Costs Remain a Barrier Despite the Growing Buzz around Green Hydrogen

The excitement surrounding hydrogen has grown significantly in recent years, with many recognizing its potential as a tool for reducing the environmental impact of heavy industry and achieving net-zero goals. One particularly intriguing sector is green hydrogen, which involves producing hydrogen using renewable energy sources like wind and solar power. This area has attracted attention from influential figures, including German Chancellor Olaf Scholz, who called it “one of the most important technologies for a climate-neutral world.” Major companies like Iberdrola and Siemens Energy are also exploring opportunities in green hydrogen.

Despite the enthusiasm for hydrogen, there are undoubtedly challenges ahead. The majority of hydrogen production still relies on fossil fuels rather than renewables, which contradicts net-zero goals. Additionally, the production costs of green hydrogen remain high and must be reduced in the coming years. Another crucial factor to consider is the transportation of hydrogen from production sites to end-users, which presents significant difficulties.

“Moving hydrogen is a costly endeavor,” said Murray Douglas, head of hydrogen research at Wood Mackenzie, during an interview with CNBC. “It’s technically more challenging than transporting natural gas.” Douglas is not alone in recognizing the hurdles associated with hydrogen delivery. The U.S. Department of Energy has identified key challenges, including cost reduction, increased energy efficiency, ensuring hydrogen purity, and minimizing leakage.

The DOE emphasizes the need for further research to analyze the trade-offs between hydrogen production options and delivery methods as a system.

Regarding the logistics of green hydrogen, the location of production facilities is a critical consideration. These facilities are often situated in areas where renewable energy sources are abundant, such as Australia, North Africa, and the Middle East. However, they are often far from the end-users of hydrogen. Murray Douglas pointed out the importance of considering transportation options when discussing the investment horizon for the next decade. He suggested the possibility of a dedicated pipeline close to end-users or the export of hydrogen as ammonia, which already has an established shipping infrastructure.

An efficient delivery system is crucial for the success of green hydrogen, according to Jorgo Chatzimarkakis, CEO of industry association Hydrogen Europe. Chatzimarkakis also emphasized the need for a certification program to ensure the renewable sourcing of green hydrogen.

Despite the challenges, partnerships and programs focusing on the supply and distribution of green hydrogen are emerging. Companies like Greenergy, Octopus Hydrogen, and Enertrag have already initiated green hydrogen delivery partnerships, while Cepsa and the Port of Rotterdam are working on the development of a green hydrogen corridor between southern and northern Europe.

While the technology and knowledge for hydrogen production and delivery exist, there is still one major obstacle: cost. Murray Douglas of Wood Mackenzie explained that reducing production costs is essential to making transportation more affordable. He acknowledged that finding cost-reduction technologies specific to hydrogen transportation is unlikely. Whether liquefying hydrogen or converting it to ammonia, both methods involve significant expenses and present challenges.

Douglas concluded by stating that the key factor in the successful deployment of hydrogen ultimately comes down to cost.