Hydrogen economy needs public policies

The development of a strong clean hydrogen economy will depend on how much energy demand hydrogen developers will be able to meet, particularly from big industrial clusters, according to the 2020 Global Gas Report by International Gas Union (IGU), Italian energy and gas infrastructure company Snam, and BloombergNEF.

“The most cost-effective and practical way to deliver hydrogen to consumers in the near-term is likely to be via large-scale, localized supply chains established under a utility model,” the authors of the report said. “An example of this would be a cluster of industrial facilities that consume hydrogen, located within a radius of 50-100 km.”

China, India and Western Europe are indicated as locations for these kinds of clusters.

Investments

Huge investments should be made in order to meet demand from similar clusters and overall global demand for hydrogen. According to BloomberNEF analysts, around $11 trillion are needed to build the required production, storage and transport infrastructure to meet around a quarter of global energy needs with hydrogen in 2050.

The researchers said electrolysis powered by large-scale wind and solar was a viable option to meet this demand through the existing gas and energy infrastructure, provided that this supply is supported by geological storage in salt or rock caverns, while also not discarding the possibility of producing the so-called blue hydrogen using gas power with carbon capture storage to energize electrolysers.

Public support

The authors of the paper also stressed the importance of public policies and government co-funding to support investments in the clean hydrogen supply chain, which in their view includes both green hydrogen produced by solar and wind-powered electrolysis and blue hydrogen generation consisting of gas-powered production with carbon capture storage. “Covid-19 recovery packages may present a unique opportunity to support decarbonization initiatives in the gas industry,” the report notes.

Producing clean hydrogen is still pointed out as being too expensive, but a policy-driven development, according to the experts, could drive down costs from around $4/kg currently to around $2/kg by 2030 and $1/kg by 2050. At the end of the first half of the century, annual revenue from the hydrogen business would be $700 billion. “However, if policy measures to meet emission targets and promote the use of hydrogen do not materialize, then demand is unlikely to increase significantly outside of current uses,” the researchers wrote.

United States, Brazil, Australia, Scandinavia, the Middle East and North Africa, which all have huge renewable energy and hydrogen storage resources, are pointed out as the locations where the lowest hydrogen prices may be achieved, with China, India and Western Europe following as regions with strong potential.

By contrast, Japan and South Korea may see the highest hydrogen prices due to their low renewable energy potential and unfavorable geology.

Transport

According to the report, there are currently 4,542 km of dedicated hydrogen pipelines worldwide, which could be expanded if existing gas infrastructure is repurposed for hydrogen transportation. For example, blends of gas and up to 5-20% hydrogen may be easily transported without changes in the pipes used in existing gas grids, while transport of pure hydrogen would require pipes made of polyethylene, that are not susceptible to hydrogen embrittlement.

“The cost of hydrogen transport using pipelines is similar to that of natural gas, even though hydrogen is less dense,” the paper’s authors said. “The cost of the materials used for hydrogen pipes are also broadly comparable with gas pipes.” Transnational and long pipes are considered a strong driver to reduce transportation costs.

Barriers

The report highlights a series of actions that should be taken to accelerate the development of a clean hydrogen economy. These include the setting of long-term emission reduction targets at country level, the removal of all those rules that currently forbid the use of hydrogen in many countries and the creation of decarbonization roadmaps for industrial sectors such as steel and cement making, chemicals, aviation, shipping and heavy-duty transport.

Furthermore, the experts advise against investments in fossil fuel infrastructure without regard to its compatibility to a transition to clean fuels like hydrogen. They also suggested the encouragement of production and demand for low emission materials like steel and concrete. “Awareness of the embodied emissions in many materials is often low, and voluntary markets and labelling standards for green products do not yet exist,” the report states.