Hydrogen: fuel of the future or another false start?

Hydrogen fuel of the future energy IEA
Hydrogen could be the clean energy source of the future if technologies are upscaled and costs are reduced, according to the IEA’s latest report.

The time is ripe for the world to take full advantage of hydrogen’s rising momentum and its potential as a more sustainable and secure energy source, according to the International Energy Agency.

In a new report entitled The Future of Hydrogen: Seizing Today’s Opportunities, unveiled at a meeting of G20 energy and environment ministers in Japan over the weekend, the IEA said the number of hydrogen-related policies and projects around the world is rapidly expanding but there are still several challenges that need ironing out.

The report recognised hydrogen’s versatility and ability to tackle various critical energy challenges, including its ability to decarbonise sectors such as long-haul transport and chemicals where it has proven difficult to reduce emissions.

It also touted its potential to help store the variable output from renewable sources like solar photovoltaics and wind to better match demand, along with its ability to be easily transported as a gas by pipelines or in liquid form by ships like liquefied natural gas.

Market challenges

However, the IEA noted major hurdles holding back the world’s transition to clean and widespread hydrogen use.

For starters, hydrogen is so far not as “clean” as it could be, since producing the fuel from low carbon energy is currently quite costly.

So, its production is almost entirely supplied from natural gas and coal at the moment, which the IEA claims is responsible for annual carbon dioxide emissions equivalent to those of the United Kingdom and Indonesia combined.

Though according to the agency, the cost of producing hydrogen from renewable electricity could fall 30% by 2030 as a result of declining costs of renewables and the scaling up of hydrogen production.

Production costs hydrogen natural gas coal 2018

Other challenges include the fact that the development of hydrogen infrastructure has been slow and government regulations currently limit its development.

“Government and industry must work together to ensure existing regulations are not an unnecessary barrier to investment. Trade will benefit from common international standards for the safety of transporting and storing large volumes of hydrogen and for tracing the environmental impacts of different hydrogen supplies,” the IEA said.

Another false start?

The IEA noted there have been many false starts for hydrogen in the past.

For example, interest in hydrogen as a fuel source surged in the 1970s when the Arab nations of OPEC declared an oil embargo in 1973 and the Iranian revolution in 1979 both slashed supply and sent oil prices through the roof.

However, the oil market moderated before any significant advancements were made.

The IEA believes this time could be different, with global efforts to reduce carbon emissions outlasting any fluctuating commodity prices.

“With a global energy sector influx, the versatility of hydrogen is attracting stronger interest from a diverse group of governments and companies,” the agency stated.

“Support is coming from governments that both import and export energy as well as renewable electricity suppliers, industrial gas producers, electricity and gas utilities, automakers, oil and gas companies, major engineering firms, and cities,” it added.

Ways to push the market forward

In its report, the IEA offered up seven recommendations to help scale up hydrogen projects around the world.

It called on governments to create policies that stimulate commercial demand for clean hydrogen, support research and development to bring down costs, and address investment risks of early investors.

“Government actions, including use of public funds, are critical in setting the research agenda, taking risks and attracting private capital for innovation,” the IEA said.

The agency suggested targeted and time-limited loans and guarantees could help the private sector to invest.

It also called for consistent regulations and permit requirements, including a coordinated international approach.

In addition, it said both governments and companies alike should establish a role for hydrogen in long-term energy strategies and focus on four key opportunities to further build momentum over the next decade.

Hydrogen policy targets IEA

These included making existing industrial ports into hubs for lower cost, lower carbon hydrogen and using existing gas infrastructure to spur new clean hydrogen supplies, as well as establishing shipping routes to kick-start international hydrogen trade and supporting ground transport routes to make fuel-cell vehicles more competitive.

IEA executive director Dr Fatih Birol said 2019 was a “critical year” for hydrogen as it could finally be on the path to fulfilling its longstanding potential as a clean energy solution.

“To seize this opportunity, governments and companies need to be taking ambitious and real-world actions now,” he said.

Danica has extensive experience writing and editing business news in the Oceanic and Southeast Asian regions. She has written across a range of industries including oil and gas, mining, energy, science and research, retail and travel. Danica has covered small and large cap companies listed on the Australian, Singapore, Hong Kong, Indian, London and Toronto exchanges.