The most abundant element in the universe is trying to forge its role in accelerating the pathway to our low carbon future.  Let’s talk about green hydrogen.

Hydrogen holds the key to the transition; a clean fuel which will be the future of transportation including heavy vehicles, ships and perhaps even aircraft.  Manufacturing hydrogen through intermittent renewable resources like wind and solar can stabilise energy supply, and carbon intensive industries such as the steel and cement sectors have a green future by embracing hydrogen.  These two industries alone account for over 15% of global GHG emissions, and the numbers become dramatically stark when you understand that transport represents 28% of annual GHG emissions and power generation 40%. (Do the math, we've just accounted for over 80% of global emissions in one sentence).

The Hydrogen Insights 2024 report published yesterday contains some promising figures - a seven fold increase in investment in hydrogen projects in the past four years, total investments increased from US$90bn in 2020 to US$680bn this year, and 48Mtpa of clean hydrogen supply has been announced.

The supply side of projects has been the clearer part of the puzzle.  Significant projects have been announced but have failed to reach FID because they need to solve their end use solution to create bankable projects.  Absent this, as we have recently seen in some examples in Australia, State support may not be immediate, opportunities missed (or run out of money) and project concepts shelved.

End use demand is critical for capital to be deployed to many of these projects and it is pleasing to see governments ‘walking the talk’ in delivering the promise made in Dubai at COP28 to triple the world's installed energy generation capacity by 2030.  This week the declaration of intent signed by Germany and Australia, following their Hydrogen Accord in June 2021, announced a $660m H2Global window to trade renewable hydrogen and hydrogen derivatives.  South Korea recently launched the world's first auction for clean hydrogen fired power generation offering 15 year contracts for up to 6,500GWh of power.  The Hydrogen Council estimated Korea will import 35Mtpa of clean hydrogen by 2050, which starts to make that 48Mtpa of projects mentioned above look modest.  Similarly, Japan's Basic Hydrogen Strategy aims to increase the importation of clean hydrogen to 3Mtpa by 2030 and 20Mtpa by 2050.

India has installed 6.6GW of new renewable power year to date by end of July 2024, adding to the overall renewable capacity installed of 150GW, but still short of the planned 500GW by 2030. Under the National Green Hydrogen Mission, India intends to earmark 125GW of renewable power capacity to support green hydrogen production of at least 5Mtpa by 2030. 

Transmission challenges continue to limit wider renewable adoption and the ambitious Pilbara transmission projects announced yesterday by the Western Australia government will not only unlock the delivery of the Pilbara Energy Transition Plan, (this is the region containing significant mining interests in WA), but also catalyze some of the green hydrogen and ammonia hubs that have been announced in that region.

All of these numbers are impressive. Creating the demand for the wonder fuel is critical and government policy must lead the way and provide the scale.  Unlike LNG, where the natural gas price is easily discoverable, pricing models for green hydrogen need to be determined.  Power costs, electrolyzer costs, infrastructure and transportation costs impact the price of every project and whilst the expectation is that with greater scale will come lower costs, the market remains reasonably immature.  Stable, long term demand, with price certainty, is the immediate challenge for many of these projects to move off the design table and into tangible on the ground project development.