According to research from BloombergNEF (BNEF) the falling cost of producing hydrogen from renewable power offers a promising route to cutting emissions, but governments need to step in and provide US$150 billion of subsidies over the next decade to scale up the technology.
Renewable hydrogen can be made by splitting water into hydrogen and oxygen, using electricity generated by cheap wind and solar power.
Reuters Newsagency reports the technology to do this is currently funded by companies, but BNEF estimates that if governments worldwide were to provide US$150 billion in funding over the next 10 years, less than half the amount currently spent on subsidies for fossil fuel consumption, that would help halve the cost of producing hydrogen from renewable energy sources.
The BNEF Hydrogen Economy Outlook said that usage of carbon-free hydrogen is currently small and costs are high, slowing the deployment of hydrogen production, storage and transport infrastructure, which could help industries decarbonise.
“This needs policy coordination across government, frameworks for private investment and the roll-out of around US$150 billion of subsidies over the next decade,” said Kobad Bhavnagri, head of industrial decarbonisation at BNEF.
“In the years ahead, it will be possible to produce it at low cost using wind and solar power, to store it underground for months, and then to pipe it on-demand to power everything from ships to steel mills.”
The cost of electrolyser technology to make hydrogen from renewable power has fallen by 40 per cent in the last five years in Europe and North America, while Chinese-made systems are 80 per cent cheaper than those in the West, according to BNEF.
This has encouraged industries such as steel, heavy vehicles, shipping, cement, fertilisers and power generation to explore measures to replace natural gas usage with hydrogen, to cut carbon emissions under climate targets.
In Japan, carmaker Toyota seeks to establish hydrogen-powered cities and transport and in Germany, oil majors and utilities including BP and RWE plan plants and pipelines while the government is drawing up a hydrogen strategy.
BNEF said the cost of producing a kilogram of hydrogen from renewable power could fall to a range of US$1.14 to US$2.71 per kilogram in 2030, compared with $2.53 to US$4.57/kg now, if subsidies to the tune of US$150 billion were provided.
In 2050, the production cost could even fall to US$0.8 to US$1.6 in most parts of the world, making hydrogen competitive with current gas prices in Brazil, China, India, Germany and Scandinavia, it estimated.
However, achieving this hinged on how governments enforced carbon dioxide (CO2) curbing targets to drive out conventional processes, it said.
Storing and moving hydrogen is challenging.
For hydrogen to become as ubiquitous as natural gas today, a huge, coordinated program of infrastructure upgrades and construction would be needed.
For instance, three to four times more storage infrastructure would need to be built at a cost of US$637 billion by 2050 to provide the same level of energy security as natural gas.
However, cost efficient large-scale options do exist and could be used to supply industrial customers with the clean gas.
“If the clean hydrogen industry can scale up, many of the hard-to-abate sectors could be decarbonised using hydrogen, at surprisingly low costs,” Mr Bhavnagri said.
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