4 min read 8 Apr 21
Summary: The race to ‘net zero’ emissions has taken a positive step as the world’s two largest emitters of carbon, China and the US, have followed nearly all other major countries in signing up to the Paris climate deal goals.
Now that countries have the goals in place, we require the policy framework that will lead us on the path to net zero emissions within the next three decades.
The switch to renewable energy sources for the generation of electricity and the electrification of passenger vehicles will make a significant dent in global emissions. However, this alone will not be enough, given there are carbon-intensive activities where the switch to electrification does not make practical or economic sense.
Within the transportation sector – heavy-duty vehicles, air travel and shipping account for 19% of global CO2 emissions and there is currently no feasible way to electrify these activities. The cost and weight of the batteries, even with continuing technological advances means it’s unlikely electrification will be a solution by 2050 for these sectors.
In industry – the production of steel and cement account for 16% of global emissions and these areas also do not have viable paths to electrification.
We, therefore, require a high density, non-fossil based fuel to take over from oil and coal. The emerging alternative is hydrogen.
There are many shades of hydrogen; blue, brown, green to name a few. Whilst some methods to produce hydrogen emit carbon as part of the process, significantly, others don’t.
We now have the technology to produce hydrogen from carbon-free renewable energy sources, such as wind and solar power.
The electrolysers, which convert the renewable energy into hydrogen, have developed to a level where they are able to rapidly power up and down, along with the intermittency of renewable power sources, in order to capture the energy generated.
UK-based company ITM Power is the leader in developing proton exchange membrane (PEM) electrolysers that convert renewable energy into carbon-free green hydrogen, and are in the process of increasing manufacturing capacity at their facility in Sheffield.
The other side of the technology sits with the fuel cell. This is where the hydrogen is then converted back into a usable energy form, such as electricity.
Substituting hydrogen vehicles for traditional combustion vehicles remains more expensive today. However, costs continue to come down. UK-based Ceres Power, a company that develops viable fuel cells, has drastically reduced the cost of these through their innovative design – where the fuel cell is manufactured from 90% steel and the remainder mostly ceramics. Through innovation, they have removed the requirement for the use of expensive raw materials such as the platinum-group metals which had added to costs materially.
We have now reached the point where expectations are that hydrogen-powered lorries could be cheaper to own and operate than the current combustion lorries, within the next five years.
While the electrolyser and the fuel cell are critical components in the production and conversion of hydrogen, an entire supply chain needs to be in place for this process to work and be economically viable. This ranges from the renewable energy producers, industrial gas pipelines and transportation, to the manufacturers of downstream products that will now use hydrogen to replace fossil-based fuel.
Investment in the infrastructure and supply chain has already begun. For instance, the world’s largest offshore wind producer, Orsted, has partnered with ITM Power to pilot attaching electrolysers to their wind farms. Companies such as Italian pipeline utility SNAM and global industrial gases firm Linde, have taken direct stakes in ITM Power and signed contracts to work with them to incorporate electrolysers into their own infrastructure.
Oil major Shell is now ITM Power’s largest customer, with Shell deploying significant levels of capital to build out their hydrogen refuelling stations in anticipation of the phasing out of combustion vehicles.
Likewise with Ceres Power, Chinese industrial conglomerate Weichai and German engineering and technology company Robert Bosch have both taken direct stakes and signed contracts to license Ceres Power’s intellectual property (IP).
Furthermore, global vehicle and heavy-duty equipment manufacturers such as Honda, Toyota and Doosan have also signed agreements with Ceres Power to license their IP and incorporate their innovative fuel cells within their own vehicles.
The addressable market for green hydrogen is worth ca. 2 Gigawatts (GW) or $1.6 billion today. The EU alone is targeting ca. 6GW in 2024 and ca. 40GW by 2030.
The UK carbon strategy is expected to be announced in early 2022. With the US and China now engaged in Paris climate goals, the expectation is that global carbon strategies will continue to evolve from here. As we move towards the COP26 conference in Glasgow in November of this year, expect to see many more national targets incorporating hydrogen going forward.
Source: World Energy Council Germany, Bloomberg Green, January 2021
The largest barriers to green hydrogen adoption remain the infrastructure development and the current cost levels.
Tellingly, we have seen offshore wind generation prices fall 89% over the last decade – as greater investments have been made as it became the leading contender to replace fossil-fuel based power generation.
There is every reason to assume that green hydrogen will follow a similar learning curve, especially now as it is being recognised as the best alternative to activities that cannot be electrified.
In terms of infrastructure, companies that are at risk from the decarbonisation trend have already taken the lead in ‘future proofing’ their business models.
This is usually the best vote of confidence a new technology can receive.
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