What Will It Take For Clean Hydrogen Lift Off?

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Today’s low-carbon hydrogen industry is riven with paradox. On one hand, white-hot developer interest has sparked a veritable Klondike. On the other, the actual landscape for final investment is a wasteland, with less than 10% of announced projects having reached FID. OECD government support, notably the US Inflation Reduction Act (IRA), is set to be a game changer. But even with this backing, challenges remain, and only the best projects will succeed. Strategies for success are already diverging wildly. Broadly speaking, there are two main approaches. The first, championed by German utility Uniper and Norwegian renewables firm Orsted, among others, takes a more conservative approach: move now on projects with digestible investment and risk, then take those learnings and scale up. The other, spearheaded by green hydrogen developers CWP Global and Intercontinental Energy — and more recently Shell and BP — suggests only a megaproject approach will unlock the necessary paradigm shift in performance. Cost is the key challenge. Production costs of $2 per kilogram, roughly equivalent to around $85 per barrel of oil or $15 per million Btu of natural gas, are seen as a key price target. Most don’t see this as achievable much before 2030. But Neom, the world’s first green hydrogen megaproject, should come close when it starts producing in 2026, according to a 2021 study by Saudi energy think tank, Kapsarc. The problem is Neom still must get this ultra-cheap hydrogen to market, and the same study estimates 2030 costs for conversion to ammonia, shipping to Rotterdam and conversion back to hydrogen at $3.50-$4.50/kg. That compares to Europe's estimated 2030 production costs of $3-$5/kg.

Hydrogen, Renewable Electricity , Corporate Strategy , Low-Carbon Policy
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