Low-Carbon Hydrogen Essential For Net-Zero

Net zero can’t be achieved without low-carbon hydrogen, arguably a silver bullet for hard-to-decarbonise sectors like ammonia, refining and steel. 

1. Hydrogen markets analysis (supply & demand) needs a deeper dive

   1. Green Hydrogen (produced from renewable) and Blue Hydrogen (paired with CCUS) market is likely to meet 5% of global final energy consumption by 2050
   2. Europe is  aiming for 20 Mt of blue and green hydrogen by 2030.
   3. To compete with fossil fuels in hard-to-decarbonise sectors, low-carbon hydrogen will have to be priced below EUR3/kg

2. How close are projects to commerciality?

   1. Projects achieving FID today are NOT representative of the future.

   2. GREEN HYDROGEN, is well short of commerciality. Standalone green hydrogen projects have breakeven costs between EUR6/kg and EUR14/kg,

   3. BLUE HYDROGEN is s much closer to the commercial threshold.Future costs range between EUR2.0/kg and EUR3.5/kg for projects FID’d from 2023

   4. Main risk is gas price volatility . Another is Europe’s stringent criteria on carbon intensity through the value chain,

3. How can Green Hydrogen Cost can be reduced? 

   1. Scaling up will reduce Green hydrogen costs by around one-third by 2030 and by half by 2050. But costs will still be above the EUR3/kg threshold beyond this decade.

   2. Government support is also needed, in form of contracts-for-differences (CfDs) it can bridge the cost/price gap between buyer/seller.

   3. Need to combine renewable technologies  (Solar & Wind). Variable capacity factors can cause extended downtimes for single technology

      1. Green hydrogen project with a EUR40/MWh PPA supporting at least 70% capacity factor could achieve a breakeven competitive with blue hydrogen.

4. Is there a Geographical preference for Green Hydrogen

   1. Northwest Europe, that will most likely be green hydrogen with onshore or offshore wind.

   2. Norway, UK and Netherlands are among those with the access to gas and infrastructure (including CCUS) to produce blue hydrogen.

   3. Southern Europe, blue hydrogen is largely out of the equation, but land availability supports large and burgeoning low-cost solar and wind capacity.

   4. Asia, All countries (China, Japan) that import high priced gas/LNG will benefit from Green Hydrogen.

BOTTOMLINE

The industry needs to know where in the world the advantaged opportunities are, and do the comprehensive global benchmarking of project economics for low-carbon hydrogen.