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FEATURE: COP26 sets stage for hydrogen market boom, if policy supports investment

Highlights

Pledges at COP26 support hydrogen rollout

No 1.5 C world without hydrogen: Nel

Investment at critical threshold: Hydrogen Council

The UN Climate Change Conference at the start of November has paved the way for a rapid, widespread and large-scale rollout of clean hydrogen, though policies to underpin investment decisions in the coming months will be critical to achieving global climate targets, according to industry leaders.

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The Glasgow Pact does not mention hydrogen, but the fringe events at COP26 featured the renewable energy carrier prominently.

The UAE announced a target of 25% of the hydrogen market by 2030. A group of 40 global leaders announced 2030 ambitions to make clean hydrogen widely available.

Over 20 countries signed the Clydebank Declaration to develop at least six green shipping corridors between two or more ports by 2025 and "many more" by 2030, with hydrogen and derivatives such as ammonia seen as key future marine fuels.

The Green Hydrogen Catapult coalition of companies will commission 45 GW of electrolyzers by 2027, making a total of 70 GW of electrolyzer capacity by 2027, close to the 80 GW the group said is needed to limit global warming to 1.5 C above pre-industrial levels.

And the US partnered with the World Economic Forum to launch a "first movers coalition" of companies to build demand for technologies to cut emissions from hard-to-abate sectors, with a focus on renewable hydrogen.

Hydrogen critical to 1.5 C

But of wider significance for the hydrogen market was the reinforced commitment at COP26 to 1.5 C, setting the stage for the development of a global hydrogen economy.

"There is no 1.5 C world without renewable hydrogen," electrolyzer manufacturer Nel's Head of EU Affairs, Constantine Levoyannis, said at the Reuters Hydrogen Economy Europe 2021 conference Dec. 2.

It can "unlock the full potential of renewable energy," providing long-term energy storage, grid balancing and decarbonization of hard-to-electrify sectors, he said.

BP Vice President for Hydrogen and CCUS Advisory Shirley Oliveira said the global methane pledge launched at COP26 and signed by over 100 countries was a "key enabler for low-carbon hydrogen."

And the $130 trillion in financing pledged to support the energy transition was also supportive, she said at the Reuters event.

Hydrogen Council Executive Director Daryl Wilson saw great potential from COP26 for low-carbon hydrogen, but warned that the pace of adoption of the energy carrier must step up a level if the world is to achieve its climate ambitions.

"There's a very broad understanding that hydrogen has a major role to play, and there's very good acceptance of hydrogen and what contribution it can make," Wilson told S&P Global Platts in an interview Nov. 30.

"The criticism around too much 'blah, blah, blah' is somewhat well placed, and we actually need to get down into the work of implementation and action," he said. "There are a lot of government strategies and plans, but not so many of them have got down into the details of the implementation where the asset allocation is clear, the project portfolio is clear, the funding is put in place."

The Hydrogen Council at COP26 called on leaders in the public and private sectors to back pledges on clean hydrogen investment and capacity installations with concrete action, saying investment has reached a "critical threshold."

"Swift uptake of renewable and low-carbon hydrogen by 2030 and expansion to an economy-wide solution by mid-century are essential to deliver on global net-zero targets," the Hydrogen Council said Nov. 3. "Investment has reached a critical threshold and urgent, decisive policy action is now needed to fully unlock hydrogen's climate and societal benefits."

Wilson said clear environmental standards and definitions for hydrogen production were key to market development.

Speaking at COP26, S&P Global Platts Analytics Head of Future Energy Scenarios Roman Kramarchuk said the carbon intensity of each hydrogen production pathway could be separately assessed and accounted for with instruments such as guarantees of origin traded in secondary environmental markets.

Hydrogen market progress

Wilson noted that the rapid progress in project announcements and electrolyzer manufacturing capacity was in line with the group's expectations.

Platts Analytics Hydrogen Production Asset Database shows announced projects amounting to over 20 million mt/year of capacity.

"Even though the pipeline of announced low carbon hydrogen projects grew by eight times in the last 18 months, the total capacity would only meet a third of existing hydrogen demand," Platts Analytics said.

"The scale-up of projects is following more or less the trajectory that we envisioned," he said. "The cost reductions that we were showing are in the order of 50%, so these are big changes. And the good news is they're happening."

The EU aims to drive down the cost of renewable hydrogen production to below Eur1.80/kg ($2/kg) by 2030, European Commission President Ursula von der Leyen said at European Hydrogen Week Nov. 29.

"This goal is within reach," she said. "We have to scale up clean hydrogen production, expand its applications, and create a virtuous circle where demand and supply feed each other and bring the price down. This is without any doubt a global endeavor, but I want Europe to be leading the race."

Platts assessed the cost of producing hydrogen by alkaline electrolysis in Europe at Eur13.72/kg ($15.51/kg) Dec. 2 (Netherlands, including capex), based on month-ahead power prices, though electrolyzer producers say power purchase agreements and technological developments can drive down costs rapidly.