Governments and business around the world may be supporting the widespread use of green or blue hydrogen, but “sizeable barriers exist in turning vision into reality”, says a new report from analyst Westwood Global Energy Group.
The current high cost of producing renewable H2 or low-carbon hydrogen from natural gas with carbon capture and storage (CCS) — and the consequent current lack of demand from would-be users — are cited as major hurdles in a “chicken and egg dilemma”.
“The lack of clarity on [clean hydrogen’s] ultimate end-use potentially holds back the necessary investment in renewable (or natural gas) energy sources needed to support [green or blue hydrogen production]... End-use markets won’t develop until hydrogen is viewed as [a financially] attractive alternative.”
Another key issue, the report explains, is determining whether green/blue hydrogen is “the appropriate decarbonisation solution” for potential use cases, which include heating, road transport and steel industrial production.
“End-use markets are currently weighing up the various alternatives available to decarbonise their operations, whether it be electrification, hydrogen, CCS, etc. The final ‘choice’ is not set in stone and will evolve.”
The report, entitled Framing a Business Case for Hydrogen in Northwest Europe, adds that “business case facilitators” are needed to move green or blue hydrogen projects towards a final investment decision (FID).
“Renewable energy producers and oil & gas companies are among the key stakeholders in taking the leadership to integrate stakeholders across the value chain,” it says. “However, while these synergies and collaborations have resulted in an initial pipeline of conceptual projects, only those with a strong facilitator have managed to move the most ambitious projects from concept to[wards] FID.”
The study adds: “The initial effort of project leaders and governments looking to develop an opportunity for hydrogen requires a further element: a business case facilitator.
“Essentially, a business case facilitator helps align a particular proposal/project with the government strategy to address its domestic emissions or create a new economic development opportunity... the facilitator also allows for a quicker and more focused identification of policy gaps in the value chain of a project. As a result, governments can develop financial and regulatory mechanism[s] that meet the actual needs of a hydrogen — or hydrogen and CCUS — proposal aiming to effectively decarbonise prioritised sectors.”
The Westwood study cites the PtX Alliance in Denmark as a good example of a business case facilitator. This collaboration between industry associations Wind Denmark and Hydrogen Denmark has resulted in the Green Fuels for Denmark project, in which partner companies from across the value chain — from developer Orsted to H2 end users — have joined forces on a 1.3GW electrolyser project to be powered by a 2-3GW offshore wind farm by 2030.
The hydrogen produced would be used for fuel-cell buses and trucks, synthetic fuels for shipping and aviation, with the off-takers including Copenhagen Airport, airline SAS, and maritime companies Maersk, DFDS and DSV Panalpina.
The report concludes: “The complexity associated with developing hydrogen projects can be managed by matching the opportunity of hydrogen with a country’s needs, identifying synergies and collaboration opportunities across the value chain, and crucially, determining a business case facilitator — that creates alignment and supports the development of country / project specific support mechanisms.”