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generates electricity from hydrogen. industrial processes, heating, fuel cell To meet these ambitious
Working in reverse, electrolysers use buses and trucks (not passenger cars), environmental targets, governments
electricity to generate hydrogen from grid and back-up power generation in will need to put supportive policies in
water. Currently, 99 per cent of the areas with strict restrictions on emissions place. Scale, as the experience of falling
hydrogen produced globally is done and materials-handling equipment. renewable energy and battery prices
so through techniques based on fossil highlights, is the key to sustained falls
fuels, so the widespread deployment of HYDROGEN ESSENTIAL TO ACHIEVING in production costs. Yet it is difficult
electrolysers running off surplus wind ‘NET ZERO’ TARGETS to justify the investment in either the
and solar power is needed to ensure Net zero targets cannot be achieved, R&D or capacity needed to scale-up
enough ‘green’ or renewable hydrogen. in our view, without green hydrogen. hydrogen production without greater
Recently published forecasts from visibility of demand.
the EU, the Hydrogen Council and Widespread adoption of hydrogen
Costs for renewable hydrogen Bloomberg New Energy Finance will require co-ordinated investment
are going down quickly. (BNEF) suggest hydrogen could grow across the energy industry in new or
Electrolyser costs have reduced significantly by 2050. adapted infrastructure. To reduce the
by 60 per cent in the last Decarbonising the hard-to-reach sectors need for additional infrastructure and
improve the economics, industrial
ten years. For regions where Hydrogen is critical for replacing sectors such as steelmaking, chemicals,
renewable electricity is cheap, coal and gas in fossil-fuel intensive oil and gas should look to collaborate
electrolysers are expected to industrial processes such as and co-locate in hubs. Governments
be able to compete with fossil- steelmaking. By storing the excess will need to play a role in facilitating
this co-ordination and establishing
energy generated by renewables
based hydrogen by 2030. until it is needed, hydrogen can help sufficient demand certainty in the
address intermittency in the power initial development phase.
sector and provide a potential path
Enabling the transition – pushing for decarbonising heating. Hydrogen’s HYDROGEN PRODUCTION AND DISTRIBUTION
down costs of fuel cells and high energy-to-mass ratio makes it The infrastructure needed to create,
renewable hydrogen particularly suitable for heavy-duty, store and distribute hydrogen is also
At present, neither renewable hydrogen long-distance road freight, maritime essential for the development of the
nor fossil-based hydrogen with carbon and aviation applications. market. In the initial phase of the EU’s
capture are cost-competitive with roadmap, hydrogen will be generated
fossil-based hydrogen. However, costs Adoption still dependent on close to where it is used by multiple
for renewable hydrogen are going down government initiatives clients on industrial parks or hubs. Such
quickly. Electrolyser costs have reduced Investment in hydrogen technology clusters are already forming, for example
by 60 per cent in the last ten years. For and capacity has accelerated in the last in Fukushima in Japan, Ulsan in South
regions where renewable electricity year, analysts have lifted long-term Korea, San Pedro Bay Ports in California,
is cheap, electrolysers are expected to forecasts and share prices have soared. Pilbara in Western Australia and Hebei,
be able to compete with fossil-based Yet hydrogen has a long history of not Hunan and Shandong in China.
hydrogen by 2030. The cost of fuel cells delivering on its potential. Historically, its Ports around the North Sea appear
is also expected to fall. role has been limited by high production particularly active with projects such as
costs and the need for new and adapted Humber Zero and the Tees Valley in the
Virtuous circle required – government infrastructure to support distribution UK and H-Vision Rotterdam and NortH2
funding and regulatory frameworks and storage. Falling renewable costs are in the Netherlands. These sites could
are key addressing the price premium for green potentially expand to form hubs where
These cost reductions are predicated hydrogen, but governments will also need electricity from wind farms in the North
on the creation of a virtuous circle that to provide investment and implement Sea could generate hydrogen to use in
drives hydrogen adoption and triggers policies that explicitly encourage local petrochemical and steel industries.
the economies of scale required. This hydrogen adoption and deliver the scale The IEA estimates that North Sea
requires government investment required to drive down costs. generation capacity is expected to
in infrastructure, R&D, as well as exceed 50GW by 2030, roughly two-
an enabling regulatory framework. Converting ambition into reality: thirds the current total electricity
Although it is impossible to say how Policy and economics generation capacity in the UK. Beyond
successful investment and policy The EU’s recently published report, A these hubs, the economics of hydrogen
initiatives will be, the level of support hydrogen strategy for a climate-neutral distribution get more challenging.
is likely to be the major determinant of Europe, suggested hydrogen’s share Hydrogen flows faster than natural
how rapidly the market grows. of Europe’s energy mix could grow gas, making it potentially suitable for
from two per cent in 2018 to 13–14 per distribution through pipelines, but
The hydrogen economy – cent by 2050. The Hydrogen Council its smaller molecules make it much
decarbonising the final 20 per cent (a global CEO-led initiative of over 90 leakier. Upgrades to pipeline networks
At least 20 countries, collectively leading energy, transport, industry will be needed.
representing around 70 per cent of and investment companies) thinks it The European Hydrogen Backbone
global GDP, are proposing hydrogen could reach 18 per cent by 2050, BNEF Report, published in July 2020, estimates
strategies or roadmaps as key elements predicts 24 per cent globally. Estimates a total investment of €27–64 billion
of their decarbonisation plans. We have vary but it is difficult to imagine net would be required by 2040 to create a
identified the sectors where we see the zero being achieved without significant 23,000km-long network across western
biggest opportunities for hydrogen: growth in hydrogen, in our view. Europe. Three-quarters of this network
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