Clean hydrogen deployment will be instrumental in the pursuit of global net-zero emissions as not all sectors can easily switch to a renewable electricity path

Putra

Interest in hydrogen is on the rise worldwide. In Asia, the use of hydrogen and its fuel derivatives, such as ammonia and methanol, is being promoted for novel applications such as transport and power generation because burning hydrogen releases no carbon dioxide. It is timely to outline the motivating factors and industries at play in the hydrogen space to understand a landscape also shared by renewable energy and electrification.
<h2>The future of hydrogen</h2>
Clean hydrogen deployment will be instrumental in the pursuit of global net-zero emissions as not all sectors can easily switch to a renewable electricity path. The International Energy Agency has forecasted a potential need for more than 500 million tonnes annually by 2050. Current global consumption stands at about 100 million tonnes a year, mainly for fertilizers, oil refining and other industries using hydrogen which is practically all made from fossil fuels.
Skeptics are less optimistic about the growth of hydrogen, considering energy-inefficient supply chains, competing alternative pathways, and an apparent lack of enthusiasm around the world to clean up existing hydrogen uses before leaping into other applications. The contrasting views form a crucial juncture that calls attention to hydrogen&rsquo;s potential for being oversold by industries trying to stay relevant.
It is not all rosy, because downsides may be seen in production, transport and costs. Clean hydrogen is still very expensive. It is created by two main methods: &ldquo;green hydrogen&rdquo; is produced with electrolysis using clean electricity, and &ldquo;blue hydrogen&rdquo; through the processing of fossil fuels combined with carbon capture, the latter of which is under scrutiny for its emission performance. Then, to move the manufactured hydrogen from its point of origin to usage, energy losses of 60%-70% are often encountered. Due to these drawbacks, some industries want to secure government support.
<h2>The energy importer&rsquo;s motives</h2>
Notable progress can be observed in major energy importers such as Japan, which has exhibited leadership in bilateral and multilateral initiatives. The country has produced less than 14% of its energy needs over the past decade, in contrast with other industrial nations, which typically show <a href="https://www.enecho.meti.go.jp/en/category/special/article/detail_180.html">stronger energy self-sufficiency</a>, for instance, the United States with 106% and Australia, 345%, in 2020. It is therefore unsurprising that Japan is pursuing more importable commodities. In <a href="https://www.reuters.com/business/energy/japan-aims-boost-hydrogen-supply-12-mln-t-by-2040-2023-04-04/">April</a>, the country announced plans to quadruple its hydrogen target by investing US$107 billion in the hydrogen supply chain over the next 15 years. The substantial commitment was built on Japan&rsquo;s receipt in recent years of blue ammonia from Saudi Arabia and liquefied hydrogen made from Australian coal, both shipments being the world&rsquo;s first. While the emission credentials of the cargoes will likely still invite questions, Japan&rsquo;s pioneering efforts toward establishing a new global supply chain are evident and may tempt other Asian countries to jump on the bandwagon, as users or as exporters.
Elsewhere in Asia, the fuel has been gaining traction in major energy-importing countries. South Korea is home to the world&rsquo;s largest fleet of hydrogen-powered cars. China is pursuing the establishment of <a href="https://www.iea.org/reports/electrolysers">electrolyzer manufacturing</a>, although its near-term clean hydrogen target is modest. India is exploring green hydrogen, having an eye to reducing dependence on imported fuels and feedstocks leveraging its renewables expansion. Singapore, home to sizable refinery and petrochemical industries, is another country contemplating hydrogen.
<h2>The industry motives</h2>
The hydrogen trend can be further illuminated by mapping industry interests to complement the country-level targets. Table 1 presents a simplification of dual paths that different sectors can take in pursuing net-zero goals. The first path outlines the adoption of hydrogen and its derivatives, while the second path describes clean energy and electrification. There are certainly other pathways with current and future technologies, but the table prioritizes simplicity to aid understanding.
Table 1. Hydrogen motives for myriad industries
<img src="https://illuminem.b-cdn.net/articlebody/d518b4f2f87acf568e35db388442d8be11b6db0c.png?" alt="Hydrogen Motives for Myriad Industries" />
By way of example, contrast shipping with the gas pipeline sector. Shorter shipping routes are expected to be electrified, but on the whole, vessel electrification will probably remain limited because battery life for long journeys could be challenging and will need to be complemented, such as by using hydrogen-based methanol or ammonia. Both hydrogen-based fuels and biofuels hold prospects for the sector.
The gas pipeline sector has distinctly different considerations. In a future where the odds are on increased electrification, applications such as heating in buildings would likely tilt toward the more efficient electric-based options, such as the electric heat pump, straining the gas business. Under the scenario of tough competition, gas pipeline owners would probably fall back on existing infrastructure by proposing the repurposing of pipelines for transporting hydrogen instead, whether in full or as a partial blend with gas.
However, many are cautious about the technical limitations and safety challenges of using gas pipelines for hydrogen. Another concern is that a partial blend yields only a modest impact on emissions. A 20% hydrogen blend will raise gas prices while <a href="https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/electric-power/011422-uks-gas-grid-ready-for-20-hydrogen-blend-from-2023-network-companies">reducing CO2 emissions</a> by only 6%-7%, a reason why in some markets, lobbying for government support is rising.
Hydrogen is a costly fuel, thus competition from alternative pathways will remain a challenge across all applications. Green hydrogen costs vary widely depending on its origin, ranging from US$4 to more than US$8/kg. It is comparable to the liquefied natural gas (LNG) range of US$30-US$60 per million British thermal units (MMBtu), three to six times Asian spot LNG prices in recent months. Around the world, various goals have been outlined to make hydrogen cheaper, particularly to reduce green hydrogen prices below blue hydrogen.&nbsp;
Suppose hydrogen meets its target price of US$1-US$2/kg in the next couple of decades and the export chain materializes. It will cost US$7-US$15/MMBtu plus significant transport charges. Japan is accustomed to importing LNG at US$10-US$13/MMBtu, but emerging Asian markets would be wise to tread carefully if they followed the Japanese&rsquo;s footsteps to burn hydrogen. Countries with excellent renewable resources could be in a position to become hydrogen exporters but are unlikely consumers when other net-zero pathways remain underexplored.
<h2>Conclusion</h2>
Given the high costs, challenging supply chain and alternative pathways, competition is a reality even in the most promising applications of hydrogen. For stakeholders, a difficult exercise is to weed out which of the hydrogen promises are driven by a real pursuit of progress, and which ones in effect serve business interests vying for relevance &ndash; and buying time &ndash; amid a shifting landscape.&nbsp;
Many industries are facing a material risk of being displaced on the road to net-zero emissions. As policy support for hydrogen builds up and the market takes shape, it is important for stakeholders to understand the industry interests at play. For some sectors, hydrogen adoption could be credible because alternative net-zero pathways are limited, while for others, their foray into the fuel just does not hold water.
illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability &amp; Energy writers, their opinions do not necessarily represent those of illuminem.

The hydrogen motives: various industry interests are at play behind clean energy drive

Everyone hopes that CCUS can be commercially viable, but stay wary of the fine print. ‘Carbon capture’ has increasingly become a magic word for many investors and regulators. ‘Carbon capture potential for project [insert name here] will be evaluated in the future’ presents a convenient way to wing questions on emissions and to get the project through the last miles.

Everyone hopes that CCUS can be commercially viable, but stay wary of the fine print.
‘Carbon capture’ has increasingly become a magic word for many investors and regulators. ‘Carbon capture potential for project [insert name here] will be evaluated in the future’ presents a convenient way to wing questions on emissions and to get the project through the last miles.
While media reports may captivate the public imagination of having low-to-no emissions power delivered from coal or gas plants, many do not distinguish the relatively low-cost gas processing carbon capture, utilization and storage (CCUS) and the prohibitively expensive power sector CCUS.
In Southeast Asia, discussions on CCUS have also been gaining traction. With sizeable coal plant fleets, many of which are relatively new and locked in rigid long-term contracts, the region is touted as a good place to explore CCUS. There is also the promise of capitalizing depleted oil and gas field in the region as CO2 storage.
Three ‘small’ details are often missed.
First, three-quarters of the planned CCUS project in the region is for gas processing, not from where the bulk of emissions comes from – the power sector. Gas processing CCUS has been around since the 1970s. The region is catching up to this past trend, given its sizeable gas resources with high embedded CO2 content.
Separating embedded CO2 from the gas is already a commercial necessity as consumers has little use of CO2 which lower the energy content. In many projects, the separated CO2 is vented to the air, while CCUS allow these emissions to be reduced. This process is nevertheless still rife with challenges, as exemplified in the <a href="https://ieefa.org/articles/chevrons-gorgon-project-australia-badly-missed-its-co2-capture-target-2021">Gorgon Australia project</a>, which repeatedly failed to meet its targeted capture commitments despite having all the big names in the game: Exxon, Chevron and Shell.
The problem with the current plan relates to public perception, as in most cases, gas processing is not what the public think of when they hear ‘carbon capture’.
Secondly, aside from Singapore, the region has a practically non-existent carbon price. Proponents seem to conveniently overlook the fact that CCUS essentially represents a ‘tax’ to continue CO2 emissions. In a cost-sensitive region where carbon pricing is largely non-existent, how would this contradiction be reconciled? The elephant is still in the room, and it is not going anywhere anytime soon.
The euphoria in promoting cluster-based CCUS, which combines multiple CO2 sources to reduce investment risks, often glosses over the fact that current cluster plans in the UK and Norway comes with hundreds of millions of dollars of public funding support. This is despite both countries already having some the highest carbon prices in the world.
Thirdly, capture cost tends to dominate project budget. The promise is to build gas processing CCUS facilities which can later be tied-in to the power plants as the technology develops. Yet there is little mention that the capture cost is the key barrier, where more than 60 to 70% of the total cost typically lies. Thus, while shuffling the cards in the transport and storage stage may help, its impact will likely remain limited before the capture cost decreases substantially.
CCUS in the power sector has had a patchy history, with only one CCUS power plant operating globally. Capturing CO2 in a coal or gas power plant currently comes at a hefty price tag north of US$60 per tonne of CO2, not to mention the transport and storage cost, and investments to accommodate the lower emissions standards.
Retrofitting a CCUS facility into a 240-megawatt (MW) coal power plant can cost up to US$1bn and experimenting with CCUS is more likely to be affordable for developed economies.
While the current CCUS plan in the region is to produce more gas, the entourage of outside supporters are growing: power plant owners, investors in coal gasification, and public officials seeking to pass the carbon baton to the next elected government.
The CCUS train risks becoming a convenient ride for many to buy time, while knowing full well the slim chance of seeing a viable CCUS in their projects in the near decades.
There is no easy way to chart decarbonization pathways, but the greatest ‘cost’ of CCUS to the emerging economies will likely be the stalled decisions. Promising power generation CCUS in emerging economies with a non-existent carbon price is outlandish at best, and distracts policymakers and businesses from asking the hard questions and enabling long-term solutions.
Energy Voices is a democratic space presenting the thoughts and opinions of leading Energy &amp; Sustainability writers, their opinions do not necessarily represent those of illuminem.

Putra Adhiguna

Putra Adhiguna

The hydrogen motives: various industry interests are at play behind clean energy drive

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