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Felicity Bradstock

Felicity Bradstock

Felicity Bradstock is a freelance writer specialising in Energy and Finance. She has a Master’s in International Development from the University of Birmingham, UK.

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Clean Hydrogen Dreams Delayed By Rising Costs

  • Despite increasing interest, green hydrogen production is hampered by high costs and a lack of adequate policy and financial backing.
  • Recent projects, such as the green hydrogen corridor between Spain and the Netherlands, demonstrate the global push for hydrogen dominance.
  • The IEA report emphasizes the urgent need for government support and R&D investments to reduce costs and drive the hydrogen market.
Green Hydrogen

There is currently not enough funding and support for hydrogen projects to roll it out on the scale they require to achieve the net-zero scenario by 2050, according to several energy experts. The widespread rollout of clean hydrogen projects has been restricted due to the high costs involved with producing the clean energy source, which is much more expensive to make than dirtier forms of hydrogen derived from fossil fuels. In addition, while companies worldwide are showing increasing interest in green hydrogen, many are failing to get the government backing required to commence operations. 

Green hydrogen is being viewed as increasingly critical to the global green transition as it is a versatile energy carrier that can be used in a range of applications from heating to transportation fuel. It provides an alternative to natural gas and fossil fuel-derived fuels and can also be used to power cars and other forms of transport instead of electric batteries. The fuel is produced by using renewable energy sources to power electrolysis. 

There has been increasing interest in green hydrogen in recent years, with various regions of the world competing to gain sectoral dominance – from the Middle East to Europe. Last year, the Spanish energy firm Compañía Española de Petróleos (Cepsa) partnered with the Port of Rotterdam to establish “the first green hydrogen corridor between southern and northern Europe”. The aim is to develop a green hydrogen supply chain between two of Europe’s main ports - the Port of Algeciras in southern Spain and the Dutch Port of Rotterdam. Meanwhile, several energy companies are investing in developing green hydrogen projects in some of the world’s emerging economies to drive down costs. 

However, this month, a report from the International Energy Agency (IEA) suggested that rising costs and lagging policy support from governments are limiting clean hydrogen’s potential. There have been several announcements about the launch of green hydrogen projects around the globe over the last couple of years, but the report found that many are being significantly delayed due to a lack of policy government support. The executive director of the IEA, Fatih Birol, said the world had seen “incredible momentum” behind low-emission hydrogen projects in recent years “but a challenging economic environment will now test the resolve of hydrogen developers and policymakers to follow through on planned projects”.

Hydrogen produced in a low-carbon process continues to account for less than 1 percent of the world’s total hydrogen production. This is perhaps surprising given the momentum in green hydrogen projects in recent years and the media attention given to the energy source. In addition, green hydrogen has been identified by the IEA and several other energy organisations as one of the most promising fuels for reducing emissions in hard-to-decarbonise industries, such as steel and chemicals. 

The report found that the annual production of low-carbon hydrogen, including that derived from using captured CO2 if all projects are realised could total 38 million tonnes by 2030. The pipeline includes 27 million tonnes from electrolysis and 10 million tonnes from carbon capture. However, this seems increasingly unlikely as a final investment decision has been made for just 4 percent of the projects. Projects have been further jeopardised by high energy prices, rising inflation and global supply chain disruptions owing to both the Covid pandemic and the Russian invasion of Ukraine. 

Adrian Odenweller, a scientist at the Potsdam Institute for Climate Impact Research, explained why it’s so difficult to predict the mid-term global hydrogen capacity. He stated, “The hydrogen market ramp-up is characterised by the specific challenge of scaling up supply, demand, and infrastructure at the same time. Our research shows that this leads to short-term scarcity and long-term uncertainty of green hydrogen.” 

While there are several challenges to ramping up clean hydrogen production, governments worldwide can help encourage private companies to invest in the energy source in a variety of ways. Firstly, the introduction of favourable policies for green hydrogen projects would help reduce the red tape involved with set-up. Secondly, governments should take the U.S. approach by providing climate legislation with financial incentives for companies investing in clean energy sources. And, thirdly, governments must work together to establish clear standards and regulations for hydrogen projects across different regions of the world to develop an international market. 

The IEA’s chief energy technology officer, Timur Gül, stated, “This is the critical decade to bring down the cost of low-emission hydrogen.” This can be done through greater investment in research and development around the globe to provide the innovations needed to drive down costs. This will also help to establish the market required to drive up both the supply and demand for clean hydrogen. However, without government support for these projects, this may not be achieved. 

By Felicity Bradstock for Oilprice.com 

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