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The global quest to make hydrogen cheaper and cleaner
Governments and companies are working to develop the abundant chemical element into a widely available renewable energy source. The challenges are enormous but their efforts are bearing fruit
Jayde Cheung 21 May 2024

After solar and wind have matured into viable power sources through decades of development, the world is now turning its attention to hydrogen as a clean energy source. Countries most interested is developing 100% clean hydrogen are those already abundant in renewable energy resources; renewable power is essential in the production of hydrogen with zero carbon emissions. Achieving this goal entails costly and complex operations, however.

Hydrogen power is gaining traction worldwide as a low-emission and highly potent fuel, surpassing fossil fuels in many aspects. According to the US Department of Energy, hydrogen boasts an impressive energy density per mass, nearly three times that of gasoline. This characteristic provides a significant advantage by delivering more energy within the same mass, while also reducing the space required for hydrogen storage.

Hydrogen plays a crucial role in facilitating the decarbonization of heavy industries as it is primarily used in the refining and chemical sectors, such as in making urea fertilizer. These sectors are characterized by their significant size and high energy intensity, making it challenging for them to rely solely on intermittent renewable energy sources, highlights the Fuel Cell and Hydrogen Association, a US industry group.

By leveraging hydrogen, these industries can effectively reduce their carbon emissions and transition towards cleaner energy alternatives.

Financially burdensome

While hydrogen is touted as a renewable energy source, the reality is that a significant portion of hydrogen production currently involves burning natural gas, resulting in carbon emissions. Methane, a byproduct of hydrogen production and a potent greenhouse gas, is particularly concerning as it is approximately 80x more harmful than carbon dioxide emissions from conventional energy sources. In 2021, nearly half of the hydrogen power produced is derived from natural gas, with coal and oil also contributing to its production, according to the International Renewable Energy Agency (Irena), an intergovernmental organization supporting energy transition.

Only a mere 4% of the total hydrogen production is classified as green hydrogen, generated solely through electrolysis using renewable energy sources. The decision to prioritize more polluting forms of hydrogen production is often driven by cost and efficiency considerations. While electrolysis, which utilizes renewable energy to split water molecules into hydrogen and oxygen, offers the cleanest form of hydrogen production, it can be financially burdensome. According to Irena, powering the electrolysis process with renewables can at least double the price of blue hydrogen derived from natural gas.

This cost differential poses a significant challenge to the commercial feasibility of implementing large-scale electrolysis operations. As a result, the widespread adoption of electrolysis as a primary method for hydrogen production is hindered, leading to a continued reliance on more polluting sources. Addressing the cost and efficiency barriers associated with green hydrogen production is essential to accelerate its adoption and achieve a cleaner and more sustainable energy system.

Renewable energy sources often come with a higher cost compared to fossil fuels. In the case of green hydrogen production, the energy-intensive nature of electrolysis further exacerbates the pricing challenges. The US Department of Energy has even referred to electrolysis as "one of the worst energy-intensive ways to produce the fuel", citing the significant electrical losses that occur because of the high voltage requirements of the process.

These concerns are valid. However, as technology advances and economies of scale are achieved, the costs associated with renewable energy sources are expected to decrease. Ongoing research and development efforts aim to improve the efficiency of electrolysis and mitigate electrical losses.

Due to its price and efficiency limitations, green hydrogen currently appears less attractive compared to other renewable energy options. The majority of green hydrogen projects are still in the pre-commercial stage, and according to PricewaterhouseCoopers, the demand for such projects is expected to remain limited until 2030. Nonetheless, recent technological advancements and increased investment are moving towards a turnaround in the green hydrogen landscape. These developments hold the potential to improve the cost-effectiveness and efficiency of green hydrogen production and utilization, making it a more compelling option in the future.

Bringing down the cost

Green hydrogen energy prices are expected to decrease as the cost of renewable energy sources that power it, such as solar and offshore wind, goes down. Wood Mackenzie, a leading data provider in the energy industry, reports that the cost of solar and offshore wind energy in Asia-Pacific has dropped 30% and 15% respectively over the past two years. Such price reductions help overcome the economic challenges associated with using renewable energy for electrolysis. And as the costs of generating green hydrogen become more affordable, the demand for this environment-friendly energy source is expected to increase.

A significant factor contributing to the growth of the green hydrogen market is the active involvement of key stakeholders, driven by government investments in infrastructure. Japan, being one of the earliest economies to commit to a hydrogen transition in 2017, allocated 15 trillion yen (US$97 billion) last year to enhance the advancement of hydrogen technology for a 15-year period. This funding encompasses the development of fuel cells and water electrolysis devices, among other hydrogen-related technologies.

The involvement of both public and private investment is crucial in increasing the viability of hydrogen projects, stresses the Global Infrastructure Facility, a G20-initiated platform that coordinates efforts to boost private investment in sustainable infrastructure. Encouraged by the support from Japanese authorities, local energy companies are actively participating in the green hydrogen sector. Earlier this year, ENEOS, Idemitsu Kosan, and Hokkaido Electric agreed to collaborate on the development of a 10,000-megawatt green hydrogen supply chain within the next ten years. This initiative is considered the largest of its kind in Japan. Additionally, ENEOS expanded its operations to Australia, where they established an offshore green hydrogen project. These endeavours demonstrate the growing interest and engagement of energy companies in the green hydrogen market.

Technology breakthroughs

Increasing investment in the green hydrogen sector is resulting in advancements in the technology, particularly in the evolution of electrolyzers. These devices have become less complex due to several significant breakthroughs. As reported by 100% RE MAP, an international alliance to achieve 100% renewable energy, electrolysis cells have been modified to accommodate fluctuating voltage, which occurs when intermittent renewable energy sources produce surplus power. Additionally, there has been a shift away from relying on rare-earth minerals as electrolysis catalyst. Instead, common metals are being used, enabling more cost-effective manufacturing processes. These developments contribute to the overall reduction in the complexity and cost of electrolyzer equipment.

In addition to advancements in component technologies, developers are also exploring the concept of "photo-electrolysis", which involves directly harnessing energy from sunlight instead of converting it to solar power before using it for electrolysis. This innovative approach has the potential to enhance the cost-competitiveness of green hydrogen. By eliminating the intermediate step of converting solar energy into electricity, photo-electrolysis can streamline the process and potentially reduce costs associated with energy conversion, thus further improving the viability of green hydrogen as a renewable energy solution.

As advancements in electrolysis technology continue to progress, with a focus on improving durability and efficiency, these upgrades collectively contribute to cost reductions in the production of green hydrogen. Research conducted by the Irena forecasts a significant decrease in the cost of electrolysis by around 40% by 2030, driven by a surge in installed capacity. Once net-zero emission targets are achieved, the cost of electrolysis is expected to decrease even further, reaching approximately one-third of the current levels.

These projections paint a brighter outlook for green hydrogen as a viable renewable energy source and the global mission to fight climate change.

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