Customer willingness to pay remains key unknown in hydrogen market development: panel

Customer willingness to pay for green or renewable hydrogen remains the unknown factor shaping both government policy and investment in the nascent industry, panelists said at an S&P Global Platts virtual hydrogen conference Oct. 1.

During a Q&A session, key hydrogen leaders were asked whether they envisioned their customers would be willing to pay a premium for green hydrogen produced from renewables over time.

"This is the elephant in the room," said Pierre-Etienne Franc, vice president of Air Liquide's hydrogen energy world business line, said at the first annual Platts Hydrogen Markets Europe conference.

"We can pay the price of moving into a low carbon system, but in the end, if we can't price at the right level, it won't make a difference," he said.

Customer willingness to pay could depend on the size of the company and their need to capture future market share as the world turns to hydrogen, said Michele Azalbert, CEO of Engie's hydrogenbusiness unit.

"Engie's experience for the big players engaged in the decarbonization pathway is that hydrogen is the only viable solution in the long run," Azalbert said. "Paying the full premium -- it's a big challenge, but paying a portion of it is achievable."

Regulation is key to push up the value of green hydrogen over gray hydrogen, Franc said.

"It needs to go from the producer to the consumer -- in the end, if the policymaker does not put forward the regulation ... we can't price at the right level."

LCFS an effective incentive

Using carbon pricing to achieve price between fossil-based hydrogen and renewable green hydrogen could help, but it is unlikely to be the final answer, said Roman Kramarchuk, head of energy scenarios at S&P Global Platts Analytics.

"The issue isn't as much about carbon efficiency, or what kind of carbon price you would need to equalize gray hydrogen with green because it's a large number," Kramarchuk said. "It's way above what we are seeing in the EU ETS [Emissions Trading System] right now."

Kramarchuk pointed to California's Low Carbon Fuel Standard, which he said has been very effective in incentivizing low carbon sources.

"The LCFS shows us how hydrogen can penetrate and displace diesel in long-haul trucking," he said. "Incentives like the LCFS actually were getting us close by the time we get to 2030, in our estimates."