To unlock low carbon hydrogen growth, the International Energy Agency (IEA) has called on governments to take decisive action.
On 4 October, the IEA published its Global Hydrogen Review 2021, tracking progress in hydrogen production and demand, as well as other areas such a policy, regulation, investments, innovation and infrastructure development. While investment in hydrogen projects is increasing and there are encouraging signs hydrogen is close to significant cost declines and widespread global growth, greater efforts are needed to fully realise this.
As of 2020, hydrogen demand stood at 90Mt, made up of almost entirely refining and industrial applications, produced near exclusively from fossil fuels. This has resulted in 900Mt of CO2 emissions, though there are signs of progress. The IEA pointed to the global capacity of electrolysers doubling over the last five years, reaching just over 300MW by mid-2021 and the fact there are around 350 projects in development that could lift global capacity as high as 54GW by 2030.
Another 40, accounting for over 35GW of capacity, are in the early stages of development and would see global hydrogen supply from electrolysers exceed 8Mt by 2030, however this would lag behind the 80Mt deemed necessary in the IEA’s 2050 net zero emissions pathway in its Roadmap for the Global Energy Sector.
At least $37bn investment has been committed by countries through hydrogen strategies, alongside a further $300bn announced by the private sector. Once more, however, this is some way short of what is required with the IEA citing the need for $1,200bn of investment in low carbon hydrogen supply and use through to 2030. With government policies focused on production, it stressed the particular need for a step change in policies devoted to demand creation to boost the role of low carbon hydrogen in clean energy transitions.
Technology innovation and increased deployment have the potential to cut costs, with the IEA highlighting how hydrogen from renewables could drop to $1.3/kg by 2030 in regions with excellent renewable resources under its net zero emissions (NZE) by 2050 scenario. The levelised cost of hydrogen production from natural gas – the cheapest option in most parts of the world – currently ranges between $0.5-1.7/kg, whereas hydrogen from renewables is currently $3-8/kg.
Overall, faster, more decisive action is needed to realise low carbon hydrogen’s potential and meet climate pledges. Illustrating this point, the IEA outlined how if all industrial plans currently announced are realised, then by 2030 there would be 105Mt of total hydrogen demand, compared to 200Mt in its NZE scenario; 17Mt of low carbon hydrogen production, just an eighth of the level in its NZE scenario; 90GW of electrolysis capacity, considerably below the 850GW in its NZE scenario; and up to 6mn fuel cell electric vehicles (FCEVs) deployed, just 40% of the total under its NZE scenario.
It went on to make a series of recommendations, calling for the continued development of hydrogen strategies and roadmaps to built momentum and trigger investments, and for governments to use mechanisms such as carbon pricing, mandates, quotas and hydrogen requirements in public procurement to stimulate demand and reduce price differences.
It also called for tailor-made support to be provided to shovel ready flagship projects, kickstarting the scaling up of low carbon hydrogen and development of infrastructure to connect supply sources to demand centres and manufacturing capacities; to provide strong innovation support and ensure critical technologies can reach commercialisation soon; and stressed the need for international cooperation to establish standards and regulations, and create global hydrogen markets to spur demand in countries with limited potential to produce low carbon hydrogen and create export opportunities for those with large renewable energy supplies or large CO2 storage potential.