This article was first published in World Oil.
By Daryl Wilson, Executive Director of the Hydrogen Council.
The global energy crisis is squeezing consumers and businesses alike. As household bills rise, governments are competing over a limited supply of gas, the price of which is rising every day. With investors pouring more and more into hydrocarbons to meet this newfound demand, many have voiced concerns over the direction of the global energy transition. However, the interest and investment in the hydrogen sector shows there is real progress being made in renewables, and that despite current market challenges, hydrogen will play a major role in global energy in the near future.
The history of global energy can, in many ways, be viewed as a long journey of decarbonization, from wood, to coal, to oil, and then to natural gas. Over time sources have become cleaner and more efficient. Hydrogen is the obvious last step on that path, a clean energy source, with no significant environmental impact.
Last October, a Hydrogen Council report showed that hydrogen can provide the lowest-cost decarbonization solution for 22% of final energy used by 2050, roughly equivalent to the role electricity takes in today’s global energy mix. While hydrogen would by no means be a panacea, it clearly has the potential to play an essential role in the energy transition.
There are a wide range of fields that hydrogen can support to reduce emissions, from heavy industry, transportation, and decarbonizing ammonia for food and agriculture.
Hydrogen will also open up opportunities for regions richly endowed with renewable energy sources. Chile, Australia, and a number of African countries, strong in wind and solar power, will be able to make a much bigger contribution to the global energy mix than before, as hydrogen will allow them to export their excess renewable energy further afield, becoming major producers in the process. This in turn will boost their economies, providing growth and jobs.
This is the ideal scenario for hydrogen, but to get there a lot has to happen. To get to 22% of global energy, the means of producing hydrogen have to be massively scaled up, not only to meet demand but to reduce costs.
Critics of hydrogen like to claim the technology is not competitive against standard fuels, but they forget that oil and gas have had a hundred-year head start, and as the hydrogen sector grows, and it is growing, this advantage will decrease.
There has already been an increase in the size and number of hydrogen projects over the last year. More than 700 projects have been announced, which is a quarter of the total required to meet anticipated demand by 2030. However, the number of hydrogen projects (in terms of demand) will need to grow 4x to be on the right trajectory.
In the past few months, through the swings of the energy market and policymakers’ concerns over energy security, the investment community has shown more interest in hydrogen. Traditionally projects have largely been captive within existing companies, and there has not been a broad open market for financing hydrogen infrastructure finance. But that is now changing, as investors look for ways to supercharge projects, or develop new ones.
The challenge for the industry and lawmakers, will be to create an environment that can make the best use of this newfound appetite. The industry will need to find a way to de-risk large scale projects, and educate key stakeholders about the timelines and potential of the technology. For example, critics often claim hydrogen is not deployed at scale, but this is misleading. Hydrogen is in use on a massive scale in global refining operations and in the manufacturing of ammonia. The issue is, hydrogen’s greatest successes are industrial, and the industry will need to show how the same benefits can be applied to the public domain, in automotive transports like cars, and in our utility systems.
As the industry moves its technology into this domain, it can then bring with it the codes and standards it has implemented in the industrial process to guarantee the same levels of efficiency.
A viable model is already apparent in Chile, which produces economically profitable hydrogen, largely carrying solar and wind energy, at a low cost. Low renewable energy costs will determine who leads the global hydrogen industry, and Chile may well be a viable model for many renewable rich countries.
Over the last two years, the number of hydrogen projects has grown massively, and the next five years will be no different. To keep this growth up however, the industry will need to keep engaging policymakers and partners up and down the value chain, both through public partnerships and on a more ad-hoc basis at major industry conferences like ADIPEC 2022.
This is an exciting time for hydrogen, at a crunch point for the global energy sector, hydrogen can offer hope and security, it just needs the right investment.