Following a year in which renewable hydrogen emerged as a lifeline for emissions-intensive industries facing mounting decarbonization demands, 2022 is expected to be a watershed moment for hydrogen investment, with investment and production reaching new highs – if governments get on board.
According to a new report from energy market experts BloombergNEF, 2022 will be a banner year for the green hydrogen industry, as a growing focus on industrial decarbonization and lowering technological prices drive further investment in new renewable hydrogen production capacity.
In a recent study from Bloomberg Intelligence, the research firm makes numerous bold forecasts for the green hydrogen sector in the next year, including a major acceleration in electrolyzer installations and a growing number of specialized hydrogen firms going public.
Renewable hydrogen will begin to outcompete “blue” hydrogen on price in most major economies by the end of the decade, according to BloombergNEF, with renewable hydrogen likely to become the cheapest source in Australia as early as 2027, but not until much later in China.
“Although currently pricey, green hydrogen costs are predicted to drop by 75% by 2030, as the cost of electrolyzers falls. According to BloombergNEF, Chinese businesses currently sell electrolyzers for a fraction of the price of their western counterparts.
“By 2030, green hydrogen will be cheaper to produce than blue hydrogen from natural gas all across the world,” says the report.
According to BloombergNEF, renewable hydrogen will continue to be the most cost-effective source of zero-emission hydrogen for the foreseeable future, with its competitive advantage only widening and fossil hydrogen remaining viable only in countries where governments continue to subsidize its production and use.
In the medium term, the analysis group believes that attempts to meet promises to achieve zero net emissions, rather than carbon price systems, will act as the primary long-term driver of growing renewable hydrogen uptake.
“Carbon price will be critical for clean hydrogen demand to develop,” industry participants, governments, and even BloombergNEF agree. While carbon price will generate more clean H2 demand in 2022, national and business net-zero objectives will drive more clean H2 demand in the short term, according to the analysis.
BloombergNEF expects that demand for electrolyzer equipment additions would quadruple in 2022, rising from 458MW of new electrolyzer capacity added in 2021 to between 1.8 and 2.5GW of new electrolyzer capacity likely to be built this year.
China is anticipated to lead this spike in demand, accounting for around two-thirds of new electrolyzer installations.
According to BloomgbergNEF, five important industrial sectors will lead to the rise in renewable hydrogen utilization, including steel, ammonia, methanol, chemicals, and oil refining.
However, hydrogen fuels are projected to trail in terms of passenger transportation, with electric cars being the most cost-effective alternative for zero-emission vehicles.
“Hydrogen will be employed in these projects for a variety of reasons, including chemistry and economics. Chemicals like ammonia and methanol, as well as oil refining, are impossible to make without hydrogen. “Hydrogen is poised to be one of the most cost-effective solutions to decarbonize steel,” according to BloombergNEF.
“Battery electric drivetrains, on the other hand, will be less expensive than hydrogen in passenger automobiles.”
Given its established market for usage as a fertilizer and in other chemical processes, ammonia is projected to continue its move to renewable sources.
According to BloombergNEF, “this might lead to the development of a green ammonia market in parallel with hydrogen.”
“Using ammonia in its natural state makes sense in industries that require it for its chemical qualities, such as fertilizers, and might be promising in uses such as naval fuel.” In many other situations, however, hydrogen will be preferred. For example, using ammonia in turbines to generate energy, as Japan plans, would be unprofitable.”
The research is based on findings from the International Renewable Energy Agency, which claims that the emergence of a global hydrogen industry will result in a significant shift in global energy geopolitics, with new energy superpowers emerging and countries traditionally reliant on fossil fuel exports.
According to the IRENA report, Australia is well-positioned to become a leading global supplier of low-cost renewable hydrogen, but it may face stiff competition from other producers in an export market that is expected to be more competitive and have lower profit margins than traditional fossil fuels.
