While governments and businesses worldwide advocate broad use of green or blue hydrogen, a new analysis by analyst Westwood Global Energy Group notes that “significant impediments exist in translating vision into reality.”
The current high cost of renewable hydrogen or low-carbon hydrogen produced from natural gas with carbon capture and storage (CCS) — and the resulting lack of demand from potential users — are mentioned as major impediments in a “chicken and egg issue.”
“The lack of clarity regarding the final use of [clean hydrogen] could stymie investment in renewable (or natural gas) energy sources necessary to enable [green or blue hydrogen production]. Markets for end-use applications will not grow until hydrogen is considered as a [financially] viable alternative.”
Another critical challenge, the research notes, is assessing if green/blue hydrogen is the “proper decarbonisation solution” for a variety of potential applications, including heating, road transportation, and steel industrial production.
“End-use markets are now evaluating the many options for decarbonizing their operations, including electrification, hydrogen, and carbon capture and storage.” The ultimate ‘option’ is fluid and will evolve.”
The research, titled Framing a Business Case for Hydrogen in Northwest Europe, also notes the importance of “business case facilitators” in advancing green or blue hydrogen projects to a final investment decision (FID).
“Renewable energy producers and oil and gas corporations are critical stakeholders in assuming leadership roles in integrating stakeholders across the value chain,” the report states. “However, while these synergies and alliances have resulted in an initial pipeline of conceptual projects, only those with a strong facilitator have been able to advance the most ambitious proposals from concept to final investment decision.”
“The initial effort of project leaders and governments seeking to establish a hydrogen potential requires an additional component: a business case facilitator,” the report continues.
“Essentially, a business case facilitator assists in aligning a proposal/project with the government’s plan for reducing domestic emissions or creating new economic development opportunities… the facilitator also enables a more targeted identification of regulatory gaps in a project’s value chain. As a result, governments can establish financial and regulatory mechanisms that are tailored to the specific requirements of a hydrogen — or hydrogen and CCUS — plan aimed at effectively decarbonizing certain industries.”
According to the Westwood study, a notable example of a business case facilitator is the PtX Alliance in Denmark. This collaboration between Wind Denmark and Hydrogen Denmark resulted in the Green Fuels for Denmark project, in which partner companies from across the value chain — from developer Orsted to H2 end users — have joined forces on a 1.3GW electrolyser project that will be powered by a 2-3GW offshore wind farm by 2030.
The hydrogen produced would be utilized to power hydrogen-powered buses and trucks, as well as synthetic fuels for shipping and aviation, with offtakers including Copenhagen Airport, SAS, and maritime companies Maersk, DFDS, and DSV Panalpina.
“The complexity associated with developing hydrogen projects can be managed by aligning the hydrogen opportunity with a country’s needs, identifying synergies and collaboration opportunities across the value chain, and, most importantly, identifying a business case facilitator — who facilitates alignment and the development of country / project-specific support mechanisms,” the report concludes.
