Green hydrogen could be a game-changer for industries struggling to decarbonise, but high costs and infrastructure challenges threaten to undermine its potential.
The fight against climate change has reached a critical tipping point: global CO2 emissions will rise to a record 37 billion tonnes in 2023, and the International Energy Agency predicts a 50% increase in energy demand by 2050. These alarming trends underscore the urgency of decarbonising industries that are notoriously difficult to electrify, such as steelmaking, refining and heavy transport. Amid these challenges, green hydrogen appears as a glimmer of hope – it promises to decarbonise sectors responsible for a significant share of global emissions. However, this potential solution comes with significant hurdles that must be overcome for green hydrogen to deliver on its promise.
Hydrogen, the most abundant element in the universe, holds enormous potential as an environmentally friendly alternative to fossil fuels. Combustion of hydrogen produces only water, making it an ideal candidate for reducing the industrial carbon footprint. In the steel industry, which accounts for about 7% of global CO2 emissions, green hydrogen can replace coal in the oxygen blowing furnace (BOF) process, reducing emissions by up to 95%. In refining and chemical production, which together account for almost 10% of global CO2 emissions, green hydrogen can also dramatically reduce carbon intensity with minimal changes to existing processes.
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Green hydrogen can be groundbreaking
Green hydrogen can serve as an energy storage medium for long periods of time and is therefore crucial to offset the fluctuating availability of renewable energy sources such as wind and solar. It can also be converted into e-fuels such as green methanol and green ammonia, which are already used in the shipping sector as an alternative to conventional heating oil.
Despite its promise, the widespread adoption of green hydrogen faces several daunting challenges. The biggest of these is cost. Producing green hydrogen through water electrolysis using renewable energy is almost four times more expensive than producing grey hydrogen from natural gas. These cost differences make it difficult to build hydrogen infrastructure when demand is uncertain and may not materialise for years. No project developer will produce hydrogen without buyers, and no banker will finance a project without adequate confidence in future demand.
Another critical issue is infrastructure. The transition to a hydrogen economy will require massive investments in electrolyser capacity, the use and storage of carbon capture and storage for blue hydrogen, and the development of new transport and storage facilities. The IEA estimates that the world will need to produce 520 million tonnes of low-emission hydrogen annually by 2050 to achieve carbon neutrality. However, building the necessary infrastructure is a daunting task, especially given the current financial and regulatory challenges.
In addition, while hydrogen’s versatility is one of its greatest strengths, it also complicates its adoption. Many industries that could potentially run on hydrogen need to undergo expensive conversions to use the new fuel. This conversion process represents a significant obstacle, especially for sectors such as steel and refining, where margins are thin and capital costs are high.
Political support and strategic investments
For green hydrogen to reach its full potential, bold government action is essential. Governments need to create demand through incentives such as grants, subsidies and tax breaks. This would stimulate investment in hydrogen production projects and make them more financially viable. The European Union’s goal of producing 10 million tonnes of carbon-free hydrogen by 2030 and the $7 billion the US government is investing in regional hydrogen hubs are steps in the right direction. However, these efforts need to be scaled up and supported by a comprehensive regulatory framework that encourages private investment.
Successful hydrogen projects are likely to be those that involve the entire ecosystem – from production to end use. For example, Thyssenkrupp Nucera’s project in northern Sweden, which integrates green hydrogen production into steelmaking, is a model for future developments. This project has already received EUR 6.5 billion in funding, demonstrating that green hydrogen can be a viable solution with the right combination of political support, strategic investment and customer commitment.
Green hydrogen offers a promising path to decarbonise some of the most demanding sectors of the global economy. Its potential to reduce emissions in steelmaking, refining and chemical production, as well as its role in energy storage and transport, make it an indispensable tool in the fight against climate change. However, realising this potential requires overcoming significant challenges, including high production costs, infrastructure gaps and uncertain demand.
To meet these challenges, bold government policies, strategic investment and a holistic approach to hydrogen production and use are essential. If green hydrogen production can be scaled up effectively, it could play a critical role in the world’s transition to a net-zero economy and bring us one step closer to averting the worst impacts of climate change. The stakes are high, but the potential benefits are even greater. Now is the time to invest in the future of green hydrogen.
