Why Hydrogen Fuel is fundamental to clean energy targets

Renewable energy such as wind and solar is crucial to the adoption of hydrogen fuel for meeting clean energy targets for heavy industry. Read on to find out more.

Laura Rodríguez

21 Jun, 21

We’re confident in saying that hydrogen fuel will play a key role in the clean energy transition. Green hydrogen, produced from renewable energy, can provide the solution to the low-carbon needs of energy-intensive industries like chemical refining, manufacturing, construction and long-haul transport.

Governments around the world are devising hydrogen strategies to provide incentives for investment and position themselves at the forefront of technological development. Investments in hydrogen fuel averaged around $1.5 billion per year in 2018-2020, and could grow at around 7% annually, according to BloombergNEF.

Let’s take a closer look at how the industry is developing and what’s in store for the future.

Hydrogen production at a turning point

Hydrogen is extracted from fossil fuels using a steam reforming process, from biomass using microbial processes, or from water using electrolysis.

The consumption of hydrogen fuel is well established in the oil and chemical refining industries. Around three-quarters of the 70 million tons of annual global hydrogen production comes from natural gas, accounting for around 6% of global gas consumption, according to the International Energy Agency. Gas prices account for the bulk of the production cost, making it cheaper to produce hydrogen in regions with lower gas prices, such as the Middle East and Russia.

As well as currently using fossil fuel as the main source, hydrogen production is highly energy-intensive. But the sharp drop in costs for renewable electricity generation is driving increased interest in producing electrolytic hydrogen, marking a major turning point for its widespread adoption as a clean energy solution.

The source of hydrogen production is critical if it is to contribute to decarbonization. Hydrogen produced from natural gas generates carbon emissions and is referred to as “grey hydrogen”, while the production of “blue hydrogen” captures carbon emissions for storage or reuse. “Green hydrogen” generated from wind and solar electricity produces no carbon emissions.

Prospects for green hydrogen use

The automotive industry is looking to hydrogen fuel cells as an alternative to lithium-ion batteries for electric vehicles. Unlike lithium, hydrogen produces only water as a by-product and fuel cells offer higher energy density, allowing vehicles to travel further before needing refueling. Project developers are looking at ways to bring down the cost of fuel cells and establish a delivery infrastructure.

A KPMG survey in 2020 found that 84% of automotive executives expect fuel cell vehicles will experience their breakthrough in industrial transportation, up by 5% from 2019. Hydrogen could provide a viable clean fuel for the aviation and shipping industries, where batteries are not a practical option.

Using hydrogen in air transport could reduce the aviation industry’s climate impact by 75-90%, a European study found, adding that the industry could switch to hydrogen fuel for short-haul flights in 8-15 years.

There is also the potential to use hydrogen in gas networks or fuel cells to provide heating for residential and commercial buildings, and to use fuel cells for renewable energy storage.

While hydrogen extraction is currently an expensive process, the cost of production from renewable energy sources could decline by 30% by 2030 according to the IEA, as renewable costs continue to fall and mass production of hydrogen equipment benefits from economies of scale.

Where is hydrogen being used today?

Hydrogen is gathering strong momentum thanks to the shift in attitudes towards decarbonization among governments and regulators, investors, and consumers. As of January 2021:

  • More than 30 countries had released hydrogen strategy roadmaps
  • There are more than 200 hydrogen projects under development around the world
  • Governments have committed more than $70 billion in public funding

Around 55% of the 228 projects under development are in Europe, Australia, Japan, South Korea, China, and the US also announcing multiple projects. The projects focus on large-scale industries such as refineries, power, methanol, steel, and feedstocks, as well as transport and infrastructure.

Europe

In its hydrogen roadmap released in July 2020, the EU set out its objective to install at least 6GW of renewable hydrogen electrolyzers in the region and produce up to 1 million tons of renewable hydrogen in 2020-2024.

This would help decarbonize existing hydrogen production used in the chemical sector and enable the adoption of hydrogen use in new applications such as other industrial processes and heavy-duty transport. In the second phase, the EU plans to reach 40GW of electrolyzer capacity by 2030.

There are more than 2,000 hydrogen-fuelled cars on the road across Europe and more than 100 fuelling stations. The first phase of the Hydrogen Mobility Europe (H2ME) project between 2016 and 2020 deployed 630 hydrogen fuel cell electric vehicles in 10 countries and installed 37 new refueling stations in eight countries.

United States

In the US, there were around 46 hydrogen refueling stations as of October 2020, almost all of them in California. There were also 161 fuel cells generating a total of 250MW of electricity at 108 facilities around the country, according to the Energy Information Administration (EIA).

Australia and Asia

Australia, Japan, and South Korea are among the countries accelerating their hydrogen strategies, leading to new developments in the push to establish hydrogen infrastructure. The strategies go hand-in-hand with the countries’ push to expand their renewable generation capacity.

In Australia, hydrogen electrolyzer and storage system manufacturer Lavo signed an agreement in February with Springfield City in Queensland to build the country’s first hydrogen fuel cell production line by early 2022.

South Korea’s Hyundai Motor plans to start mass production of a hydrogen-fuelled heavy-duty truck in August. It will ship 140 vehicles to Switzerland by the end of the year and plans to sell them to more European countries in 2022.

In Japan, Panasonic announced a pilot project in May to combine 500kW of hydrogen fuel cell capacity with 570kW of solar power generation and 1.1 MWh of lithium-ion batteries. The project is scheduled for completion in the spring of 2022 and aims to demonstrate the use of hydrogen and photovoltaic generators to meet 100% of the electricity needs of a business.

Such innovative projects show how hydrogen can be used in tandem with solar power to enable energy transition

If you want to learn more about the trends that will drive the renewable industry forward this year, check out the Energy and Solar Research Report: What’s in store for 2021.

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Laura Rodríguez

Business developer

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