Governments and businesses around the world may be supporting the widespread use of green or blue hydrogen, but “daunting obstacles exist to turning vision into reality,” says new report from analyst Westwood Global Energy Group.
The current high cost of renewable energy production2 or low carbon hydrogen from natural gas with carbon capture and storage (CCS) – and the resulting current lack of demand from potential users – are cited as major hurdles in a “dilemma”. of the chicken and the egg ”.
“The lack of clarity on [clean hydrogen’s] end-use potentially hinders the necessary investment in renewable energy (or natural gas) sources needed to sustain [green or blue hydrogen production]… End-use markets will not develop until hydrogen is seen as a [a financially] attractive alternative.
Another key issue, the report explains, is determining whether green / blue hydrogen is “the right decarbonization solution” for potential use cases, which include heating, road transport, and industrial steel production. .
“End markets are currently evaluating the various alternatives available to decarbonize their operations, whether it is electrification, hydrogen, CCS, etc. The final ‘choice’ is not fixed and will evolve.
The report, titled Development of a business case for hydrogen in North West Europe, adds that “business case enablers” are needed to move green or blue hydrogen projects forward to a Final Investment Decision (FID).
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“Renewable energy producers and oil and gas companies are among the key stakeholders taking leadership to integrate stakeholders along the value chain,” he says. “However, while these synergies and collaborations resulted in a first pipeline of conceptual projects, only those with a strong facilitator managed to take the most ambitious projects from concept to[wards] FID.
The study adds: “The initial effort of project managers and governments looking to develop a hydrogen opportunity requires another element: a business case enabler.
“Essentially, a business case facilitator helps align a particular proposal / project with the government’s strategy to tackle its domestic emissions or create a new economic development opportunity … the facilitator also allows for faster identification and more targeted policy gaps in a project’s value chain. As a result, governments can develop financial and regulatory mechanisms[s] which meet the real needs of a hydrogen – or hydrogen and CCUS – proposal aimed at effectively decarbonizing priority sectors.
The Westwood study cites the Alliance PtX in Denmark as a good example of a business case facilitator. This collaboration between the industry associations Wind Denmark and Hydrogen Denmark resulted in the Green fuels project for Denmark, in which partner companies across the entire value chain – from developer Orsted to H2 end users – have joined forces on a 1.3 GW electrolyser project that will be powered by a 2-3 GW offshore wind farm by 2030.
The hydrogen produced would be used for fuel cell buses and trucks, synthetic fuels for shipping and aviation, with buyers including Copenhagen Airport, SAS airline, and shipping companies Maersk, DFDS and DSV Panalpina.
The report concludes: “The complexity associated with developing hydrogen projects can be managed by matching the hydrogen opportunity to a country’s needs, identifying synergies and collaborative opportunities along the chain. value and, most importantly, determining a business case facilitator – which creates alignment and supports the development of country / project specific support mechanisms.