How To Drive The Hydrogen Economy Forward?

Hydrogen is a useful and adaptable energy carrier. In the eyes of many, it could address the myriad energy challenges we face as a society searching for meaningful paths to a net-zero carbon future.

The concept of the “hydrogen economy”—a broad description of producing and using hydrogen as an alternative to fossil fuels and mitigating climate change—to achieve these goals has been around for more than a hundred years. But its modern iteration is believed to have first appeared in A Technical report from the University of Michigan, 1970.

Use cases now range from road transportation to petrochemicals. Although burning hydrogen does not emit carbon dioxide, its effectiveness as a carbon-neutral fuel depends on the processes used to produce it. This is why hydrogen is often referred to as “gray,” “blue,” or “green” depending on the amount of carbon dioxide generated during its production.

It’s all about going green

The bulk of the hydrogen currently produced around the world is gray hydrogen made from natural gas through a process known as steam methane reforming (SMR). Next comes blue hydrogen, a low-carbon version still made using SMR technology but with carbon capture and storage, and finally there is green hydrogen, which is generated through water electrolysis using renewable energy.

However, blue and green hydrogen will make up less than 1% of global production in 2022, according to a new report. International Energy Agency (IEA). This will need to change for hydrogen to play a significant role in the net zero economy.

It is encouraging that nearly 40 countries have announced several noteworthy policy and development efforts over the past five years. Overall, the IEA expects 115 GW of new electrolysis capacity to generate green hydrogen by 2030.

But there will likely be many challenges along the way. According to PricewaterhouseCoopersMost of the current green hydrogen projects under construction and operation, despite increasing capacities, are almost exclusively at the pre-marketing stage and have limited electrolyzer capacities, typically well below 50 MW.

The financial advisory firm further noted that “the proposed plants have larger electrolyser capacities of 100 MW or more, but are still small compared to existing gray hydrogen production plants.”

It’s not just the ability to generate green hydrogen that needs to be taken into consideration. Hydrogen must be filled by liquefaction or compression, transported via surface vehicles or pipelines, stored and transported.

Therefore, infrastructure barriers or opportunities will also require huge investments before the fuel can achieve its carbon-neutral potential for consumer or industrial use. This is a topic that is expected to be under scrutiny and deliberation in the Council Hydrogen Summit of the Americas Scheduled to be held June 11-12 in Washington, D.C., United States

The event – which was attended by the US Department of Energy and is expected to witness more than 4,000 international delegates – may offer a glimpse into the global response to the challenge of meeting growing demand for hydrogen while reducing costs.

This market dynamism is critical to ensuring that hydrogen can be traded and transported in significant enough quantities to make a difference in reducing carbon emissions by 2030.

Taxes, subsidies, or free markets?

The need to act now is clear, if the ultimate goal is to make the hydrogen economy play a pivotal role in achieving net-zero emissions targets by 2050 for countries and companies alike. However, the jury is still out on the best way to achieve this and put green hydrogen at its heart.

Current forecasts for the scale of green hydrogen production and support market remain elusive. For example, A recent report by Deloitte He noted that growing “subsidies” for green hydrogen could see it top the value of LNG trade by 2030 and grow further to $1.4 trillion annually by 2050.

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This “support” is currently being driven through policy announcements regarding tax incentives and subsidies for green hydrogen in key markets such as the US, UK, EU and China. Many Middle Eastern countries, Australia, India, Morocco, South Africa and Namibia have also intensified their efforts.

Of particular interest is the US Inflation Reduction Act passed in August 2022, which provides several financial incentives for the deployment of green hydrogen and fuel cell technologies.

The European Union has established the European Hydrogen Investment Bank while the UK government is on track to award contracts totaling… Electrolysis capacity: 250 MW To a variety of major developers such as Phillips 66, BP, Octopus Renewables, EDF Energy and Marubeni Europower.

Multilateral financial institutions have intensified their efforts on green hydrogen fuel financing and storage facilities in Latin America (eg World Bank initiatives in Brazil, Chile, Colombia, Costa Rica and Panama).

As things stand, there are many hints of private sector interest and a reasonable belief that fostering a hydrogen economy could be left to free markets to decide what the eventual low-to-zero carbon energy mix might look like.

But that is easier said than done. Currently, nine-tenths of global hydrogen use is devoted to just three industrial applications – methanol production for fuel blends, ammonia manufacturing for fertilizers and chemicals, and reducing the sulfur content of diesel by refineries.

Many industries assumed to be potential users of green hydrogen in a future net-zero world are not currently using any. Changing this scale, especially the use of green hydrogen as a heat source for industries, will require a huge amount of investment and a complete retooling of energy systems to operate effectively.

This means that taxes or subsidies will still be necessary to attract the private sector in the current decade as the market enters a pivotal phase. But a dynamic mix of tax incentives, subsidies and private sector investment could push the green hydrogen industry into a trillion-dollar business by the end of the decade. At this point the entrepreneurial spirit will be ready to take over the market.

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