Soaring gas prices due to the war in Ukraine has made fossil fuel-produced Hydrogen uneconomic compelling lawmakers worldwide to source alternative fuel sources urgently. As a result, a report published by Carbon Tracker on Thursday found that higher gas-feed prices have caused more than $70 billion of fresh investments in hydrogen from renewables. In comparison, the report Clean Hydrogen’s Place in the Energy Transition finds that $100 billion of ‘dirty’ hydrogen assets may become stranded by 2030, with Europe and Asia being the most exposed.
The report finds that 25 countries, primarily drawn from the Global North, have committed $73 billion of public and private funds in just a few months to manufacture the cleaner fuel. Germany, Morocco and the United States have pledged the most. On the other hand, Global South will dominate most of the production, responsible for 50% of total world production by 2050, with South Africa, Morocco and Chile controlling most (68 million tonnes).
Kofi Mbuk, senior cleantech analyst and author of the report, said:
“Though green hydrogen is not the silver bullet to the climate crisis, it offers part of the solution if used in a targeted way for specific industries and offers an attractive solution to bridging the thorny issue of energy intermittency anxiety in the power sector, alongside advanced battery technology and the use of smart grids.”
Despite the apparent benefits of green hydrogen in helping to achieve net zero and as costs undercut fossil-based hydrogen, the report finds that environmental factors, like excessive fresh-water consumption and technological and energy inefficiencies in its manufacture, will stymie growth in the short to medium-term.
“Green hydrogen will play a crucial role in the energy transition but applications will need to focus on the agricultural sector (fertilizers) & heavy industry (steel, heavy transport, shipping, mining) until tech innovation for electrolysers improves and fresh water usage is cut. Clean hydrogen could effectively be used to plug energy intermittency issues for solar and wind power as supply of those renewables grows exponentially,” Mbuk said.
Growing Pains
Reliance on massive quantities of freshwater – to split hydrogen from water — and energy inefficiencies could seriously impede the growth of green hydrogen. A third of energy needed is wasted in production, up to a further 25% is lost when liquefying or converting to other carriers such as ammonia, while another 10% of hydrogen’s own energy is consumed to transport the product.
Using the IEA’s growth projection targets for the fuel the report estimates that by 2050 the total volume of freshwater needed will surpass a quarter of the world’s current freshwater consumption with countries in the MENA region most vulnerable.
The report estimates that building out a green hydrogen economy will require $3 trillion of investment by 2050 under Net-Zero targets. This is exclusive of building critical assets like import/export facilities, transportation (tankers), storage, pipelines and desalination plants. To that end governments have a major role in facilitating growth by creating the right regulatory environment including:
- Introducing green hydrogen certificates to confirm supply entirely made from renewable power.
- The introduction of Contract for Difference (CFD) schemes that boost the growth of renewable energy technologies. Under CFDs investor is guaranteed a favourable subsidy incentive that enables them to capitalise on returns. The CFD protects the investor against future unknown cost fluctuations through hedging strategies.
- Introduction of tax credit schemes. The US has recently introduced a tax credit scheme, under the Inflation Reduction Act. This makes it more accessible for fertiliser production and to power other heavy industry.
- Setting up dedicated financial bodies to fund growth.
Source: Carbon Tracker
