BNEF: Green hydrogen could slash energy, transport and industry emissions by one-third
Large-scale, global deployment of renewable hydrogen across the energy, transport and industrial sectors could reduce their annual emissions by up to 34% by 2050 - at a "manageable cost".
That is the key conclusion of Bloomberg NEF (BNEF’s) latest Hydrogen Economy Outlook report, published on Monday (30 March).
The report details how producing hydrogen using wind or solar-powered electrolysis has, in the past, proven more expensive than traditional, non-renewable methods of artificial production, whereby acids are made to react with metals under conditions heated using fossil fuels.
It goes on to predict that this trend will be turned on its head in the coming decades, as renewable energy costs come down and as innovative methods of green hydrogen production are scaled. Renewable hydrogen will be able to be produced for $0.80-$1.60 (£0.64-£1.30) per kg by 2050, in most global markets, the report concludes, around the same as current natural gas prices in major markets across South America, Asia and Europe.
This prediction is founded on the basis that electrolyser technologies have seen their costs decrease by 40% since 2015 – a trajectory BNEF believes will continue if businesses and policymakers continue to ramp up deployment.
Of course, the increase in green hydrogen production will also warrant increased investment in storage and pipeline infrastructure. BNEF concludes that the world will need three to four times more storage infrastructure than present levels by 2050, if the emissions reductions charted are to be achieved. Constructing and maintaining this infrastructure to provide the same level of energy security currently associated with natural gas will cost $637bn (£516bn), according to the report. This means that the delivered cost of new renewable hydrogen in China, India and Europe will be around $2 per kg in 2030 and $1 per kg in 2050.
Policy and finance
BNEF’s key recommendation for getting businesses to raise and invest these sums is the implementation of internal minimum carbon pricing of $50 (£41) per tonne for steelmaking; $60 (£48) per tonne in cement and $145 (£118) per tonne in cargo shipping. The global average carbon price is currently around £24 per tonne.
Policymakers must take a “critical” role alongside business, the report emphasises, with Ministers setting national carbon pricing and implementing other incentives and mandates. On government subsidies alone, BNEF warns, $150bn (£121.5bn) must be allocated over the next decade globally.
“That may sound daunting but it is not, in fact, such a huge task – governments around the world currently spend more than twice that every year on fossil fuel consumption subsidies,” BNEF’s head of industrial decarbonisation Kobad Bhavnagri said.
“The clean hydrogen industry is currently tiny and costs are high. There is big potential for costs to fall, but the use of hydrogen needs to be scaled up and a network of supply infrastructure created,” he added. “This needs policy coordination across government, frameworks for private investment.”
BNEF is keen to caution that its outlook for the hydrogen economy is currently “uncertain”, and that whether its predictions come to fruition are ultimately dependent on national policy. Moreover, they are dependent on action in other sectors, given that hydrogen will “not be a silver bullet” for total decarbonisation in line with a net-zero world.
Signs of policy action here in the UK since the 2050 net-zero target was set have been promising. The government awarded 20 projects a share of £7 million to explore innovative ways of making and using low-carbon hydrogen last August, then built on this with a £90m pot for decarbonising heavy industry using hydrogen earlier this year.
Hydrogen was, however, notably absent from Chancellor Rishi Sunak’s first budget, which contained multi-million-pound pots for electric vehicles (EVs), low-carbon heat and carbon capture and storage (CCS).
Moreover, the Committee on Climate Change’s (CCC) advice on scaling up the UK’s hydrogen economy in alignment with its long-term climate targets urges the creation of a low-carbon heat strategy and low-carbon HGV strategy by 2021. Neither of these moves seem forthcoming, and the CCC has highlighted how ministers have previously implemented policies that have slowed the uptake of hydrogen technologies, like excluding them from its £1m industry decarbonisation roadmap studies in 2015.