PKF O'Connor Davies Accountants and Advisors
PKF O'Connor Davies Accountants and Advisors
Insights

Green Hydrogen -The Vanguard of Sustainable Energy Solutions

By Pratibha Vuppuluri, General Partner, Plum Alley

In an era where the exigency for ecological sustainability and resource conservation perpetuates as the cardinal dogmas, the role of green hydrogen is swiftly ascending to prominence as the quintessential energy vector. The pursuit of green hydrogen as a fuel represents the culmination of innovative prowess, delineating a trajectory toward a more sustainable, carbon-neutral society.

Even though employing low-carbon technologies, like renewables, is crucial, there are substantial obstacles, especially in sectors difficult to decarbonize, such as heavy industry and transport. Certain activities, like high-temperature heating and heavy-duty freight, are notably challenging to electrify fully. Additionally, the expansion of wind and solar power, as their prices decrease, brings forth network stabilization challenges due to their variable nature.

Clean hydrogen is emerging as a potentially revolutionary solution to these challenges. Hydrogen’s versatility allows it to be used directly in fuel cells, for power generation, or as a raw material to create derivatives like ammonia and methanol, catering to specific industrial and transport needs. Presently, hydrogen is primarily produced through carbon-intensive processes like natural gas reforming and coal gasification, leading to significant CO2 emissions.

The game-changer lies in the ability of clean hydrogen to decarbonize current supply chains and foster new applications on a large scale. Green hydrogen, generated from renewable electricity through electrolysis, holds immense promise as a truly sustainable technology. Blue hydrogen, when produced with carbon capture from natural gas, can also be considered “clean” if it adheres to strict emission and carbon capture standards.

Hydrogen

Hydrogen, being the most plentiful molecule in the universe, boasts versatility—it can serve as both a raw material and a source of energy for diverse applications. While some applications require undiluted hydrogen (H2), others utilize derivative molecules created from clean hydrogen, like ammonia (NH3), methanol (CH3OH), or sustainable aviation fuels (SAF). These derivatives, compared to pure hydrogen, are simpler to store and convey, and ammonia even has the capability to be reverted back to pure hydrogen, providing cost-effective options for maritime transport.

Methods for Hydrogen Production

There are multiple established technologies for producing hydrogen, alongside emerging ones in differing phases of development, principally aiming to render the production process either low-emission or emission-free. To categorize the diverse technological families of hydrogen, the industry employs color codes, differentiating between carbon-rich (represented as grey and black/brown) and clean variations (depicted as green, blue, turquoise, white, and pink) of hydrogen.

Green

Green hydrogen is generated through electrolysis, powered by renewable energy sources, such as solar and wind. This method is one of the least carbon-intensive ways to produce hydrogen and emits no direct emissions. It has the potential for easy scalability and is anticipated to be highly cost-competitive with increased deployment, mirroring the trends witnessed in the development of renewable energies over the previous decade.

Pink

Pink hydrogen is generated through the electrolysis of water, utilizing nuclear power. This method is also carbon neutral. However, nuclear power might encounter challenges with social acceptance and scalability, or it might primarily be allocated to producing baseload electricity due to these issues.

White

White hydrogen is derived from natural reservoirs of hydrogen that can be obtained by drilling underground wells. However, these reserves are minuscule compared to global requirements.

Black or Brown

Black or brown hydrogen is produced through the gasification of coal, which is the most contaminating technology, emitting 20 kgCO2 per kg of hydrogen during the procedure.

Grey

Grey hydrogen is produced predominantly through natural gas reforming, utilizing technologies like steam methane reforming, auto-thermal reformation of methane, or methane gas-heated reforming, which are the most commonly used methods currently. Due to the carbon emissions from steam methane reforming (9kgCO2/kgH2) and the upstream methane emissions from the natural gas supply, the production of grey hydrogen is considered to be a process with substantial emissions.

Blue

Blue hydrogen enhances grey hydrogen by incorporating carbon capture and storage (CCS) technology. Utilizing existing infrastructures for grey hydrogen, blue hydrogen can swiftly augment the demand for clean hydrogen. However, achieving complete carbon neutrality with this technology is challenging in the long run due to remaining emissions—given that the maximum carbon capture rate is presently believed to be around 95%—and upstream methane emissions.

Turquoise

Turquoise hydrogen is generated through the pyrolysis of natural gas. Divergent from grey or blue hydrogen, this method yields solid carbon instead of gaseous, which can either be utilized as raw material for various industrial processes (without subsequently releasing it as CO2 into the atmosphere) or can be perpetually stored, averting direct carbon emissions. However, compared to other available options, this technology is currently costly, hasn’t demonstrated scalability, and still needs to address the upstream methane emissions.

The Genesis of Green Hydrogen:

Green hydrogen, distinguished from its grey and blue counterparts, is engendered utilizing renewable energy resources, mitigating the emission of carbon dioxide and other greenhouse gases. This paradigm of hydrogen production is predominantly underpinned by electrolysis, a process where electrical energy derived from renewable sources, such as solar or wind, is utilized to dissociate water into hydrogen and oxygen, facilitating the procurement of green hydrogen with minimal carbon footprint.

Catalyst of the Energy Transition

The ascendancy of green hydrogen is pivotal in transforming current energy frameworks, offering diverse applications ranging from energy storage to fuel for transportation. As a flexible energy mediator, it proficiently amalgamates with numerous industrial domains, outlining innovative routes to decarbonization and the incorporation of renewable energy.

To achieve climate neutrality by 2050, it is anticipated that the capacity of the clean hydrogen market will increase to 170 million tons (MtH2eq) by 2030 and further amplify to 600 MtH2eq by 2050. Initial demand is forecasted to primarily arise from the decarbonization of current industrial hydrogen applications, especially in fertilizer production, totaling 95 MtH2eq. The journey to net-zero is projected to catalyze a significant upswing in demand, consolidating hydrogen’s role as a comprehensive decarbonization tool. By 2050, sectors like iron, steel, chemicals, cement, and high-temperature heating, coupled with transportation sectors such as aviation, shipping, and heavy road transport, could account for 42% and 36% of total clean hydrogen demand, respectively.

This framework positions clean hydrogen as a principal agent in reducing carbon emissions, potentially reducing up to 85 GtCO2eq in cumulative emissions by 2050, a quantity notably exceeding double the global CO2 emissions reported in 2021. While initial demand is projected to rise rapidly in developed countries, clean hydrogen also offers considerable sustainable development opportunities for developing nations, setting the foundation for a truly international market. Nonetheless, establishing a substantial new industry within the emerging value chain in under thirty years presents colossal challenges.

In the early stages, initiatives depend on government backing to achieve financial feasibility, as evidenced by major government initiatives like the United States Inflation Reduction Act, the Australian Clean Energy Finance Corp., the European Union Fit-for-55 package, among others. The actual environmental impact of traditionally produced hydrogen is not fully reflected in its production costs, requiring government support until clean, and specifically, green hydrogen attains cost equivalence through economies of scale and tighter CO2 pricing. Cost parity might be realized by 2030 for ammonia, 2035 for gaseous hydrogen, 2045 for methanol, and 2050 for sustainable aviation fuels (SAF).

Thus, green hydrogen is poised to achieve self-sufficiency in due course. By 2050, the global hydrogen market is expected to be well-established, with enhanced supply capacities to meet demand, propelled by the emergence of new applications in industry and transport. The projected market growth is expected to allow spot markets a significant role in price determination, boosting market stability and channeling investments to the most competitive areas.

Electricity Sector

Green hydrogen exhibits the potential to ameliorate the conundrums inherent in the electricity sector, particularly pertaining to energy storage and balancing intermittent renewable energy sources. It acts as a sagacious solution for storing excess energy produced during periods of abundant renewable energy generation, releasing it when the demand escalates or supply dwindles, thus bolstering grid resilience and stability.

Transportation Domain

Within the transportation domain, green hydrogen emerges as a pivotal solution to offset carbon emissions, particularly in heavy-duty and long-range transport segments, where battery technology faces intrinsic limitations. Fuel cell electric vehicles (FCEVs) powered by green hydrogen offer commendable range and rapid refueling capabilities, rendering them a pragmatic alternative to internal combustion engine vehicles.

Industrial Sector

The industrial sector, characterized by its colossal energy consumption and carbon emissions, stands to reap substantial benefits from the integration of green hydrogen technologies. It serves as a viable substitute for fossil-based hydrogen in myriad applications such as ammonia production and metal reduction, contributing to the de-carbonization of high-emission industries.

Economic Alacrities and Investment Landscape

The financial ecosystem surrounding green hydrogen is experiencing burgeoning interest, with investments inundating from both public and private sectors, reflecting an accelerating momentum toward sustainable energy solutions. This financial influx is pivotal for fostering research and development, enhancing production efficiencies, and scaling up green hydrogen projects to commercial viability.

Challenges and Projections

Whilst green hydrogen embodies immense potential, the path to widespread adoption is laden with significant impediments. The high capital expenditure in green hydrogen production, infrastructure inadequacies, and technological constraints necessitate concerted efforts from policymakers, industry stakeholders, and the scientific community to render green hydrogen an economically viable alternative. Continued advancements in electrolyzer technology, infrastructure development, and policy frameworks are quintessential for mitigating costs and accelerating the market readiness of green hydrogen solutions.

Conclusion: The Future Symbiosis of Sustainability and Innovation    

Green hydrogen stands out as a beacon of sustainable energy, showcasing immense potential to overhaul the prevailing energy paradigms and mitigate human-induced strains on our planetary ecosystems. It is the convergence of technological breakthroughs, purposeful policy measures, and cooperative endeavors that will be crucial in actualizing a future where green hydrogen serves as a catalyst, driving us toward energy autonomy, economic robustness, and ecological balance.

This extraordinary energy medium is not just a fleeting phenomenon but signifies a deep amalgamation of environmental wisdom and innovative brilliance, signaling a transformative era in humanity’s pursuit of sustainable energy alternatives and a balanced cohabitation with nature.

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We welcome the opportunity to answer any questions you may have related to this topic or any other assurance, technology, tax, or advisory matters relative to sustainability and ESG. Please call or email any of the Sustainability and ESG Services team members below:

Plum Alley is a venture platform offering investment opportunities to individuals, entities, family offices and others with syndicates/SPVs and Plum Alley’s Venture Fund. If you would like to discuss this article further, please contact Pratibha Vuppuluri, General Partner, Plum Alley at pratibha@plumalley.co

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