Clean hydrogen a key part of future energy system: WB

WASHINGTON, DC: Clean hydrogen is widely seen as a key component of the global energy transition, notably for its potential to decarbonize hard-toabate sectors, such as heavy industry (cement, steel, and chemicals), and heavy-duty transport (trucking, shipping, and aviation).

A global hydrogen economy will change the geopolitics of energy and could become an engine for sustainable economic growth in emerging markets and developing countries (EMDCs). Several EMDCs are well positioned to become first movers in the development of this new value chain, both for domestic consumption and for export. Many countries have already issued strategies and roadmaps to operationalize their ambitions, a report prepared by the World Bank said.

As a next step, well-aligned policies adapted to those strategies are necessary to leverage private financing and mitigate the risks of first movers’ investments. The cost of clean hydrogen is a major sticking point in its widespread adoption and deployment. While most attention to date has focused on innovation strategies to lower technology costs, financing costs have received less attention. This report analyzes the importance of the cost of financing, identifies

the project risks that drive up such financing cost, and proposes risk-mitigation measures. The report describes how governments can support deployment by reducing the costs of both technology and financing. Successful projects in the coming years will typically require a combination of strong sponsors, robust regulation, long-term offtake arrangements, and financial support, the report said.

Governments have a key role to play in this early phase. Hydrogen policies on both the supply side and the demand side must be well integrated for the greatest effect and efficiency. A careful selection of early hydrogen projects can reduce the need for government financing. Clean Hydrogen Production Must Grow Twenty-Fold by 2030 Realizing hydrogen’s potential means first replacing today’s fossil fuel-based hydrogen production with a cleaner variety.

To meet the 2050 climate goals, today’s levels of clean hydrogen production must increase 20-fold through 2030. Today, less than 3 “Clean hydrogen” includes hydrogen produced from fossil fuels coupled with carbon dioxide capture and storage (combustion based) or carbon storage (pyrolysis based). These are also known as low carbon hydrogen or “blue hydrogen.” Hydrogen produced from water electrolysis using renewable electricity or from biomass is known as renewable hydrogen or “green hydrogen.” “Conventional hydrogen” refers to fossil fuel-based production without carbon dioxide capture and storage.

Two million ton (Mt) of clean hydrogen is produced each year. Current projections suggest that of the 40 Mt of clean hydrogen production needed by 2030, an estimated two-thirds would come from renewables while the rest would be of the low carbon variety. Clean hydrogen today is more expensive than conventional hydrogen produced from fossil fuels.

This cost gap is the main factor why clean hydrogen projects are often viewed as unviable. Rule of thumb cost estimates for best-in-class projects with optimistic assumptions in favorable locations is $1/ kilogram (kg) to produce conventional hydrogen, $2/ kg for low carbon hydrogen, and $3/kg for renewable (green) hydrogen, respectively, though clean hydrogen (hydrogen from fossil fuels with carbon capture/ storage) can already compete under certain favorable circumstances. Costs vary widely, however, especially for renewable hydrogen. Some EMDCs can be among the lowest-cost producers of clean hydrogen worldwide owing to their favorable renewables resource endowment. Moreover, their resource potential is very significant.