COP26: Governments asked to provide money, regulatory frameworks to kickstart hydrogen economy

While the momentum for clean hydrogen projects has been growing recently, business leaders say governments need to establish regulatory frameworks and provide financial incentives to realize the fuel's potential in a low-carbon world.

Many energy experts—including the International Energy Agency (IEA)—see blue and green hydrogen having an important role in the future global energy mix, with more than 130 countries already pledging to achieve net-zero emissions by the midcentury.

The Hydrogen Council, formed by the CEOs of over 120 financiers and energy-related companies, said clean hydrogen can help reduce 7 billion metric tons (mt) of CO2 emissions per year in 2050 if its production reaches 660 million mt.

The Brussels-based trade group estimates $700 billion will be required to create a hydrogen market of 75 million mt by 2030 as the initial step. Of that money, $300 billion would be spent on production, $200 billion on infrastructure, and $200 billion on incentivizing demand from end-users.

For its interim 2030 goal to be reached, the Hydrogen Council estimates another 200-250 GW of electrolyzer capacity, 300-400 GW of renewable electricity, and carbon storage infrastructure with an annual capacity of 350-450 million mt must be constructed for green and blue hydrogen production by 2030.

Stakeholders in the public and private sectors have so far just committed $95 billion to hydrogen production, $20 billion to infrastructure, and $45 billion to end-uses, resulting in a financing gap of $540 billion, it added.

Geographically, the Hydrogen Council said China will require another $160 billion in hydrogen sector investment to meet its 2030 climate goals, Europe will need $90 billion, North America $80 billion, Japan and South Korea $60 billion, and the rest of the world $150 billion.

Of the announced direct investments, only $20 billion have reached the final investment decision stage.

"The conversion of this momentum into real deployment and scale-up now critically depends on the right regulatory framework, which will create demand, enable supply, and reduce investment risks," the Hydrogen Council said in a research report published 3 November and presented at a side event at COP26.

"Hydrogen's full potential can only be realized if action is taken across three fronts to: stimulate demand, enable access through infrastructure, and create scale to bring down costs and close the economic gap of hydrogen decarbonization solutions versus conventional alternatives," it added.

The IEA estimated that hydrogen production totaled 90 million mt in 2020, nearly all of which was involved the conversion of fossil fuels, without offsets or capture of the carbon. There was negligible output of green hydrogen from electrolyzers powered by renewable energy or blue hydrogen from fossil fuels with carbon capture and storage technology, it said.

COP26 actions

While more than 30 countries have published national hydrogen roadmaps, few have started to establish regulatory regimes to fulfil their goals.

To give the development of hydrogen supply chains an extra push, Australia, China, India, Japan, South Korea, the UK, the US, and the EU partnered with 25 countries in the Glasgow Breakthrough initiative on hydrogen during COP26.

They said 2 November that they will work with the IEA, the International Renewable Energy Agency, the UN High Level Climate Action Champions, and other stakeholders in the private and public sectors to make affordable green and blue hydrogen available on a global basis by 2030.

In the private sector, 28 of the world's largest energy, mining, and financial services companies signed up for the World Business Council for Sustainable Development's H2Zero initiative, which aims to promote development of clean hydrogen markets.

The Green Hydrogen Catapult (GHC), a UN-backed coalition formed by Snam, Iberdrola, Ørsted, and some others, also said 4 November its members had committed to building 45 GW of electrolyzers with secured financing by 2026. This compared with their previous target of 25 GW in December 2020.

Details of the projects in the latest announcement are not yet available. But Fortescue Future Industries (FFI), one of the GHC members, announced plans to develop green hydrogen projects in countries like Australia, Jordan, and the UK.

In addition, Argentinian President Alberto Fernandez said on Twitter 1 November that FFI plans to build an $8.4-billion project in the country.

The green energy arm of Australian miner Fortescue Metals Group has a target to produce 15 million mt of hydrogen from renewable power annually by 2030.

"We are not waiting. The time is now to build the green hydrogen industry," said FFI CEO Julie Shuttleworth.

The GHC members aim to drive down the cost of green hydrogen to below $2 per kg, putting it on par with the current costs of grey and brown hydrogen. Before that happens, they want governments to ensure "equal market conditions for all fuels to create fair competition in energy markets." This could be in the form of subsidies for green hydrogen consumers or additional emission surcharges on conventional hydrogen users.

In addition, the GHC said governments should promote investment in hydrogen infrastructure, such as pipelines between production and consumption hubs.

Trucking sector

The road freight, steelmaking, cement, aluminum, and petrochemical sectors can make great progress in decarbonization by replacing fossil fuels in their operations with clean hydrogen, according to energy experts. When converted to ammonia, hydrogen can also eliminate emissions from new types of marine and aircraft engines.

Some major players believe trucking firms could emerge as the first demand sources in the fledgling market. Trucks powered by hydrogen fuel cells have already hit the market, while the infrastructure costs for refueling them are relatively low compared with other hard-to-abate sectors.

During COP26, TotalEnergies said it has teamed up with German automaker Daimler Truck to develop "ecosystems for heavy-duty trucks running on hydrogen." The energy major plans to be involved in up to 150 hydrogen refueling stations in Germany, the Netherlands, Belgium, Luxembourg and France by 2030.

"Heavy-duty trucking is an optimal sector for the introduction of low-carbon hydrogen, as it offers the lowest marginal cost of abatement," Switzerland-based trader Trafigura and hydrogen supplier H2 Energy said in a whitepaper 10 November.

"The development of low-carbon hydrogen supply and infrastructure ecosystem for trucking would act as a catalyst to accelerate the growth of the wider hydrogen economy," they added.

The two companies said that clean hydrogen demand from trucks could reach 32 million mt per year, if 10% of their fuel requirements are met by low-carbon alternatives.

This is a plausible scenario by 2030, but Trafigura and H2 stressed that governments need to ramp up financial support for hydrogen producers, consumers, and boost infrastructure development to realize it.

Their policy wish list includes safety standards for handling and using hydrogen, exemption of grid connection fees for renewable energy, subsidies for delivering hydrogen, buying fuel-cell trucks and scrapping diesel trucks, among others.

"Governments need to act quickly on a range of low-carbon hydrogen policy measures in order to incentivize private sector investment and accelerate hydrogen uptake," the companies said.

Hydrogen Council's roadmap

The Hydrogen Council recommended policies such as upfront subsidies, simplifying licensing and permitting processes, localized rules and international cooperation on infrastructure, specified production and consumption targets in various timeframes, and a number of others.

In particular, the trade group said governments should establish carbon pricing and certification schemes to promote green and blue hydrogen at the expense of grey hydrogen, which is generated from natural gas without abatement technology, and brown hydrogen, generated from coal.

Posted 12 November 2021 by Max Tingyao Lin, Principal Journalist, Climate and Sustainability