Low carbon hydrogen has significant role to play worldwide by 2040


Across the world, low carbon hydrogen has the potential to play a significant role in achieving aims under the Paris Agreement, according to a report.

On 23 May, the World Energy Council (WEC) published a working paper following a series of deep dives to understand regional differences within low carbon hydrogen development. It found that as well as supporting the pursuit of Paris Agreement goals, low carbon hydrogen can also help countries in both diversifying their energy portfolios and strengthening the security of them.

However, the extent to which low carbon hydrogen is able to fulfil its potential is dependent on the evolution of its key production technologies, as well as significant global trade flows of hydrogen and hydrogen-based fuels.

Due to the high cost of transporting hydrogen, the majority will be consumed in the country or region where it is produced, with China and the USA – the two largest markets – expected to be self-sufficient. Though if enough regional and global cooperation emerges in the near future, there will be scope for substantial trade flows to open up by 2030. Hydrogen’s versatility makes it is relevant in many countries, with regional similarities and potential synergies therefore possible. This will pave the way for increasing regional cooperation in hydrogen development.

There are significant uncertainties that must be addressed as the focus switches from “whether” to develop low carbon hydrogen to “how” to do it. These include whether challenges in various supply chain options can be overcome, as well as whether hydrogen can play a role in tackling climate change in the short-term. The issue here is that the timeline for low carbon hydrogen project development is not sufficiently aligned with the need to address climate change. 

Further uncertainties included whether bankable projects can emerge, along with if the gap between engineers and financers can be bridged. This gap refers to what technology providers could deploy and what bankers will finance. Guaranteeing the stability of supply of the main low carbon hydrogen production sources is also an issue, for both renewable hydrogen and fossil-based low carbon hydrogen. Renewable hydrogen relies on the supply of electricity from renewable resources which are at the mercy of weather fluctuations, while hydrogen derived from fossil fuels with CCUS could encounter issues through major fluctuations in the price of natural gas.

Looking ahead, to enable low carbon hydrogen at scale will call for greater coordination and cooperation among stakeholders worldwide to better mobilise public and private finance, and to shift the focus to end-users and people. Key enablers include moving from production cost to end-use price; developing Guarantees of Origin schemes with sustainability requirements; developing a global monitoring and reporting tool on low carbon hydrogen projects; and better coordination of social impacts alongside economic opportunities.