Clean Hydrogen Helpful, But Needs Policy Push

BloombergNEF: Delivered Cost Of Renewable Hydrogen By 2050 Could Reach $1.00/kg If Backed By Supportive Policy Environment To Scale Up Demand & Investment
07:48 AM (Beijing Time) - 06. April 2020
Presentation1

BloombergNEF's latest report calls for clean hydrogen to be backed by subsidies till 2030 for it to be scaled up and become competitive. (Source: BloombergNEF)

Key Takeaways

  • A report on renewable hydrogen by BloombergNEF hails the technology and claims it can help cut down global GHG emissions
  • Supportive policy environment can help shoot up demand leading it to be produced at scale and its cost can come down
  • BloombergNEF expects deliverable cost of clean hydrogen to in some regions to come down to $1.00 per kg in 2050
  • For the world to meet 24% of its energy demand with clean hydrogen in a 1.5 degree scenario, BloombergNEF expects around 31,320 TWh of additional renewable electricity generation to be needed globally

Hydrogen produced using wind and solar power can help slash up to 34% of global GHG emissions from fossil-fuels and energy intensive industries as steel, heavy-duty vehicles, shipping and cement among others, at a ‘manageable’ cost, according to a global study from Bloomberg New Energy Finance (BloombergNEF). But for this to happen, policies need to be put in place to scale up the technology and drive down costs.

Lead author of BNEF’s Hydrogen Economy Outlook, Kobad Bhavnagri presents a scenario for renewable hydrogen when it will be “possible to produce it at low cost using wind and solar power, to store it underground for months and then to pipe it on demand to power everything from ships to steel mills.”

Cost decline

Talking about costs, in most geographies the study claims renewable hydrogen can be produced for $0.8 per kg to $1.6 per kg before 2050 at par with current natural gas prices in Brazil, China, India, Germany and Scandinavia on an energy-equivalent basis. Add in the cost of storage and pipeline infrastructure its delivered cost in China, India and Western Europe could go down to $2.00 per kg in 2030 and $1.00 per kg in 2050.

Policy and carbon pricing needed

But then, there are still challenges as there isn’t enough policy support to scale up the industry as currently it is an expensive process to produce it since, as Bhavnagri explains, hydrogen needs to be manufactured but natural gas, coal and oil need to be extracted. Cheap coal and gas can threaten the use of renewables to produce hydrogen. At the same time, transporting and storing hydrogen needs massive investments in storage infrastructure for it to be able to compete with natural gas.

To deal with these challenges, governments must focus on supportive regulatory policies that can support the massive demand that can help bring down the costs of producing and delivering renewable hydrogen. Bhavnagri also supports carbon prices to enable hydrogen to compete with cheap fossil fuels that can come about only with critical policy support.

“If supportive but piecemeal policy is in place, we estimate that 187 million metric tons (MMT) of hydrogen could be in use by 2050, enough to meet 7% of projected final energy needs in a scenario where global warming is limited to 1.5 degrees. If strong and comprehensive policy is in force, 696 MMT of hydrogen could be used, enough to meet 24% of final energy in a 1.5°C scenario. This would require over $11 trillion of investment in production, storage and transport infrastructure,” reads the report. “Annual sales of hydrogen would be $700 billion, with billions more also spent on end use equipment. If all the unlikely-to-electrify sectors in the economy used hydrogen, demand could be as high as 1,370MMT by 2050.”

For the world to meet 24% of its energy demand with clean hydrogen in a 1.5°C scenario, BloombergNEF expects around 31,320 TWh of additional renewable electricity generation to be needed. For this and for supply to the power sector, renewable energy generation excluding hydro power would need to reach over 60,000 TWh. Currently, it stands at below 3,000 TWh.

Though currently missing, these signs of hydrogen economy can be expected as the world starts to explore decarbonization ways. (Source: BloombergNEF)
Though currently missing, these signs of hydrogen economy can be expected as the world starts to explore decarbonization ways. (Source: BloombergNEF)

Tell-tale signs of renewable hydrogen economy

A clean hydrogen economy could be emerging if investors spot these 7 signposts, as per the report, which currently aren’t there. BloombergNEF lists these as:

1) net-zero climate targets are legislated

2) standards governing hydrogen use are harmonized and regulatory barriers removed

3) targets with investment mechanisms are introduced

4) stringent heavy transport emission standards are set

5) mandates and markets for low-emission products are formed

6) industrial decarbonization policies and incentives are put in place, and

7) hydrogen ready equipment becomes commonplace

Key messages from the report can be viewed online on BloombergNEF’s website.

Anu Bhambhani

Anu Bhambhani is the Senior News Editor of TaiyangNews

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Anu Bhambhani