The stage is set for a revolution in the energy landscape, and at its heart is the promise of low-emissions hydrogen. A recent report by the International Energy Agency (IEA) reveals a complex yet hopeful picture of an industry on the brink of transformation.
While progress has been undeniable, a challenging economic environment, rising costs, and the need for greater international cooperation present formidable hurdles.
Low-emissions hydrogen, produced without the carbon-intensive processes of traditional methods, has captured the imagination of governments, industries, and environmentalists alike. The numbers speak volumes about its potential. More than 40 countries have unveiled national hydrogen strategies, and announced projects for low-emissions hydrogen continue to proliferate. However, despite this enthusiasm, low-emissions hydrogen constitutes less than 1% of overall hydrogen production and utilization.
The specter of government support looms large in the low-emissions hydrogen landscape. Developers across the globe are awaiting crucial backing before making significant investments, leading to a sluggish rollout of projects. While government support is essential, it also comes with its challenges. High inflation and supply chain disruptions, fueled by a global energy crisis, have inflated project costs temporarily, threatening long-term profitability. These financial headwinds impact an industry already burdened by substantial upfront costs for equipment manufacturing, construction, and installation.
Nonetheless, the deployment of electrolysers, a key component of hydrogen production, is gaining momentum. By the end of 2022, electrolyser capacity reached nearly 700 MW. Based on projects under construction or with final investment decisions, this capacity could triple to 2 GW by the close of 2023, with China leading the charge. The potential is staggering; if all announced projects materialize, a colossal 420 GW could be reached by 2030, a remarkable 75% increase from the IEA’s 2022 review.
IEA Executive Director Fatih Birol acknowledges this momentum but emphasizes the challenges ahead. Low-emissions hydrogen holds immense potential, particularly in energy-intensive sectors like chemicals, refining, and steel. However, it’s a testing time for developers and policymakers, as the resolve to push forward with planned projects encounters economic headwinds. To fully realize low-emissions hydrogen’s potential, Birol calls for progress on technology, regulation, and demand creation.
The report underscores the critical need to stimulate demand for low-emissions hydrogen, a vital step in achieving climate ambitions. In 2022, global hydrogen use surged to 95 million tonnes, with strong growth in all major regions except Europe. However, low emissions hydrogen remains a minuscule fraction, constituting only 0.6% of total hydrogen demand. In the same year, hydrogen production and use emitted a staggering 900 million tonnes of CO2 into the atmosphere.
Low-emissions hydrogen is more than just an environmental necessity; it presents opportunities for countries to build new industrial supply chains, strengthening economies for the future. Government funding programs are available, such as the US Clean Hydrogen Production Tax Credit and the European Union’s Important Projects of Common European Interest, but delays between policy announcements and implementation hinder progress.
The report charts a course for governments to mitigate risk and enhance the economic feasibility of low-emissions hydrogen. Effective delivery of support schemes, bolder action to stimulate demand, and addressing market barriers are among the suggested steps. International cooperation is also paramount to develop common standards, regulations, and certifications.
In conclusion, the journey from hype to reality in the realm of low-emissions hydrogen is underway. The challenges are formidable, but the rewards are immense—both environmentally and economically. With concerted global efforts, low-emissions hydrogen can transition from a promising concept to a world-changing reality, shaping a greener, more sustainable future for all.