Green hydrogen: Ready for take-off?

It was last month that the world’s first hydrogen-powered plane took flight.

Simultaneously, the global green hydrogen market now seems to be ready for take-off after a surge in green new deals from governments keen to accelerate us out of the world’s Covid-induced economic slump. The pipeline for utility-scale green hydrogen projects now exceeds 60GW according to research from Rystad Energy last week. Of that, 87% would come from gigawatt-scale plants.

The timing of that hydrogen-powered flight was no doubt a coincidence, but it is a sign of the importance of ensuring that economic prosperity and net zero go hand-in-hand. Does this mean green hydrogen will soon take flight? Or will this nascent industry be forced to taxi back to the terminal?

The Rystad Energy study showed the great potential of green hydrogen. But it also predicted that countries would only manage to build half of that 60GW by 2035. We interviewed Rystad to find out more.

Let’s start with the positives.

Green hydrogen is central to many countries’ post-pandemic recovery plans, offering global economies the opportunity to spark investment, innovation and secure export supply chains while meeting green targets.

The European Union has pledged to support not only the installation of 40GW of hydrogen electrolyser capacity in Europe by 2030, but also the growth of import supply chains with a further 40GW of capacity outside Europe.

Gero Farruggio, head of renewables at Rystad, said commercial use of green hydrogen is “no longer something that is ten years away… it’s within reach”.

Sixty percent of all hydrogen costs are for the energy input for electrolysis, the process that separates oxygen and hydrogen from water. In many markets, renewables produce energy cheaper than fossil fuels. In other words, green hydrogen doesn’t just offer an eco-competitive alternative to hydrogen, but a cost-competitive one.

Green hydrogen also offers a solution to the intermittency of renewables. Transferring the energy from wind or solar into liquified green hydrogen is an effective way to store energy for considerably longer than any batteries Elon or his rivals could produce.

This has been reflected in major projects from utilities: Shell’s 10GW NortH2 project is among the largest hydrogen electrolyser schemes and is powered with offshore wind, and Ørsted's 600MW Westkuste in Germany is powered by offshore wind too.

But the growth of green hydrogen comes with challenges too. Farruggio said green hydrogen is “less a technical challenge than a commercial one”, and that it would be an “understatement” to even call the market “embryonic”.

Currently the only operational green hydrogen projects are pilots. This rapid increase in targeted capacity is too ambitious according to Rystad, estimating that only 30GW will be installed by 2035, with economics the biggest obstacle.

It said that the high production costs involved in such an embryonic market would not give sufficient stability to facilitate such high capacity goals. Not only are governments in a race for investment, but they must heavily subsidise the sector to nurture its growth.

For example, Australia is a current leader in green hydrogen and offers support at state and federal levels. Australia’s Clean Energy Finance Corporation has committed $210m for equity financing, and the Australian Renewable Energy Agency is offering $50m for select electrolyser projects over 10MW.

But this state support is only a short-term fix, and getting to 60GW requires huge commercial demand that doesn’t exist yet. Building it will take time.

Investors also want to see what other global energy giants are saying. China and the US are yet to announce their green hydrogen plans, although hydrogen is likely to be a big part of China’s ‘net zero by 2060’ strategy. In addition, we expect hydrogen to feature in Joe Biden’s plans if he wins the US presidency.

The key message is this. Technically, firms can deliver 60GW of green hydrogen by 2035, but this will only happen if investors are confident in the demand. Investor support is key as this plane-powering tech moves beyond pilots.