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Green hydrogen set to make its mark in energy market
Big plans afoot to develop alternative clean energy source in transition to net zero
Daphne Li 27 Jun 2022

With most of the world reeling from energy shortages and high energy prices, hydrogen is gaining wider acceptance as a clean and reliable energy source that could play a crucial role in the transition to net zero.

Like liquefied natural gas, hydrogen can be transported as gas through pipelines or in liquid form on land, offering a potentially low-cost option for energy storage.

Global investment in low-carbon hydrogen is on the rise. Seventy-five new projects with total capacity of 11.1 million metric tonnes per annum (mmtpa) were announced in the first quarter of 2022 alone, according to consultancy firm Wood Mackenzie.

These new projects raised the cumulative global pipeline by 20% to 64 mmtpa, of which almost two-thirds are in six leading countries including Australia, the United Kingdom, the United States and the Netherlands, the firm says.

The global green hydrogen market size was valued at US$300 million in 2020 and is projected to reach US$9.8 billion by 2028, with a compound annual growth rate (CAGR) of 54.7% from 2021 to 2028, according to market researcher Valuates Reports. From virtually non-existent, low-carbon hydrogen is expected to eventually account for most of the hydrogen supply in the market.

“If you ask me the question about green hydrogen two years ago, I would have sounded pessimistic. But it has become a more promising area in the long term,” an Asia-Pacific corporate rating analyst specializing in infrastructure tells The Asset.

Better economics

Right now, almost all hydrogen is produced from natural gas and coal. The annual volume of carbon dioxide emissions from the manufacturing process is equivalent to that coming from Indonesia and the UK combined.

However, technological advancements in recent years have made it possible to generate hydrogen from cleaner energy sources, although it is about two to three times more expensive. The cost difference can be attributed to price differences in electricity sources in the manufacturing process.

“Places endowed with rich renewable energy conditions (such as plenty of wind and sunshine) can offer far better economics for green hydrogen. Hydrogen and hydrogen-based fuels can transport energy from renewables over long distances – from regions with abundant solar and wind resources, such as Australia or Latin America, to energy-hungry cities thousands of kilometres away,” Bain & Company says in a report.

In view of its versatility and potential, hydrogen is attracting the attention of various governments and companies. “Investments in hydrogen can help foster new technological and industrial development in economies around the world, creating skilled jobs,” the International Energy Agency says in an analysis.

In Asia, countries like China are ramping up efforts to decarbonize, with hydrogen being an important element in the toolbox. The output value of China's hydrogen energy industry is forecast to reach 1 trillion yuan (US$150 billion) between 2020 and 2025, and 5 trillion yuan in the next five years, according to the China Hydrogen Alliance.

Since 2020, over 16 Chinese provinces and cities have crafted relevant policies and plans for the hydrogen fuel cell value chain. Approximately one-third of the state-owned enterprises included hydrogen-related value chain in their plans, including production, storage and refuelling, according to the State-owned Assets Supervision and Administration Commission of the State Council.

“We are now focusing on hydrogen and carbon capture facilities because that is something we see as key clean development in Asia,” an APAC banker specializing in project financing tells The Asset

Ambitious plans

French energy giant TotalEnergies and India’s Adani Group have teamed up to create the world's largest green hydrogen ecosystem. Over the next decade, the partnership will invest over US$50 billion in the venture, which targets a production capacity of 1 mmtpa before 2030.

Meanwhile, American oil and gas behemoth ExxonMobil is also planning a hydrogen production plant and a carbon capture and storage facility at its integrated refining and petrochemical site in Texas to reduce emissions from company operations and local industry.

Other carbon-intensive industries have jumped into the fray. Volvo Trucks has begun testing vehicles that use hydrogen-powered fuel cells. Customer pilots will begin in the next few years with commercialization in the latter part of this decade.

The adoption rate of green hydrogen will vary from country to country, depending on the availability and extent of use of renewable energy.

Nonetheless, it is believed that commoditized green hydrogen will be the next game changer in the market.

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Ivan Chung
Ivan Chung
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