Hydrogen: A clean-hot topic
With the energy transition progressing, hydrogen is a “hot topic” in the shift to clean energy.
Hydrogen as an energy carrier is not a new concept and has been topical before. The difference now is that clean hydrogen seems to have real momentum, and is being seen as part of the energy transition. The pathways of policy makers, industry and technology development appears likely to converge and culminate in substantial progress in clean hydrogen.
Whether hydrogen is “clean” depends on its source and production. The industry has helpfully developed a colour coding system (illustrated below, with indications of current cost and prevalence of each method). The term “clean” hydrogen covers either the green or blue production methods.
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Progressing clean hydrogen as an energy carrier presents a number of challenges that government and industry are working to overcome, most of which go hand-in-hand. They include the following issues:
Market development
The current market for hydrogen is largely for industrial use, particularly in petrochemical refining and fertiliser production. Comparatively little hydrogen is (currently) used as an energy carrier. Some economies are encouraging more use of hydrogen as an energy carrier through government incentives, in particular Japan, South Korea and China.
However, the use of hydrogen as an energy carrier is not a case of “plug-and-play” into existing gas infrastructure. Most gas infrastructure requires costly alteration or replacement to handle hydrogen. For the most part, market development will hinge on new hydrogen fuelled infrastructure or hydrogen blending/enrichment solutions for existing infrastructure.
Ashurst is actively involved in advising on hydrogen projects including:
- a proposed green hydrogen plant for industrial application in Western Australia
- a pilot hydrogen project in Victoria
- a proposed green hydrogen project in Tasmania.
Scale
The scale of hydrogen production will need to step-up significantly in order to displace existing energy sources. Most existing or planned projects are smaller scale, or pilots testing technology. Investment in large scale projects will be necessary, but cost (and timing alignment with market development) will be a challenge. That said, government policy and technology seem to be on the same path to provide momentum to a step-up in scale, and to test scaling up of technologies.
Transportation and storage
Transportation and storage of hydrogen is currently expensive and has some technical challenges. There is some scope for blending hydrogen into existing pipeline infrastructure. However, there are technical limits as to how far this can go. Alternative solutions, such as conversion to liquid ammonia for sea transportation and re-separation at destination, show some promise but are relatively costly and carbon emission intensive.
Technology
Technology is set to play a major part, with emerging technologies for more efficient hydrogen production, but also for storage and transportation solutions. Existing production technologies are well established, and their further development appears likely to offer more scale and efficiency.
Regulation
Many economies lack a regulatory regime governing scale production, transportation, storage and use of hydrogen. This results in uncertainty and potential regulatory risk. These are likely to manifest in key areas, such as managing safety aspects to allow market development and regulatory hurdles to allow pipeline blending and hydrogen related infrastructure.
Carbon and price
A "clean" hydrogen production project is also a renewable energy project or a carbon capture and sequestration or off-set project. These aspects of "clean" hydrogen drive much of the current cost differential between clean hydrogen production compared to grey or brown hydrogen production. As we move towards cheaper renewable energy and pricing carbon emissions, the cost differential will reduce.
Policy and incentivisation
Many developed economies have (or are progressing) policies favouring production of "clean" hydrogen and seeking to expand the demand for "clean" hydrogen.
However, further action and implementation of the policies will be required to incentivise industry and, in so doing, assist in overcoming the above challenges. In developed economies, we can see government policy settings emerge quickly and there is a general trend for clean hydrogen being on the policy agenda as a priority item.
Part of the future
A hydrogen project often brings together components of multiple projects, including renewable, infrastructure and CCS components. The growing hydrogen industry and market is becoming a key part of the future in energy developments.
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