Analysis: Asia's nascent hydrogen dream needs roadmap beyond refining, fertilizers

Asian governments are increasingly crafting strategies to embrace hydrogen in their quest to boost clean energy's share in the fuel mix, as they ponder how to slash production costs, draw in investors and diversify usage beyond oil refining, fertilizers and petrochemicals.

While the road for hydrogen as a diversified fuel will face multiple challenges in Asia, the region's growing search for clean energy means policy makers will have to speed up plans in order to whet the appetite of investors to pump funds into the sector sooner rather than later.

"Asia needs a clear strategy on how to boost hydrogen consumption in areas other than refining, fertilizers and petrochemicals," said Kang Wu, head of Asia Analytics at S&P Global Platts. "High cost and infrastructure are some of the key challenges for hydrogen use for power generation and transportation, and it needs to be addressed with technological developments and government policies in order to reduce carbon in the long run."

Peter Godfrey, managing director for Asia Pacific at The Energy Institute, told Platts the core dilemma that needs to be addressed is how to incrementally build demand and supply in a cost-effective manner.

"Hydrogen is an interesting medium-to-longer-term development potential, both as a tradable commodity and as a medium for clean energy," Godfrey said. "Much will depend on the pace of appropriate infrastructure development that will be highly dependent on regulatory support."

The International Energy Agency said in a study earlier this year that the "time is right" to tap into hydrogen's potential as it offers ways to decarbonize sectors such as long-haul transport, chemicals, and iron and steel where it is proving difficult to meaningfully reduce emissions.

For it to make a significant contribution to clean energy transition, it needs to be adopted in sectors where it is almost completely absent -- such as transport, buildings and power generation, IEA added.

The majority of hydrogen produced today is from fossil fuels.

Producing hydrogen from low-carbon energy is expensive, IEA said, but added that the cost of producing hydrogen from renewable electricity could fall 30% by 2030 as a result of declining costs of renewables.

"Governments have an essential role to play for hydrogen to establish its place in energy systems. Policymakers have both the opportunity to stimulate demand and the tools to ensure that hydrogen is able to compete on a level playing field with other de-carbonization pathways," Godfrey said.

KEY CHALLENGES

Martin Lambert, senior research fellow at the Oxford Institute for Energy Studies, said the existing use of hydrogen for industry will need to be decarbonized by moving from current production from fossil fuels -- either by adding carbon capture and storage, or moving to production from electrolysis.

"There is an emerging consensus that while battery electric vehicles will dominate for light-duty and short-haul transport, higher energy density of hydrogen fuel cell vehicles will be likely for heavy-duty and long-distance transport," he said.

Lambert highlighted three key challenges -- cost and scale of production, the need for new infrastructure and government policies.

"Production of low-carbon and zero-carbon hydrogen is significantly more expensive than other alternatives, so will not happen without government incentives. There is an opportunity for Asian countries, notably China, to scale up production of hydrogen technology and thereby reduce costs significantly - much as China has done for Solar PV production," he added.

In addition, transporting hydrogen in large quantities, whether by ship or pipeline, requires investment in new technology. To some extent existing natural gas infrastructure can be repurposed, but this needs to be carefully evaluated on a case-by-case basis, Lambert added.

HYDROGEN DEMAND POCKETS

The IEA has identified a few ways to create demand for hydrogen -- making industrial ports nerve centers for hydrogen use, introducing clean hydrogen to replace a small portion of natural gas supplies, powering high mileage cars, trucks and buses and launching trade in hydrogen.

Interest in blending hydrogen into natural gas grids has risen in recent years, leading to several major demonstration projects, IEA noted.

"The existing natural gas infrastructure in many countries is extensive and could transport hydrogen at much lower unit costs than would be the case if new dedicated hydrogen pipelines had to be built," IEA said.

Governments in the Asia-Pacific region have initiated projects in the past two years to explore opportunities, IEA said.

China has announced that the Ten Cities program, which launched battery electric vehicles, would be replicated for hydrogen transport in Beijing, Shanghai and Chengdu, among others. And in India, the Supreme Court has asked the New Delhi government to explore the use of fuel cell buses.

Australia is aiming to launch a National Hydrogen Strategy and has allocated funds to support research. Japan is eyeing new targets for hydrogen and fuel cell deployment, while South Korea has published a hydrogen economy roadmap with 2022 and 2040 targets for buses, fuel cell electric vehicle and refueling stations.

-- Sambit Mohanty, sambit.mohanty@spglobal.com

-- Deepak Kannan, deepak.kannan@spglobal.com

-- Edited by Wendy Wells, wendy.wells@spglobal.com