IEA (2018), Hydrogen, the missing link in the energy transition, IEA, Paris https://www.iea.org/commentaries/hydrogen-the-missing-link-in-the-energy-transition
Hydrogen as an energy carrier and feedstock has clearly gained momentum in the past year. I see at least three reasons for this. First, the huge decline in the cost of wind and solar energy in recent years has opened the prospect of large-scale production of green hydrogen. In countries where wind and solar energy can be produced at very low cost on well-endowed location — for instance in Argentina, Australia, Chile, Morocco, Oman, Saudi Arabia, or South Africa — serious projects and feasibility studies are underway to ship green hydrogen to demand centres.
If this turns into a reality, hydrogen could become a game-changer, the same way LNG linked previously disconnected regional natural gas markets. In short, a nascent global hydrogen market is no longer unthinkable.
Second, there is fast-growing acknowledgment that we can’t decarbonize our energy system just by greening electrons. In industry and (heavy) transport, there is a huge need for greening molecules. Even when electrification gains pace, as the projected by the International Energy Agency (IEA), it is often more efficient and cost-effective to achieve decarbonisation of industry and heavy transport through hydrogen.
In the iron, steel and chemical industries, as well as in refineries, green hydrogen can be used directly as a feedstock; for trucks and buses, hydrogen can often provide a better solution than electric vehicles. For this reason, a recent report by the International Renewable Energy Agency (IRENA) calls green hydrogen the “missing link” in the transformation of the energy system. In addition, hydrogen is suitable for long-term (seasonal) storage of renewable electricity, for instance in salt caverns, and thus helps the flexibility of the power system as well as balancing the grid.
The third reason for the growing momentum behind hydrogen is the insight that existing gas infrastructure can be used to transport hydrogen, with limited adjustments and costs (about 5% to 10% in preliminary Dutch gas industry estimates). Hydrogen can also be blended (up to 15-20%) in the gas grid in a transition phase. This significantly enhances the potential of hydrogen.
The Hydrogen Council expects that hydrogen will cover at least 18% of final global energy demand in 2050. The Shell Sky Scenario projects this might be 10% in 2100 — including up to 25% of transport demand. In any case, much of the future development of hydrogen will depend not only on upscaling and technological development (e.g. in electrolysis) but also on energy policies in key regions across the world. The good news here is that the IEA has started working on a major hydrogen study for next year’s G20 presidency of Japan — a leader in the hydrogen field for quite some time. This will provide a very useful baseline for projections on the potential contribution of hydrogen and a sound basis for evidence-based policy making at the global level.
When it comes to policy, an important sign of the rising relevance of hydrogen is the remarkable “Hydrogen Initiative” signed by most European Union countries at the Informal Energy Council in Linz, last month. This document states how critical hydrogen may be in the EU’s pathway to decarbonise the economy.
But it also highlights the geopolitical dimension of hydrogen: a significant deployment of hydrogen may well help to reduce the EU’s dependency on fossil fuel imports and thus boost energy security. It seems likely that the EU will build on the new momentum to take hydrogen forward in R&D, innovation and deployment in the months and years to come. After having been so successful in advancing the greening of electrons in Europe, it is now necessary to push the greening of molecules.
The Netherlands seeks to play a leading role in Europe here. The impressive rise of off-shore wind capacity on the North Sea and the Wadden Sea, in combination with the country’s unique gas-infrastructure, offers great opportunities for developing a hydrogen hub. A number of hydrogen pilot projects are already underway. But since the North-West European electricity and gas markets are already well integrated, we believe it would make perfect sense to accelerate the development of hydrogen in a framework of international cooperation with our neighboring countries.
With all the understandable enthusiasm about hydrogen in many quarters, we also need to be realistic and have a keen eye on the possible impediments and time-horizons involved. At this very moment in time, cost levels are too high and it seems rather unlikely that hydrogen will become a massive energy carrier before 2030. Many still remember how hydrogen was embraced in the beginning of this century as a silver bullet. Important market players made what turned out to be bad investment decisions on this basis and are understandably hesitant.
So, is this time different? They key question for many energy companies is how to develop a viable business case around green hydrogen. Do we need an interim phase with “blue” hydrogen (produced by gas with pre-combustion CCS or CCUS) to scale up and develop the infrastructure before moving to large-scale green hydrogen? To what extent can higher CO2-prices, as we are now eying in the EU, help build these business cases? What is the role of standardisation and regulation?
These questions and many others are squarely on the table when it comes to hydrogen. There is a strong conviction in the Netherlands that this time is different for hydrogen and that the time has come to face the challenge together with other countries. The IEA can play a critical role in providing fact-based analysis and supporting the design of cost-effective policies to develop sustainable hydrogen.