Hydrogen is a key tool in decarbonising the world’s energy sector. It’s a fuel for the ‘hard-to-abate’ industrial sectors and for activities that cannot be readily electrified such as aviation, long-haul freight and international shipping.

However, as we’re all aware, the cost of using it as an energy source is high—and in Europe, particularly, this is one of the main impediments to large-scale deployment. Since European electricity prices are driven by the cost of gas, the cost of carbon-free hydrogen produced by electrolysis has risen over the past two years. Fossil fuels are relatively cheap compared to hydrogen, but we pay the costs of their carbon emissions and subsequent effects on the planet.

95mt – Global hydrogen use in 2022

With the right policies, and appetite from the private sector, we can provide the right incentives and infrastructure for hydrogen. Between the public and private sectors, we need to create an industry with a competitive pricing structure for renewable electricity to justify reasonable production costs versus the alternative, and a reasonable business case on the demand side, due to the carbon pricing and the energy pricing that would justify end users to do the switch.

I’m calling for 2024 to be a year of collaboration in our industry, to drive change and make hydrogen an affordable energy source. We need to get out of our silos and have conversations that deliver solutions to the barriers we face to create a global hydrogen ecosystem.

The signs of progress are there: the IEA’s 2023 Hydrogen Review notes how global hydrogen use reached 95mt in 2022, a nearly 3% increase year-on-year, with strong growth in all major consuming regions except for Europe.

Why is Europe the outlier?

Governments are starting to create a suitable environment for the hydrogen industry.

The European Commission has utilised the benefits of being a large trade bloc in its hydrogen strategy, which highlights the importance of integrating the EU’s entire energy system, overcoming national and sectoral silos, as well as advocating an international harmonisation of standards. Meanwhile, REPowerEU aims to attract clean energy investment to accelerate decarbonisation across multiple sectors.

However, when we dive into the details of these policies, we see that more needs to be done. For example, on one hand, the European Commission is promoting green hydrogen by adopting proper definitions and labelling for green hydrogen derivates such as e-fuels, helping to create certainty for investors and industry and encourage them to build value chains in Europe. On the other hand, the labelling of downstream products produced by green hydrogen, such as green steel, is lacking and isn’t adequately supporting customers.

While it’s easy to look at legislators and call on them to do more, the energy sector has the power to drive change by continuing to innovate and develop technologies. We have the resources and the knowledge to address the increasing capital and financing costs highlighted in the IEA’s 2023 report. Here are some of the partnerships that are revolutionising the hydrogen industry.

Partnership in action

In Utah, US, the Department of Energy’s Loan Programs Office is supporting Mitsubishi Power Americas and Magnum Development in developing the Advanced Clean Energy Storage hub, which will be the world’s largest industrial green hydrogen facility and the world’s single largest hydrogen storage site. The hub is supporting the Intermountain Power Agency’s IPP Renewed project—upgrading to an 840MW hydrogen-capable gas turbine combined cycle power plant, which will be operating on 100% green hydrogen by 2045. It will produce up to 100t/d of green hydrogen from renewable energy using electrolysis. The green hydrogen produced at this facility can then be stored in two massive salt caverns, each capable of storing 150GWh of energy.

Governments are starting to create a suitable environment for the hydrogen industry

In Austria, the hydrogen-based fine-ore reduction (HYFOR) pilot plant developed by Primetals Technologies on the Voestalpine Donawitz site has demonstrated hydrogen’s potential to reduce the carbon footprint of the ironmaking process to close to zero. This is thanks to the 100% hydrogen fuel used in the reduction of iron ore. This programme is supported by the Austrian Government via funding from its Climate and Energy Fund.

Where next?

I appreciate these examples I shared haven’t solved the problem of high energy prices in Europe dampening the uptake of hydrogen. But I think the solution is the next frontier for us: what I call ‘hydrogen islands’—clusters of wind and solar farms making green hydrogen and shipping it straight to offtakers, via pipelines or ships. These can then set an independent hydrogen price since there is no connection to the electricity system.

I also think the European policy environment is shifting in a promising direction with the Hydrogen Bank, which will lend crucial support to the supply side by offering a subsidy of up to €4.5/kg ($4.8/kg) of clean hydrogen produced. A total of €800m ($852m) will go toward projects in the EU on this route after a first pilot auction in November 2023.

It’s an exciting time to be working on hydrogen technology. I’m energised by the conversations we’re having and the direction of travel for the decarbonisation of the energy sector. Looking back, the progress we’ve made is substantial. However, as always, there’s more to do. The foundation for the global hydrogen ecosystem is being laid. We must continue to be solutions focused and assess all available options. Let us start with playing to our strengths and working together in 2024.

Professor Dr Emmanouil Kakaras is the executive vice-president, NEXT Energy Business at
Mitsubishi Heavy Industries EMEA.

This article was published as part of PE Outlook 2024, which is available for subscribers here. Non-subscribers can purchase a copy of the digital edition here.

---

Author: Dr Emmanouil Kakaras