top of page
Search

Renewables for hydrogen are seen slowing...


Global renewable energy capacity dedicated to the production of hydrogen to 2028 will grow less than forecast just one year ago, except in China.


Hydrogen-dedicated renewable energy capacity is expected to grow 45GW between 2022 and 2028, according to the latest report by the International Energy Agency (IEA), 35% lower than forecast a year earlier.


Using conservative assumptions for sizing capacity and the midpoint targets, that is just 7% of the planned project pipeline and a tenth the sum of governments’ announced 2030 targets, IEA said.

Around 75% of that growth is based in three countries, with China taking the lion’s share, followed by Saudi Arabia, and then the United States, the IEA says in its ‘Renewables 2023’ report.



Seeking demand


The downward revision for hydrogen-dedicated renewable energy growth has been due to lower-than-expected project development progression, specifically projects that were expected to find off-takers or reach financial close last year but did not.

“The main uncertainties are whether there is sufficient demand and offtake which, in part, is due to the higher cost compared to hydrogen produced from unabated fossil fuels or with the use of fossil fuels in applications where renewable hydrogen could replace them,” the IEA says.


“A lack of sufficient demand-side incentives to bridge the cost gap make accelerating the growth a challenge. For exporting markets, there is an added uncertainty over the progress and cost of transport infrastructure.”


Hydrogen is hard and expensive to transport and store, with exceedingly low temperatures needed to create liquid hydrogen and high leakage rates for gaseous hydrogen.

Meanwhile, high inflation across the value chain is increasing capital and financial costs which, in turn, threatens the bankability of projects.

For hydrogen produced from renewable energy, a cost-of-capital increase of 3 percentage points could raise total project costs by nearly a third, and several projects have revised their initial cost estimates upwards by up to 50%.

Factors such as these, together with a recent fall in natural gas prices and supply chain disruptions, affect the efficiency of much-needed government-backed projects.


“This means that announced government funding will support a smaller number of projects than could be expected previously, as greater investment is needed to close the cost gap between low-emission hydrogen and unabated fossil fuels-based hydrogen,”

The slow implementation of government-backed schemes – the much-anticipated U.S. Inflation Reduction Act (IRA) is unlikely to start distributing funds until later this year as clean-hydrogen definition rules are drawn up – also leads to delayed investment decisions.


China bucks trends


According to the IEA, global annual growth in renewables for hydrogen production is driven by China which accounts for more than two thirds of net additions between 2023 and 2024, though this decreases by 2028 as other markets begin producing.

Today, more than half of the world’s electrolysis capacity is located in China, while production capacity for electrolyzers is increasing rapidly.

The state-backed industy group China Hydrogen Alliance announced its Renewable Hydrogen 100 initiative in 2021, which aims to increase the installed capacity of electrolyzers to 100 GW by 2030 with emission-free hydrogen production capacity of around 7.7 million tons a year.


China has the potential for rapid growth in clean hydrogen production due to a large, existing fossil-fuel hydrogen market and abundant renewable energy sources, according to the report ‘Green Hydrogen in China: A Roadmap for Progress’ by the World Economic Forum, Accenture, and the China Hydrogen Alliance.


China is also struggling with supporting demand and off-takers, made harder by a lack of transportation infrastructure, though Sandström notes that the country is focusing on enhancing hydrogen storage technologies and promoting local utilization in production areas, such as large oil refining and coal chemical enterprises.

For those areas where there is not sufficient industrial demand, projects will convert hydrogen produced into ammonia and methanol for transportation to high-demand areas or for exports.

The country’s ‘going global’ strategy led to accords signed between China Southern Power Grid International Company, MingYang Smart Energy Group Limited and Saudi utility ACWA Power in September 2023.

“This agreement encompasses the production of green hydrogen and ammonia in Saudi Arabia, as well as a global renewable energy plan and comprehensive intelligent energy solutions,” says Sandström.


Source:ReutersEvents&IEA

0 views0 comments

Recent Posts

See All

Comments


bottom of page