Hydrogen has enormous potential as a carbon-free energy source. Countries such as Australia, Namibia, and Patagonia are among the areas where plans are underway to build more than 1,600 plants to produce hydrogen using electricity from the sun or wind. Despite this enthusiasm, almost no one is buying green hydrogen.
Lack of Purchase
Most green hydrogen projects do not have purchase contracts. Even when contracts exist, they are non-binding and can be terminated. Only 12% of hydrogen installations have customers with actual purchase agreements.
Problems with Funding
Developers and bankers do not dare to invest without sure buyers. Hydrogen production requires large investments in new equipment, which companies are reluctant to make. Hydrogen produced with clean energy costs four times more than natural gas.
Hydrogen delivery infrastructure is also problematic. Building plants and pipelines is difficult when demand is uncertain. A global hydrogen transportation system is lacking, which adds further hurdles.
Exceptions and Expert Opinions
Countries such as Chile, Australia, and Egypt have announced ambitious targets for hydrogen production, but many projects are still under development. The European Union aims to produce and import 10 million tonnes of carbon-free hydrogen by 2030. The US is also making significant investments, but regulations and domestic politics are slowing progress.
Successful Examples
Some projects that involve the entire ecosystem (manufacturing, delivery, and end customer) are successful. An example is the hydrogen plant in northern Sweden, which will power an iron and steel plant. The construction of similar “green” metallurgical plants shows a market for products made with hydrogen, and customers are willing to pay a premium.
While there are significant hurdles, including high costs and a lack of ready buyers, successful projects show that green hydrogen can become a viable energy source with the right approach and integrated solutions. Developing projects that address customer needs is critical to the success of green hydrogen.
