Hydrogen will play a key role in our transition to clean energy over the coming decades as it takes a priority position in the oil and gas industry’s decarbonisation efforts. In 2020, we have seen slower industry activity and a reduced oil price, but net-zero carbon targets and broad societal support for them remain.
The announcement of hydrogen strategies and commitments across countries in Europe, including Germany, and Asia-Pacific in China and Japan, setting out ambitious hydrogen production targets and transition plans, mean it has been a year of encouraging progress.
In the UK, we are awaiting a government strategy on hydrogen, which is due in spring 2021. We have seen progress in the development of hydrogen business models, with a shortlist of preferred options articulated by the department for Business, Energy and Industrial Strategy (BEIS). At the same time, the main UK industrial cluster decarbonisation projects, involving hydrogen alongside CCS (carbon capture and storage), are progressing towards FEED studies.
To achieve net-zero targets, there will need to be a collaborative approach between government and industry to enable us to establish a hydrogen economy more quickly. I suspect there will also be further announcements on hydrogen in the run-up to the United Nations COP26 event at the end of 2021.
Short-term reprieve
In DNV GL’s Energy Transition Outlook 2020, published in September, we concluded that global emissions reached a peak in 2019, five years ahead of what we thought before the pandemic hit. Yet at the same time, there was only limited long term-effect on climate change.
The total avoided emissions for the next 30 years will amount to 75Gt of CO2, equalling two years’ worth of present emissions. We could therefore say the pandemic has “bought” us two years, owing to lower energy use and associated emissions, but given the enormous economic and social costs, this is not a sustainable way of reducing emissions for the future.
Heating homes and businesses is one way that we expect to see the hydrogen economy scale up, but we are still several years away from a decision on whether to use 100% hydrogen in homes. Tests on the first hydrogen-only boilers are taking place at DNV GL’s Spadeadam facility, where work to establish if it is technically possible, safe, and convenient to replace methane with hydrogen in residential areas is ongoing.
Earlier in the year, the first hydrogen-ready boiler was revealed – these units will run on natural gas, with quick conversion to hydrogen possible when distribution networks are converted. Industry and regulators need to continue to work together to establish robust safety standards for each specific use case, in order for hydrogen to become accepted and ultimately adopted in domestic and business settings.
Carbon counting
Governments and inter-governmental organisations will need to use incentives such as carbon pricing to encourage industry to adopt hydrogen technology at a quicker pace. At a high-enough level – $75 per tonne or more – carbon pricing will be vitally important to hydrogen uptake. Hydrogen is more expensive than natural gas and will need policy support to be adopted at scale.
A carbon price is a good way to do this, but only if much of the world acts together to raise the cost of carbon. If only one part of the world raises carbon prices substantially, emissions may simply be “offshored” as industry moves overseas. It’s likely that we will see parts of the world increase carbon prices more quickly and act to protect their industries through carbon border tariffs.
The biggest challenge will be whether hydrogen benefits from government policy to a large enough extent. If we think back 15 to 20 years, wind and solar technologies required extensive support from governments to reach scale. We are now realising the benefits of this in terms of cost reduction in the wind and solar sectors. Hydrogen is in a similar place today.
Interest in hydrogen will continue to grow at a global level, as targets for decarbonisation become stronger and policymakers understand that it is difficult to fully decarbonise certain sectors without it. DNV GL is using its technical and market analysis to work with governments and industry to change the decade-long timeline for hydrogen implementation to bring hydrogen into homes, businesses, and transport systems today.
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