A strong carbon price is needed to incentivise a switch to hydrogen in many countries, according to a senior executive at a leading green hydrogen developer.

Only the EU currently has a strong price for carbon, where it is trading at more than €80/t CO₂ ($90/t CO₂). The US and China have regional emissions trading schemes, but prices remain too low to incentivise hydrogen projects.

“In some markets you are going to need carbon taxes because companies are not motivated only by decarbonisation and helping with climate change,” said Alicia Eastman, president of Hong Kong-based Intercontinental Energy, at the Asia-Pacific Hydrogen Summit on Wednesday.

“You will need to see some kind of carbon tax… not necessarily a tax but some internalisation of the costs that are basically carried by society instead of the producer of fossil fuel-based solutions.”

Intercontinental is developing large-scale green hydrogen and ammonia export projects in Australia and Oman.

Outside the US, China and the EU, Indonesia is set to introduce a carbon levy in April, while Austria, Uruguay, Senegal and Ivory Coast are also mulling a tax. Japan is the largest economy that levies a carbon tax on fossil fuel consumption, followed by the UK.

$90/kg – Lowest carbon price required to make hydrogen competitive

All told, 40 countries and 20 cities, states or provinces having adopted some sort of price on carbon either through direct taxes on emitters or through an emissions trading system, according to the World Bank.

Recent findings from research firm BloombergNEF (BNEF) indicate a carbon price of $90-$230/t is needed for hydrogen costing $2/kg to compete in most industrial sectors, with coal- and gas-based steelmaking at the low end of the range, and cement and aluminium at the high end.

Carbon prices in the EU have surged in recent weeks and may be high enough by the end of this decade to incentivise use of hydrogen for steelmaking instead of coal or gas, according to BNEF.

Hydrogen now, not later

The hydrogen industry has a tendency to discuss scaling up over a relatively long period of time, which may not help its cause in pushing for a tax, according to Mathieu Geze, vice-president for Asia at HDF Energy, a Paris-listed hydrogen power developer.

“It is sometimes counterproductive when… we always refer to the gigawatt scale in ten or 15 years. It is inviting the governmental stakeholders to wait for that to happen. We need the industry to scale up,” says Geze.

At the same time, projects that start up by the middle of this decade may see some lean times initially, according to Michael Dolan, science and technology director at green energy company Fortescue Future Industries (FFI).

“To get the industry started, we need to be seeing what 2025 looks like,” he says.

“We probably need to be pragmatic around how we actually approach these early-stage projects to get things going, because customers with progressive decarbonisation targets and a willingness to pay are probably few and far between for that 2025 timeline.”

FFI is the green energy subsidiary of Australian iron ore miner Fortescue Metals Group, which has earmarked 10pc of net profits for the unit to explore green hydrogen projects in Australia, Argentina, Jordan and Papua New Guinea. Dolan said the mining industry has generally procrastinated on adopting hydrogen, even though it is often referenced as one of the hard-to-abate sectors ideal for hydrogen substitution.

“There has been a big perception in the industry that these things are really hard and they are going to take ten years. We do not think [they will],” says Dolan.

Fortescue has been an early mover in trialling hydrogen and other alternative fuels to decarbonise its operations. FFI has converted one of its parent company’s locomotives to run on an 80/20 blend of ammonia and diesel, with the mix rising to 90/10 soon, according to Dolan.

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Author: Shi Weijun