Hydrogen needs to become a widely traded commodity if the world is to meet its climate goals, the Secretary-General of the International Energy Forum (IEF) had told participants at an industry conference.
Policy makers believe that hydrogen could hold the key to decarbonizing some sectors where traditional forms of low-carbon energy such as batteries and renewables don’t work.
“Hydrogen will play a role in decarbonizing hard-to-abate sectors and where electrification is not possible, such as high-temperature industrial and chemical processes, and possibly heavy road transportation, and shipping,” Joseph McMonigle told the World Hydrogen: Decarbonizing the Gas Grid conference in Barcelona.
To get there, the energy industry must develop a new carbon intensity scale and move beyond the current over-simplified system of color designations, such as “green hydrogen” when it is made with renewable energy and “blue hydrogen” when it is made from natural gas.
“The market for hydrogen will be based on carbon-intensity and not ‘color’ designations as are commonly used today,” he said. “Measuring and tracking carbon intensity will need to be standardized and ‘green’ certifications and guarantees of origin will be important elements enabling international trade,” Mr McMonigle added.
Electrification, as in the case of electric vehicles, is the preferred way to decarbonize the energy sector, because low-carbon electricity can be made from sources such as nuclear, renewables or natural gas with carbon capture filters. But electrons are difficult to store and transport.
As a molecule, hydrogen has an important advantage over electrons, in that it can transfer energy over time and distances and can be stored more efficiently, Mr McMonigle said.
Hydrogen can unlock otherwise stranded energy assets such as remote and isolated renewable energy sites. It can connect places that have ample renewable energy resources but no effective means of delivering it to markets. Infrastructure and transportation developments will be needed to unlock these arbitrage opportunities, he said.
Over 500 large-scale projects have been announced in the last couple of years and more than half of these have been announced in the past 12 months. In the wake of Russia’s invasion of Ukraine, the European Commission has quadrupled its low-carbon hydrogen supply target for 2030, from 5.6 million tons per annum to 20.6 million tons.
The IEF expects the hydrogen market to develop over several decades in phases, starting with isolated local point-to-point transactions, and evolving to bi-lateral trades, then contracted international deliveries, and finally becoming a globally traded commodity.
The market for hydrogen would likely evolve in a pathway similar to that of liquefied natural gas, which is compressed and cooled for shipping in specialized tankers.
However, there are important differences and Mr McMonigle warned against over-regulating the hydrogen market to allow room for “innovation in hydrogen technology and business models”.
“Regulation that is “fit for purpose” can help mitigate risk inherent in a new market and help to attract investment,” he said.