War leads to $73 billion spent on green hydrogen as gas surge risks stranding ‘dirty’ hydrogen

The war leads to $73 billion in green hydrogen spending, as surging gas threatens to lock in “dirty” hydrogen.

25 nations pledge to invest in clean hydrogen; Europe, Asia most exposed to fossil hydrogen strandings.

The war in Ukraine has spurred more than $70 billion in new green hydrogen investment in just a few months as costs drop and has made hydrogen produced by fossil fuels unprofitable as gas prices soar. arrow. Due to rising gas supply prices, $100 billion in “dirty” hydrogen assets could be locked up by 2030, according to a report published Thursday by Carbon Tracker.

Since the beginning of the conflict, the prices of natural gas, a major raw material for the production of hydrogen of fossil origin (blue and gray), have soared by more than 70% on international markets, triggering an energy crisis and pushing legislators around the world to urgently procure alternative sources of energy. fuel.

Clean Hydrogen’s Place in the Energy Transition finds that soaring gas prices have boosted the levelized cost of hydrogen produced from fossil resources and accelerated investment and plans to build more clean hydrogen assets as interest in the fuel is growing, amid technological advances in its manufacture and falling costs.

According to the IEA, green hydrogen is expected to grow by three times its 2022 levels, while in response to conflict-induced structural changes, the report reveals that 25 countries, mainly from the North, have committed in a few months 73 dollars [1]billions in public and private funds to make cleaner fuel.

Germany, Morocco and the United States pledged the most, according to the report. Production, on the other hand, will be dominated by countries in the South, responsible for 50% of total global production by 2050, with South Africa, Morocco and Chile controlling the bulk (68 million tonnes).

Conversely, more than $100 billion in fossil hydrogen assets, especially those related to gas, could be locked in before 2030 due to high gas prices, supply insecurities and commitments to reduce fuel consumption. use of natural gas in line with net zero targets.

The report says Europe and Asia will be most at risk of grounding as new fossil hydrogen assets (8 million tonnes) come on stream from this year.

Kofi Mbouksenior cleantech analyst and author of the report, said:

Although green hydrogen is not the silver bullet to the climate crisis, it offers part of the solution if used in a targeted manner for specific industries and offers an attractive solution to the thorny problem of anxiety. related to energy intermittency in the electricity sector, alongside advanced batteries. technology and use of smart grids.

Despite the clear benefits of using green hydrogen to help achieve net zero and the costs reducing those of fossil-based hydrogen, the report finds that environmental factors, such as excessive water consumption soft water and the technological and energy inefficiencies in its manufacture will hamper growth. in the short and medium term.

“Green hydrogen will play a crucial role in the energy transition, but applications will have to focus on the agricultural sector (fertilizers) and heavy industry (steel, heavy transport, maritime transport, mining) until the technological innovation for chlorinators improves and fresh water consumption is reduced.”

“Clean hydrogen could be used effectively to solve energy intermittency issues for solar and wind power as the supply of these renewables increases exponentially,” Mbuk said.

Growing pains

Dependence on massive amounts of fresh water – to separate hydrogen from water – and energy inefficiencies could seriously hamper the growth of green hydrogen. A third of the energy needed is wasted in production, up to a further 25% is lost in liquefaction or conversion to other carriers such as ammonia, while a further 10% of clean energy hydrogen is consumed to transport the product.

Using the IEA’s growth projection targets for fuel, the report estimates that by 2050 the total volume of freshwater needed will exceed a quarter of current global freshwater consumption, with countries in the MENA region being the most vulnerable.

The report estimates that the construction of a green space hydrogen economy will require $3 trillion in investment by 2050 as part of the Net-Zero goals. This excludes the construction of critical assets such as import/export facilities, transportation (tanks), storage, pipelines and desalination plants. To this end, governments have a major role to play in facilitating growth by creating the right regulatory environment, including:

Introduce green hydrogen certificates to confirm supply made entirely from renewable energy.
The introduction of Contracts for Difference (CFDs) which are driving the growth of renewable energy technologies.

Under CFDs, the investor is guaranteed a favorable subsidy incentive that allows him to capitalize on the returns. The CFD protects the investor against future unknown cost fluctuations through hedging strategies.

Introduction of tax credit schemes. The United States recently introduced a tax credit program under the Inflation Reduction Act. This makes it more accessible for fertilizer production and for powering other heavy industries. Set up dedicated financial bodies to finance growth.

War leads to $73bn in green hydrogen spending as soaring gas prices threaten to lock in ‘dirty’ hydrogen, LONDON/NEW YORK, October 23, 2022