In current times, the supply chain for green hydrogen is limited, and its application is restricted to a few minor projects. Several barriers, such as the high cost of green hydrogen compared to non-renewable alternatives and the lack of dedicated infrastructure, are still impeding hygrogen’s full contribution to the energy transition. The report on “Green Hydrogen Supply: A Guide to Policy Making”, by the International Renewable Energy Agency (IRENA) aims to provide a basis for understanding these challenges and the solutions available. It highlights the range of policy options available, complemented by country examples. Select excerpts from the report…
The current installed electrolyser capacity is significantly less than what is required for estimated future green hydrogen use, at roughly 200 MW. Estimates for the green hydrogen pipeline are continually changing. According to the rising number of announcements of huge new electrolyser projects, capacity is likely to skyrocket.
The majority of the projects proposed for development between now and 2035 are in Europe and Australia, but these aren’t the only areas anticipating additional electrolyser capacity.
Electrolyser manufacturing capacity
Electrolyser manufacturers have been announcing expansions of their production capacity, each aiming for the hundreds of megawatts scale, similar to the announcements of electrolyser projects. By the end of 2021, global manufacturing capacity is predicted to reach 3.1 GW/year, but total manufacturing capacity will need to increase much more to satisfy either current installed capacity objectives on time or the overall energy transition goal.
Modes of transporting hydrogen
Because of its physical qualities, hydrogen poses unique hurdles. It has a high energy density by weight, but a low energy density by volume. Essentially, higher amounts of hydrogen must be carried to transfer the same amount of energy, which is why it is treated to a reduced volume when transported.
Compressed hydrogen may be transported by vehicle over short distances and in small quantities. Hydrogen is frequently carried in liquid form over greater distances and to liquefy hydrogen, it must be cooled to a temperature of –253°C or below. One truck can deliver up to 3 500 kg of liquid hydrogen.
There are currently two primary hydrogen storage options: tanks and subsurface geologic formations. Tanks are preferable for frequent use since they have high operating pressures and are more suited for low volumes. Underground storage, with its lower working pressure, is better suited to large volumes and extended durations. Following are the key hydrogen supply barriers
- Production costs
- Conversion costs
- Transport costs
- Storage costs
To guarantee that electrolyser use does not increase fossil fuel consumption elsewhere or replace more efficient uses of renewable power, sustainably created green hydrogen is created with additional renewable power.
The principle of additionality summarises this: if power generated from renewable sources has other profitable uses, that power should not be diverted from other uses to manufacture green hydrogen. Green hydrogen should instead be created only from increased renewable energy capacity that would otherwise go uncommissioned and electricity that would otherwise go unutilized.
Additionally, converting and transporting hydrogen, particularly to LOHC, might result in extra CO2 emissions. The energy efficiency of the transport method and the energy density of the carrier are directly connected to emissions during the transport stage.
Lack of clarity regarding future demand
Despite enormous promises and national ambitions, the green hydrogen industry is still in its early stages. Even among those countries that now use hydrogen extensively, the vast majority of countries do not have a hydrogen strategy. In addition, several methods consider blue hydrogen (grey hydrogen with carbon capture and storage) as a viable option. Infrastructure development may lack motivation if there is no precise understanding of hydrogen usage.
Renewable energy technologies are frequently confronted with the aforementioned barriers during their early stages of development. The following policies will address these barriers, resulting in a favourable environment for green hydrogen production, transportation, and commerce.
The government’s current incentives and policies for electrolysers and infrastructure are limited. However, governments’ expertise promoting renewable energy in power and heating, as well as regulations in the industrial sector, can provide answers.
Policies to Support electrolyser deployment
The following policies are designed to achieve the necessary electrolyser expansion while lowering capital costs.
Electrolyser Capacity Targets: These are frequently included in national or regional hydrogen policies, with varied degrees of commitment. These targets are a key method for public actors to show their commitment to the energy transition, and they can range from formal government pronouncements to full-fledged public plans like a national hydrogen strategy.
Support for the scale-up of manufacturing capacity: Governments are already adopting industrial policies to encourage the scale-up and efficiency of electrolyser production capacity, given the strategic relevance of green hydrogen in enabling a low-carbon future.
The US Department of Energy announced a USD 64 million grant in June 2020 to support 18 projects as part of the “H2@scale” strategy for a cost-effective hydrogen value chain.
Direct financial support: Subsidies for pilot programmes and other R&D-related funds have helped electrolysers for the generation of green hydrogen. Many nations have pledged to help hydrogen through recovery money since the start of the COVID-19 outbreak. According to estimates, a global commitment of at least USD 20 billion has been made.
Fiscal incentives: A specialised fiscal regime is frequently used to support industrial strategies. Policies that lower the financial burden associated with electrolyser investment will minimise that cost aspect and increase the business case for green hydrogen. Given the low electrolyser manufacturing capacity, the impact of these actions on government budgetary budgets is projected to be minimal at first.
Policies for Sustainability and Cost Competitiveness
Once the electrolysers are created, the power utilised to produce green hydrogen must be renewable. This power must be inexpensive in order to compete with traditional carbon-intensive hydrogen.
- Recasting the renewable energy target and quotas: The renewable power capacity objectives or quotas can be increased to accommodate for electrolyser demands, or they can be removed entirely to account for electrolyser power use.
- Allow (or impose) PPAs with merchant power plants: PPAs with extra renewable energy power plants that are not getting any other sort of subsidy might be requested for grid-connected electrolysers.
- Measures to take advantage of otherwise curtailed energy: Variable Renewable Energy (VRE) curtailment may become more common as VRE’s part of the power mix rises. Policymakers can encourage electrolysers to use power that would otherwise be conserved. This can be accomplished by prioritising the construction of electrolysers in grid-congested locations caused by high VRE output.
Policies to close the price gap between green hydrogen and fossil fuel-based alternatives
- Fiscal Support
- Green Hydrogen Tariffs or Premiums
- Participation of electrolysers in ancillary services procurement mechanisms
International agreements for green hydrogen
In the long run, hydrogen might be traded internationally in the same way as gas, oil, coal, and LPG are. LNG has recently been subjected to this phenomenon.
When opposed to fossil fuels, one major difference is that hydrogen generation is less site-constrained. It may be made from a variety of energy sources, transported in a variety of ways, and has a variety of sustainability implications.
Today, there is no global trade in hydrogen, and current initiatives for big green hydrogen plants are aimed at serving big local users. However, in order to transfer huge amounts of hydrogen in the future, sophisticated worldwide supply networks will be required. Policymakers will have a role in establishing such multinational supply networks, and the first channels have already been established.
Envisioned Trade Route for Hydrogen as of 2021
International trade should not be in conflict with investigation of hydrogen production and transportation’s long-term viability. Internationally, the principle of additionality should be followed. National research agendas and infrastructure development agreements might be aligned as part of collaboration to construct viable hydrogen pathways. Countries are also making targeted investments in order to develop international hydrogen value chains.
Policies to Support Hydrogen Infrastructure
Planning hydrogen infrastructure: Investors in green hydrogen production would be able to assess the prospects and pathways for future markets, as well as attract investment in the necessary infrastructure, if there was a defined long-term strategy for hydrogen. Long-term indicators may be found in hydrogen roadmaps, vision papers, and plans.
Regulatory framework for hydrogen infrastructure: Grid of natural gas TSOs are governed by a set of rules that govern their operations. Policymakers must equip them with an updated regulatory framework that allows for grid repurposing. Because pure hydrogen networks have been restricted to industrial clusters so far, repurposing the grid would need the development of a regulatory framework and hydrogen quality criteria for pure hydrogen grids.
Financing hydrogen infrastructure: The development of hydrogen gas infrastructure, both for repurposing and for building new pipes, will need TSO investment. Fees on gas bills may be used to recoup the cost of repurposing programmes. However, if a large growth is required in a short period of time, the money required may be beyond the operator’s capacity.
Countries must govern the injection and storage of hydrogen in geological formations inside their borders (ownership, obligations, environmental protection, and so on).