The Global Energy Transition is Just Getting Started

Over the next four years, the U.S. will likely watch from the sidelines as the global energy transition shifts into high gear. Among the missed opportunities is the green hydrogen industry, as governments around the world prepare for a fresh wave of economic activity centered around the growing demand for a sustainable hydrogen supply chain.

The green hydrogen industry is outpacing its own support system

Hydrogen is a vital input for key industrial sectors including food systems and metal production, as well as refining. To date, the global supply chain relies primarily on extracting hydrogen from fossil energy resources. In the U.S., for example, 95 percent of hydrogen is produced from natural gas.

Sustainable alternatives are also available, including wastewater and waste biomass. Much of the investor activity currently centers on deploying electricity from renewable resources to run electrolysis systems, which push so-named “green hydrogen” from water.

Despite some progress, the cost of water electrolysis remains an issue for the green hydrogen industry. In the U.S., hydrogen produced by water electrolysis typically costs about $5 per kilogram, compared to just $1 per kilogram for hydrogen made from natural gas. That cost gap can be filled with government subsidies. However, analysts observe the sheer size and ambition of green hydrogen projects announced globally has already overwhelmed the ability of governments to bridge the divide. There are simply too many proposals in the pipeline.

“Enormous additional subsidies of around $1 trillion U.S. dollars would be required to realize all announced hydrogen projects by 2030,” researchers from the Potsdam Institute for Climate Research found in a study published to the peer-reviewed journal Nature Energy this month.

Breaking the green hydrogen bottleneck

The Potsdam Institute team proposed that governments establish green hydrogen quotas to motivate demand instead of relying exclusively on subsidies. Other strategies are also emerging. In India, for example, where government support for the green hydrogen market is strong, a new tranche of subsidies has been offered on a tiered basis that decreases in stages over the next three years. “This tiered approach aims to encourage sustained investment and technological advancement in the green hydrogen sector,” the hydrogen news and research platform Fuel Cells Works reported this week.

Another strategy is emerging in the EU, where the European Commission approved the SouthH2 project earlier this week. A collaboration between European and North African countries, SouthH2 aims to reduce costs partly by repurposing existing gas infrastructure. Italy, Austria, Germany, Algeria and Tunisia affirmed their commitment to support the 2,050-mile SouthH2 pipeline, with the aim of providing a foothold in Europe to green hydrogen producers in North Africa, Oil Price reports. The project is expected to consist of 65 percent repurposed gas pipelines. “The corridor has political endorsement, as well as strong support from companies involved in production and offtake of hydrogen along the whole corridor,” Charles Kennedy of Oil Price reported.

The SouthH2 project complements other hydrogen hub initiatives in Europe, such as the AdvancedH2Valley initiative already underway in France. With an assist from EU funding, this project aims to integrate water electrolysis facilities with a network of fueling stations for heavy-duty fuel cell trucks, coordinated by the French hydrogen firm Lhyfe. “This initiative not only aims to advance regional decarbonization, but also establishes a scalable model for renewable hydrogen deployment,” Hydrogen Fuel News reported in November.

Money is no object, for some

The subsidy issue can vary among nations. Some don’t even seem to have it on their radar. In the United Arab Emirates, for example, the renewable energy firm Masdar has partnered with Lhyfe in a plan to co-develop green hydrogen facilities in Europe. “Masdar aims to be a leading producer of green hydrogen, targeting annual production of 1 million tons of the green fuel or equivalent derivatives in the UAE and globally within a decade,” Renewables Now reported this week.

The Sultanate of Oman is another example. In December, the firm Hydrogen Oman held an investor event that attracted hundreds of participants in support of Oman’s strategic plan for producing green hydrogen and exporting it to Europe through the Port of Amsterdam. The plan also calls for exporting green hydrogen to markets in the Asia-Pacific market through Singapore, Fuel Cells Works reports. 

Green hydrogen demand and sustainable aviation fuel

The sustainable aviation fuel (SAF) market is also emerging as a significant new demand-side supporter of green hydrogen. To date, SAF stakeholders rely mainly on jet fuel derived from biomass, but the uptake has been slow and dogged by the food-versus-fuel debate that comes from growing fuel feedstocks on land that could be used to grow food. Green hydrogen avoids the conflict entirely. Stakeholders in the newly rising electrofuels industry can synthesize jet fuel and other hydrocarbon fuels from green hydrogen and captured carbon. In Texas, for example, the firm Infinium is already producing and distributing e-fuels to customers at scale.

Texas is among the states to benefit from the new Regional Clean Energy Hubs program. Funded through the 2021 Bipartisan Infrastructure Law, the program aims to diversify the U.S. hydrogen supply chain by organizing production, transportation, storage and demand around local resources, including existing gas infrastructure. The $7 billion program resulted in the designation of seven hubs in the closing months of the Joe Biden administration, including the Gulf Coast Hydrogen Hub in Texas.

Exporting green hydrogen to Europe was one chief aim of the Gulf Coast project, but it looks like they may be sitting this one out along with the rest of the U.S. green hydrogen industry, while exporters in North Africa, the Middle East and elsewhere take over. After all, incoming President Donald Trump can regulate all he wants in the U.S., but he can’t force the rest of the world to come along for the ride.