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Cheap power, policy incentives could boost green hydrogen production

Green hydrogen, tipped by some as renewable power's way into even the most polluting industries, could become as affordable as its fossil fuel-derived alternative by 2030, experts said at the BNEF Summit in London on Oct. 22.

Generated by powering an electrolyzer with renewable energy, green hydrogen currently costs at least three times as much as conventional hydrogen, Kobad Bhavnagri, global head of special projects at BloombergNEF, said at the event. But as the price of renewable power declines globally, hydrogen costs could also follow suit over the next decade.

"By 2030, renewable hydrogen could be comparable with the mid-to-high cost range of comparable fossil fuel-derived hydrogen, and by 2050 it should undercut that gold standard price," he said.

For this parity to be achieved, some significant pieces still need to fall into place. Bhavnagri argued that investments into storage and equipment, and policy changes incentivizing green hydrogen production, would have far-reaching impacts, given hydrogen finds offtakers across a variety of industrial sectors, many of which are looking for ways to meet emissions targets.

Equipment costs are also falling. "Alkaline electrolyzers manufactured in China are 80% less expensive than those made by western manufacturers," he said. "That gives us a hint of the low costs that are achievable for the technology."

Storage and transport still hurdles

A hurdle for the mainstream use of hydrogen is storage and transport. Hydrogen takes up more space than natural gas, raising the comparative cost of storage. It also makes transport relatively more costly.

"There is a sweet spot for transport" when it comes to using hydrogen, Bhavnagri said, which is moving large volumes of the fuel over short-to-medium distances. "That lends itself to saying: the best way to use hydrogen is as a large-scale industrial fuel."

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In steel production, hydrogen competes against natural gas and coking coal for heating. In this hard-to-abate sector, where electricity alone may struggle to displace carbon-intensive fuels, green hydrogen could play an important role.

"Hydrogen is not the fuel of tomorrow; it is the fuel of today, especially in industry," said Constance Brayé-Cameron, senior hydrogen strategy analyst at French utility Engie SA, which is already seeing customer demand for green hydrogen.

But there is a long way to go: currently, less than 1% of global hydrogen production comes from renewable electricity, according to consultancy Wood Mackenzie. The company said 252 MW of green hydrogen projects will have been deployed worldwide by the end of this year. This will be boosted by 2025 with the deployment of a further 3,205 MW of electrolyzers dedicated to green hydrogen production, it added.

"We cannot achieve net-zero without hydrogen," said Guillaume De Smedt, marketing and strategy director at industrial gas producer Air Liquide International S.A. The company has invested heavily in new hydrogen production technology just this year, for example in a 20-MW proton-exchange membrane electrolyzer plant in Quebec.

Policy is the disruptor

But to displace currently more economical fossil fuels in hard-to-abate sectors such as steel, a set of policies needs to be implemented to get green hydrogen off the ground, BloombergNEF's Bhavnagri said. These include carbon pricing, blending mandates and strict standards for heavy transportation.

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In the discussion on hydrogen, "policy is the disruptor," said Jesse Scott, senior adviser for international programs at German thinktank Agora Energiewende.

Scott argued that a carbon price will not be a sufficient signal to push hydrogen into the mainstream, and instead suggested CO2 regulation for the entire gas fuel supply chain, ratcheting up over time. On top of that, there is a need for significant technology innovation from the private sector, she said.

If the current hurdles for hydrogen production can be cleared, "there is huge potential," Bhavnagri added. "The beauty of hydrogen is that it can be used for so many things."

Industry momentum seems to echo this enthusiasm. The International Energy Agency said in June, "The time is right to tap into hydrogen's potential to play a key role in a clean, secure and affordable energy future."