Hydrogen has already proven its use in many industries and is going to continue to play a huge role in decarbonising our world’s energy system. Not only will the fuel decarbonise the hard-to-abate sectors, but it will also act as a storage medium for renewable energy too.

The development of the hydrogen ecosystem is picking up pace.

Where supply follows demand, equipment makers and technology providers are responding. Capacity for the production of electrolysers, essential to produce green hydrogen, is exploding. Manufacturing capacity is set to grow from less than 1 GW/y in 2020 to an estimated 134–240 GW by 2030, according to the International Energy Agency (IEA).

Corporate offtakers are signing up to planned hydrogen ventures and commitments are turning them into realistic, bankable projects. The IEA has collated a database of almost 2,000 so far, and hundreds more are being added each year.

An international picture
The picture is more complex when it comes to national support measures. Regulatory and financial incentives from governments for hydrogen production and use are needed if we are to scale rapidly enough to help the world reach net zero by 2050. There are many positive signs.

Last year’s Inflation Reduction Act, introduced in the US, is a game changer. Meanwhile, the Middle East and parts of Latin America and Australasia are accelerating investments in renewable energy and green hydrogen. The European Union (EU) has also made tangible progress in finalising rules and regulations around green-hydrogen production and certification.

Regulatory and financial incentives from governments for hydrogen production and use are needed if we are to scale rapidly enough to help the world reach net zero by 2050. There are many positive signs.

But Europe lags behind when it comes to cost. European energy prices are driven by the cost of gas, which has risen over the past two years. This has a knock-on effect to the price of renewable electricity too, and because they make up 75% of the levelised cost of green hydrogen, they are overwhelming the economies of scale being achieved on the technology side. This means that the price of hydrogen is not falling fast enough in Europe. Currently, it is around $8–10/kg, but it needs to fall to roughly $2/kg to become competitive.

Solutions include not neglecting other hydrogen ‘colours’. Both blue hydrogen, where CO₂ emissions are captured during production, and turquoise hydrogen, made via methane pyrolysis, offer ostensibly carbon-free versions of the gas. Further into the future, pink hydrogen (produced with nuclear power) could be a possibility.

The second solution is imports. The EU itself expects to import 10mn tonnes of low-carbon hydrogen by 2030, fully one half of the demand expected under its ‘Fit for 55’ policy package. Alongside hydrogen, ammonia, as a versatile hydrogen carrier, is starting to emerge as the ‘workhorse’ of a future hydrogen economy. Indeed, the European Commission’s REPowerEU Plan has acknowledged this at a policy level. At the heart of this commitment is the flexibility ammonia can provide.

Challenges and solutions
Where hydrogen’s low (volumetric) energy density and its need for cryogenic storage are two of the biggest barriers to its growth, converting hydrogen to ammonia makes transport significantly easier. The already established trade in ammonia makes this option even more attractive, as it means a lot of existing infrastructure such as shipping terminals, storage silos and other parts of the value chain are already in place.

This presents the opportunity of remapping the energy flows, with imports from the hydrogen-producing economies of the future, including from the Middle East and North Africa, into Europe.

A further idea is the decoupling of green hydrogen production from (high) energy prices altogether. Where possible, renewable energy should of course be used for electrification directly. However, there are not, and will not be, enough interconnectors and transmission lines for electricity grids to absorb all the renewables capacity being built.

That creates the opportunity to build what I call ‘hydrogen islands’ – clusters of wind and solar farms, independent from the grid, making green hydrogen or ammonia, and shipping it straight to offtakers.

These can then set an independent, lower, hydrogen price since there is no connection to the electricity system. We’re already seeing such clusters in Australia, and I see potential for hydrogen islands in countries like Morocco, Chile and Spain as well.

So, while there’s still more to do, there’s also plenty of room for optimism. While the development of the hydrogen ecosystem has been uneven, opportunities exist to capitalise on the momentum of recent years to ensure that hydrogen continues to play a vital role in fighting climate change. 

The views and opinions expressed in this article are strictly those of the author only and are not necessarily given or endorsed by or on behalf of the Energy Institute.