Hydrogen challenge: Building a new industry in period of global turbulence

The Hydrogen Hub is a space within CERAWeek’s Innovation Agora, dedicated to the emerging hydrogen ecosystem. The Hydrogen Hub program will focus on technology, project development, hydrogen production and transportation economics, financing, and policy.

In a seminar titled: Hydrogen challenge: Building a new industry in a period of global turbulence, Ms. Catherine Robinson, Research & Analysis Executive Director, Global Gas, LNG, & Low Carbon Gas, S&P Global, said in production side, we have seen really strong growth in hydrogen production from all forms. Its going to kickstart hydrogen production all around the world. We have seen the construction of the first truly large-scale electrolysis project of 2.2GW in Saudi Arabia. We have also seen electrolysis grow to almost half GW.

Investments in the U.S. renewable energy market are expected to hit $114 billion by 2031, a 78% increase from $64 billion in investments at end 2021, buoyed by the decarbonization momentum from the landmark Inflation Reduction Act. On the policy side, we had the IRA. We are seeing development of teams in South Korea and Australia. There are launch of proposals of auctions for hydrogen procurement in the European Union, Germany, and the United Kingdom.

Hydrogen is firmly established as the third pillar of the energy transition. A clear vision is emerging for low-carbon hydrogen, and hydrogen-derived fuels. The future market is expected to resemble the natural gas market. There is increasing clarity for investors. But, uncertainties remain! An entirely new chain of hydrogen production, transport, and use will need to be developed. Annual investment of over $370 billion is expected in the production segment alone by 2030.

The vision for low-carbon hydrogen is clear. We are moving from industrial gas to low-carbon energy carrier. In future, we will see about 25% of global energy consumption. 2/3rds of production is from renewables, and 1/3rd from abated fossil fuels. We are seeing wide range of geographies that are looking to enter the low-carbon hydrogen market. North America will become a much larger component of the supply pipeline.

Ms. Eleonor Kramarz, Head of Energy Transition Consulting Americas, S&P Global, said in the IRA, there is a plethora of tax credits that hydrogen companies can qualify for. End-use credits include clean fuel production credit, clean electricity PTC/ITC, clean vehicle credit, and alternative fuel refueling property credit.

S&P Global's proprietary hydrogen cost model finds green hydrogen will be the lowest cost option across much of USA during the 2020s. It will display grey hydrogen. The IRA is giving the USA an early advantage to produce and export low-cost and low-carbon ammonia to the EU, and other likely importers. How other countries incentivize their own production will determine US advantage for the future.

PTC eligibility will determine successful business models for green hydrogen. However, we will see wide variations across regions. In 2025, grid charges and renewable energy credits, or RECs costs will account for up to 30% of levelized cost of green hydrogen production. Delivering production targets implies massive volumes of new renewables. There is competition between demand for renewable power from the grid, hydrogen producers, and buyers of power purchase agreements (PPAs).

Ms. Robinson added that the time to develop new renewable capacity is the biggest barrier for development of green hydrogen.

Hydrogen Hub, organized by CERAWeek, March 6-10, 2023, will look at the hydrogen challenge, and building a new industry. Hydrogen policy and setting up ground rules, how to make hydrogen a global commodity, financing hydrogen, can hydrogen decarbonize air travel, hydrogen and the International Maritime Organization (IMO) in 2050, evolution of hydrogen in Asia Pacific, electrolyzer technology, hydrogen supply chain, are just some of the topics.