BAKU, Azerbaijan, October 7. Global demand for low carbon hydrogen is expected to increase from less than 1 million tons (Mt) to 200 Mt by 2050, with the rapid growth in pipelines, Wood Mackenzie, a global research and consultancy group, forecasts, Trend reports via WoodMac.
According to the report, capital costs for hydrogen production technologies are projected to decrease significantly in the next 5-10 years.
The EU with its REPowerEU plan, which has set an ambitious low carbon hydrogen production target of 10 Mt, with an additional 10 Mt of imports by 2030, and the US with its Inflation Reduction Act (IRA), which reintroduces a production tax credit (PTC) for clean hydrogen, known as the 45V, will support the industry’s broader commitment to achieving net zero targets by 2030 and 2050, and will in turn help to accelerate the growth of hydrogen production, the research said.
Regarding the REPowerEU plan, WoodMac noted that despite the momentum in low carbon hydrogen supply growth such a ‘lofty target’ is beyond the most optimistic forecasts.
Meanwhile, although WoodMac predicts that the capital cost of hydrogen technologies will decline significantly in this decade, stimulating the 45V requires more immediate action. Thus, project developers who wish to take advantage of the 45 percent tax credit will have to act quickly to start construction next year or so but will be rewarded for bearing the burden of high investment. Over 50 announced hydrogen projects need to accelerate their development schedules to get a 45V tax credit.
“Despite its benefits, the IRA is not a single solution for addressing energy prices and climate change. Infrastructure permitting for power transmission is not addressed by the Act and so, both policy and markets will need to evolve further. Similarly, the REPowerEU plan offers a high-level target, but more detail is urgently required, including how Europe will address the challenge around unlocking hydrogen demand in the region,” WoodMac explained.
As the researchers noted, in general, these two main strategies will stimulate the growth and development of hydrogen. The IRA offers clear and generous support. The European Commission’s plan offers an attractive primary objective for domestic producers and those who want to develop hydrogen exports. But it lacks the clear incentives and details needed to achieve such high goals that are essential to support the region’s sustainable transition from Russian energy.
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