Air Products, the world's largest producer of conventional hydrogen, called on policy makers at the UN Climate Change Conference to focus on boosting low-carbon hydrogen demand in CO2-intensive industries, saying the supply side of the market could be easily scaled up.
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Air Products CEO and Chairman Seifi Ghasemi said the company was developing both "blue" low-carbon and renewable "green" hydrogen production alongside its conventional hydrogen production business.
It is making major investments in blue hydrogen, produced from fossil fuels in combination with carbon capture and storage, in Canada and the US, along with its large-scale green hydrogen plant at Neom in Saudi Arabia, produced by electrolysis of water powered by renewables.
"We can build more plants," Ghasemi said at the UN COP26 summit in Glasgow, Scotland, and governments should focus on incentivizing demand in sectors which are hard to decarbonize with electrification.
Sectors with the best potential for new hydrogen demand include the cement, steel and chemicals industries, he noted. A global carbon tax could help underpin such demand, Ghasemi said.
Air Products' President in Europe and Africa, Ivo Bols, said blue hydrogen would be needed to build scale in the market for the low-carbon gas to meet mid-century decarbonization goals.
Speaking at the COP26 Hydrogen Transition Summit, Bols said the main assets for blue hydrogen were already in place, and that CO2 emissions was necessary in the short term before green hydrogen production could come on stream at scale.
Air Products is however exploring global locations with high wind and solar potential to develop renewable hydrogen production.
Bols said governments should provide regulatory certainty to help develop the market.
"There will always be business risk, there are uncertainties," he said. But ensuring a solid market framework would help the industry grow, he added.
In a panel discussion at the event, David Caine, a partner at offshore wind-to-hydrogen developer ERM Dolphyn, said public-private partnerships could help to support projects in the early, unstable phases of growth.
He noted that consensus was growing around the long-term role hydrogen could play in the decarbonization of the economy, but more measures were needed in the short term to build towards the 2050 vision.
Emmanouil Kakaras, executive vice president at Mitsubishi Heavy Industry for its NEXT Energy Business, said scale in the market would first come from blue hydrogen, with early demand gains to be made in replacing existing hydrogen production by adding CCS, while energy storage needs would then help build further volumes.
These two areas would be the "game changers" in promoting the massive deployment of hydrogen, Kakaras said.
Beyond hydrogen colors
Head of Future Energy Scenarios at S&P Global Platts Analytics Roman Kramarchuk said moving away from colors of hydrogen production would be a more effective way of developing an international hydrogen market.
"From a COP perspective, it's not that we want hydrogen; it's that we want decarbonization," Kramarchuk said at the summit.
"The reality is that hydrogen is expensive," he said. "We're looking at hydrogen as a next-generation fuel because it is a decarbonization fuel."
For this reason, hydrogen should be deployed in areas where it has the greatest decarbonization potential, such as in steel production, he added.
The most cost-effective and climate-friendly routes for hydrogen production would depend on the natural resources of potential locations, Kramarchuk said.
The carbon intensity of each production pathway could be separately assessed and accounted for with instruments such as guarantees of origin traded in secondary environmental markets, he added.
That way, two large, liquid global markets could emerge -- one for hydrogen and another for GOs -- rather than a multitude of fragmented markets based on locally-mandated production pathways.
German utility Uniper's COO and Chief Sustainability Officer David Bryson said GOs and verification would be critical to enable the international hydrogen trade that Europe will rely on to meet its decarbonization ambitions, and hoped COP26 would produce some clarity in this area.
Kramarchuk noted low-cost production centers such as Australia could become global exporters of hydrogen.
S&P Global Platts assessed the cost of producing renewable hydrogen via alkaline electrolysis in Europe at Eur9.88/kg ($11.33/kg) Nov. 10 (Netherlands, including capex), compared with just $2.31/kg in Western Australia.
Platts Analytics Hydrogen Production Asset Database has tracked a 20-fold increase in renewable and low-carbon hydrogen project announcements globally in the last 18 months, with announced projects amounting to over 20 million mt/year of capacity, approaching a third of the current global hydrogen market.