancement of technology- Several components within the hydrogen value chain have already been implemented on a small scale and are primed for commercialization, necessitating investment for further scalability. Although certain technologies, like ammonia-fueled ships, still await large-scale demonstrations, the expansion of green hydrogen production can contribute to the cost-effectiveness and appeal of these pathways. Scaling up the utilization of green hydrogen has the potential to enhance the affordability and attractiveness of such technologies.
Challenges for Green Hydrogen
Various obstacles apply to all forms of hydrogen, regardless of their production methods. These barriers encompass the absence of specialized infrastructure, such as transportation and storage facilities. Additionally, specific challenges predominantly pertain to the production phase of green hydrogen through electrolysis. These challenges include energy losses, insufficient recognition of its value, difficulties ensuring sustainability, and high production costs.
- High Production Costs- In 2019, green hydrogen produced using electricity from an average variable renewable energy (VRE) plant was found to be two to three times costlier than grey hydrogen. Furthermore, adopting green hydrogen technologies for various applications can incur significant expenses. For instance, vehicles equipped with fuel cells and hydrogen tanks are priced at least 1.5 to 2 times higher than their fossil fuel counterparts. Similarly, synthetic fuels designed for aviation are currently up to eight times more expensive than fossil jetare currently up to eight times more expensive than fossil fuels
- Lack of Infrastructure- Globally, there are only approximately 5,000 kilometers of hydrogen transmission pipelines, in contrast to over 3 million kilometers of pipelines for natural gas (Hydrogen Analysis Resource Center, 2016). Similarly, there are approximately 470 hydrogen refueling stations worldwide, whereas there are over 200,000 petrol and diesel refueling stations in the United States and the European Union. While existing natural gas infrastructure can potentially be repurposed for hydrogen, not all regions possess such infrastructure. On the other hand, synthetic fuels derived from green hydrogen could potentially utilize existing infrastructure, although it might require expansion to accommodate increased usage
- High Energy Losses- Green hydrogen experiences notable energy losses at each stage of its value chain. Approximately 30-35% of the energy utilized in electrolysis, the hydrogen production process, is lost (IRENA). Furthermore, converting hydrogen into other carriers, such as ammonia, can result in an energy loss ranging from 13-25%. Additionally, the transportation of hydrogen requires additional energy inputs, typically equivalent to 10-12% of the energy content of the hydrogen itself. Moreover, an additional 40-50% of energy loss can occur when hydrogen is employed in fuel cells
Recent Developments and Key Projects of Green Hydrogen
- According to data from the International Energy Agency, around 300 green hydrogen projects are either currently in progress or initiated globally. However, the majority of these projects are relatively small-scale demonstration plants. In China, the largest project is being undertaken by Ningxia Baofeng Energy Group, utilizing green hydrogen generated from solar energy to manufacture petrochemicals like polyethylene and polypropylene
- BP, a prominent energy company with ambitions to construct numerous green hydrogen initiatives, such as the upcoming HyGreen Teesside facility in Britain scheduled for commencement in 2025, has stated its commitment to developing leakage monitoring systems
- Germany is set to join forces with France, Spain, and Portugal in an ambitious hydrogen project to generate greener gas through renewable sources and transport it via pipelines from the Iberian peninsula. As part of a collaborative effort between Paris and Berlin, a green hydrogen pipeline that currently supplies France from Spain and Portugal will be extended to include Germany. This expansion is part of a newly announced "joint road map" on hydrogen, emphasizing increased investments in future technologies, particularly those related to renewable and low-carbon energies. The H2Med undersea pipeline, also known as the Mediterranean hydrogen pipeline, will connect the Iberian peninsula to France and is anticipated to become operational by 2030. It will transport hydrogen produced using renewable energy sources. Spanish authorities estimate that it will have the capacity to transport up to 2 million metric tonnes of green hydrogen annually, equivalent to 10% of the European Union's total consumption
- In 2022, the EU Commission approved 5.2 billion euros in EU public funding for hydrogen projects
What's the Way Forward for Green Hydrogen?
There is a growing global interest in green hydrogen as a critical solution for achieving an energy transition towards zero or net-zero emissions. Unlike previous periods of interest in hydrogen, this new wave is primarily centered around establishing a connection between renewable electricity and challenging-to-electrify applications.
Several factors contribute to the growing momentum of green hydrogen adoption, including:
- Declining renewable electricity costs makes it an affordable power source for green hydrogen production
- Advancements in relevant technologies, indicating increased maturity and efficiency
- Flexibility benefits for power systems, as green hydrogen can serve as a flexible energy carrier to balance fluctuating renewable energy generation
- National commitments and pledges to achieve net-zero emissions, driving the demand for clean energy solutions such as green hydrogen
- A broader base of stakeholders expressing interest and support, including governments, industries, and communities
Despite the surging interest in green hydrogen, several barriers hinder its potential in driving the energy transition. The primary challenge lies in the comparatively high cost of green hydrogen compared to grey hydrogen and fossil fuel alternatives. Additional barriers include the lack of dedicated infrastructure, inadequate recognition of its value in terms of greenhouse gas emission reduction, and obstacles associated with developing an emerging industry.
While the hydrogen sector has gained government attention, further dedicated policy support is crucial to ensure the technology's readiness, penetration, and growth in the market. National hydrogen strategies play a vital role in defining a country's level of ambition for hydrogen and setting out the necessary support to achieve those goals. These strategies serve as a reference point for private sector actors in the hydrogen industry, stimulating increased financing and investment. Effective national strategies should provide a clear roadmap for scaling up hydrogen adoption.
Enabling policies encompass economy-wide measures that aim to create a fair and equitable environment for both hydrogen and fossil fuels. These policies are designed to enable hydrogen actors to contribute value to the energy system and the wider economic and social systems. By implementing such policies, the goal is to establish a level playing field that supports the integration of hydrogen into various sectors and promotes its holistic benefits.
