According to a new study, the widespread adoption of green hydrogen as a sustainable energy source will drive its price to competitive levels (1). Analysts predict that by 2040, it will cost less than two dollars per kilogram. China, Australia, and Europe will engage in a big energy battle to become the leading green hydrogen exporter as it becomes a more viable energy source.
Hydron had several false starts in the past but is now growing at an incredible rate compared to other energy resources. There are predictions that the rapid course of development is set to break the industry’s longstanding cost issues.
The number of total hydrogen projects announced witnessed a jump at the height of the coronavirus pandemic in 2020, almost doubling again in 2021. And according to announcements from Q1 of 2022, this exponential growth is set to continue, which is already analogous to 25% of the total project pipeline.
Although these figures were made before the conflict between Russia and Ukraine started, experts suggest that we won’t see hydrogen trajectory slowing down in the long term. If anything, rising fossil fuel prices have only bolstered the hydrogen case.
“The surging price of natural gas and oil has helped close the gap between price parity for renewable and fossil fuels in the recent months,” said Stephen Byrd, Head of North American equity research for power, clean energy, and utilities at Morgan Stanley (2).
There is a lot of optimism because the recent energy crisis and surging gas and power prices have made countries realize that they should not rely on other countries for energy imports. We are already witnessing a ramp-up and will likely see it surge even more.
According to Byrd, hydrogen has finally managed to break loose from the paradox it has been trapped in for so long. For years, experts suggested that scaled-up manufacturing and bigger electrolyzers would reduce the cost of hydrogen down, but the needed demand for those projects to stand up did not exist because of their high expenditure.
However, today, the industry is making huge investments in hydrogen. According to a recent analysis by Wood Mackenzie (3), capital expenses are likely to fall as much as 35 to 65% in the next decade.
“With traditional energy resources like natural gas becoming so expensive in Europe, there has been a growing demand for green hydrogen because it looks relatively attractive,” said Byrd.
Byrd also sees real the near-term potential for hydrogen in the United States. He suggests that hydrogen may soon start replacing battery-powered systems in transportation and logistics, mainly thanks to Plug Power’s work to make hydrogen fuel cells and electrolysis more economical.
Byrd believes that with the reduced cost of Hydrogen technologies, they will now have competitive advantages over batteries in vehicles like forklifts, which Plug Power supplies, or vehicles that require to travel long distances without stopping to charge.
“The major advantages are space and weight; in a long-haul truck, we will need a huge amount of batteries, and it can be prohibitive in terms of weight. However, with hydrogen, the fuel cell on the vehicle won’t double in size; we only need to double the hydrogen, which is relatively scalable. And that’s a big advantage for longer duration mobility,” explained Byrd.
At the same time, Byrd also noted that blue hydrogen derived from natural gas would remain far more cost-effective than green hydrogen within the US through 2030. And for that to change, the government needs significant policy action, including substantial subsidies via the Build Back Better Plan.
Nonetheless, Byrd remains optimistic that if this is passed, it would be one of the rare cases of a true game-changer for green hydrogen, and we could see very rapid demand acceleration.
Green Hydrogen, The Fuel of the Future?
Hydrogen may be made from renewable and nonrenewable sources, but green hydrogen appears to be the most promising in combating climate change (4).
And China is gunning for supremacy in the global race over green hydrogen.
As per a report published earlier this month by the IPCC, Intergovernmental Panel on Climate Change warns world leaders that unless greenhouse gas emissions are cut in half this decade, global warming will reach hazardous levels. This will need a huge effort from China, the world’s major emitter (5).
According to the IPCC, controlling global warming will necessitate a significant reduction in carbon fuel use and the deployment of alternative energy sources like hydrogen.
China makes up for more than a third of world emissions every year. It has committed to becoming carbon-neutral by 2060, and green hydrogen production is essential for its strategy.
Australia is also investing millions of dollars in green hydrogen technologies. But, China’s new strategy may throw an ax at Australia’s goal to become a worldwide hydrogen giant.
Notably, Hydrogen fuel cells are already cheaper than lead-acid batteries used in forklifts and might be used in long-haul trucking as early as 2025.
Daimler Trucks, Volvo Trucks, and Hyundai are all working on hydrogen fuel cell truck projects (6, 7). As businesses invest in this new fuel source, many experts believe the “hydrogen economy” will significantly impact global trade in the next decades (8).
There’s a Stiff Competition
As the world races to decarbonize, much has been said about hydrogen’s varied functions in the global economy.
Hydrogen is an energy carrier since it stores the energy required to extract it. It can be made without emitting greenhouse gases (as “green hydrogen”) using solar and wind energy, nuclear power, or hydropower. It is also possible to make it from carbon fuels like gas and coal.
Hydrogen is a versatile element, and it may be utilized for both energy and automotive power. It can also benefit in producing ammonia, chemicals, petrochemicals, glass, and metals (9).
Australia is well-positioned to manufacture green hydrogen, considering its abundant solar and wind resources. Furthermore, they are well-positioned to export hydrogen there because of its proximity to Asia.
The Australian government aims to ship hydrogen worldwide, establishing an export sector to replace Australian coal and gas, whose demand will decline as global climate action increases (10).
However, over the recent years, China has emerged as a prominent prospective export market for future hydrogen from Australia. It primarily happened because of an expected rise in hydrogen fuel cell-powered vehicles.
In addition, the location of onshore solar and wind power capacity in western China, far from its energy demand in the east and the coastal region, had also led to perceptions that China had a limited capacity to generate green hydrogen.
But China is changing its hydrogen picture at a rapid pace.
China’s Green Hydrogen Supremacy
Last month, it released its first national plan to create a domestic hydrogen industry by 2035. It includes mastering relevant technologies and manufacturing processes, improving industry and policy standards, and coordinating the construction of hydrogen energy infrastructure.
It also calls for a phased expansion of industries by 2035 and a ban on hydrogen derived from fossil fuels.
By 2025, China’s green hydrogen production might reach 200,000 tonnes per year, saving up to two million tonnes of CO2.
China may no longer need to buy Australia’s green hydrogen and instead compete with it as a green hydrogen exporter.
The world’s largest refinery, Sinopec, based in Beijing, has agreed to create 500,000 tonnes of green hydrogen per year for the next five years with Air Liquide of France (11).
At the same time, Australia’s federal government aspires to replace its fossil fuel energy sectors with a global export industry based on hydrogen. The country’s most recent budget allocates 635 million USD to the project, and the private sector has spent more than 1 billion USD on green hydrogen technology (12, 13).
In addition, Australia collaborated with Kawasaki Heavy Industries of Japan to transport the world’s first load of liquid hydrogen (14).
The World’s Energy Transition
Green hydrogen is already being exported to Europe by Australian companies. Fortescue Future Industries, an Australian renewable energy company, and Eon, a German utility, have teamed up to deliver green hydrogen by 2030 (15). Eon would most likely create the hydrogen in Australia, then ship and distribute it in Germany and the Netherlands.
As Europe shifts away from Russian gas following its conflict in Ukraine, researchers predict that renewable hydrogen will increase 25% faster by 2030 (16).
The EU’s Clean Hydrogen Partnership seeks proposals for sustainable hydrogen production and delivery. The race appears to be led by Germany, Spain, and the Netherlands.
By 2050, analysts predict that 30% of hydrogen will be sold across borders, more than the current percentage of natural gas. The green hydrogen industry has a lot of room for expansion, given that worldwide trade volumes of liquid natural gas are expected to reach 392 million metric tonnes this year.
India’s Position in Green Hydrogen Industry
The global hydrogen production is about 70 million tons a year, and India currently clocks about 8% of it (17). Since neither hydrogen production nor electrolyzer is a new technology, India is well-positioned to take advantage of this massive opportunity.
India also has a distinct advantage in low-cost alternative power source generation and capabilities of executing world-class clean power. It enables India to become one of the most competitive green hydrogen producers worldwide.
And since 75% of the cost of green hydrogen depends on renewable energy, we need to reduce the price of solar power to less than 1 INR per Kw/h.
Another major reason India should be vigorously pursuing green hydrogen is to reduce its dependence on other countries for its fossil fuel imports. Notably, our country spends more than 160 billion USD every year importing carbon fuels.
India expects to have about 500 GW of renewables capacity by 2030 (18). Green hydrogen could value out of excess renewable power and help India avoid the duck curve possibilities in the grid. Key measures to build a green hydrogen ecosystem have only recently been announced.
Our country needs urgent policy and regulatory measures to secure the green hydrogen export market. The European Union is increasing its green hydrogen import plans for 2030, and there is huge potential for India to export to the EU, South Korea, and Japan (19).
Besides policy reforms, our country needs to encourage industrial research and developments in all green hydrogen components, including electrolyzers, instead of relying heavily on foreign technology suppliers (20).
India can also mandate industries like refining and non-urea fertilizers to go 100% green hydrogen by 2030 to ensure this nascent industry flourishes.
Over the next decade, experts predict that the price of green hydrogen could drop from 4 USD per kg to 1 USD. India needs to position itself now to become the world’s zero-carbon, low-cost green hydrogen manufacturing hub.