BAKU, Azerbaijan, June 2. The opportunities for hydrogen in decarbonizing the energy mix are significant, but the challenges are great, Trend reports with reference to the International Energy Forum (IEF).
The new IEF report reveals that increased investment and clear and supportive policies and regulations will be needed to help development all along the supply chain.
“The magnitude of growth needed is enormous; production, infrastructure, regulations, demand, and even data collection are all currently fractions of what will be required. Understanding the scale required is crucial. Low-carbon hydrogen production and demand need to increase by 500-600-fold over the next few decades. Meeting the EU’s target of 10 Mt of hydrogen imports by 2030 will require more than 40 projects the size of NEOM in Saudi Arabia (currently the world’s largest planned hydrogen-based ammonia project to be fueled by renewables, delivering an equivalent of 650 ton of low-carbon hydrogen per day),” says IEF.
IEF analysts believe that each part of the hydrogen value-chain has inherent challenges that will need to be overcome, almost simultaneously.
“Scaling all components of the value chain is a major part of the challenge, but also part of the solution. Economies of scale will help in lowering costs and scale and diversified production sources will help lower risk for off-takers and enable competitive markets. Scaling-up production will look different in different regions. Some producing countries will need to consider access to clean water and others will need to expand renewable power or CCUS. There are also many uncertainties surrounding transportation, storage, and demand of hydrogen. Old technologies and methods will need to be proven for new applications.
Mobilizing public and private capital will be crucial to accelerate projects and support infrastructure development. More investment, research and development are needed to lower production costs and promote ramp up. Given the scale of the investments needed on the supply side, it is likely that some form of long-term supply contracts will be needed. Pricing structure, delivery terms, flexibility, hydrogen quality, review clauses will be crucial parts of the contract to be negotiated between buyers and sellers. The hydrogen market is still in its infancy, but the potential and momentum for market development have never been greater.”
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