THE PATH FOR HYDROGEN IN DEVELOPED COUNTRIES TO REACH NET-ZERO EMISSIONS BY 2050

Nguyen Chau Minh Giang (Catherine, Ms), Eng
Electrical Engineer - VATEC
June 26^th, 2023

I/ Why do we need to talk about Hydrogen?

At the 27th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP27), the following main objectives were agreed upon:

• Bring global net emissions to “zero” by mid-century (by 2050) ó Keep Earth's temperature rise to no more than 1.5ºC by 2050

• Financial mobilization for climate change response reaches 100 billion USD per year

In particular, the goal of bringing emissions to zero by 2050 has been committed to 147 countries with high emissions (nearly 90% of greenhouse gas emissions and over 90% of global GDP). To achieve the above goal, organizations such as BNEF, IEA, IRENA, and ETC have proposed a number of possible scenarios and roadmaps for policymakers of countries to refer to, in order to implement appropriate policies and actions to achieve these goals.

According to the BNEF scenario, in order to achieve the target of zero emissions by 2050 (net-zero 2050), the structure of energy sources (technology) of the global manufacturing industries is as follows:

Source: BloombergNEF - The New Energy Outlook (NEO) 2022

Comment: According to the scenario proposed by BNEF, a complete “Fossil-Free” process for electricity generation and transition to clean energy sources is one of the most important factors for achieving the BNEF Net Zero Scenario accounts for half of the total emissions that have been reduced between 2022-2050. Replace fossil fuel-based power generation with wind energy, solar energy, other renewable energy (RE), and nuclear. For other economic sectors (transportation industry, industry, building construction, and heating systems) that require energy use, electrification is required, and electricity used in the electrification process must also be "cleaned" gradually. Electrification accounts for the second largest proportion in the above structure, contributing about ¼ of the emission reduction in this period. Hydrogen contributes directly about 6% of the reduction, having the third largest share in the energy source structure by 2050.

According to IRENA's scenario to achieve a temperature increase of no more than 1.5oC by 2050, the structure of energy sources in 2050 is as follows:

  Source: IRENA - World energy transitions outlook

Comment: The 1.5oC scenario of IRENA also has some similarities with the scenario of BNEF, RE sources, and Energy efficiency occupy great importance, accounting for more than half of the energy transition roadmap. Renewable energy includes renewable power sources and direct energy sources from renewable heat and biomass. Energy efficiency includes measures related to reducing demand and improving efficiency, in addition, processes to shift the structure and activities of economic sectors towards renewables will also contribute to the energy efficiency component to Energy Efficiency (e.g. relocation of steel production with direct reduction of iron). Understandably, the Energy Efficiency of the IRENA scenario will be included in the proportion of RE sources in the BNEF scenario. Correspondingly, Electrification also plays an indispensable role in the industry structure (accounting for 20%) as well as the process of direct consumption of energy, which is electricity, renewable energy in transportation, and applications/constructions heating. Hydrogen and its derivatives, including synthetic fuels and feedstocks, represent about 10% of the pathway.

Average annual reduction in CO2 emissions for the period 2020 -2050 under IEA's NZE scenario.

Source: IEA - World energy transitions outlook

Comment: The rapid deployment of more energy efficient technologies, the electrification of end uses and the rapid growth of renewable energy all play a central role in reducing emissions across all sectors. area in NZ. By 2050, nearly 90% of total electricity generation will be from renewable energy (of which hydrogen accounts for about 20%), as well as about 25% of non-electrical energy use in industry and buildings. Emerging fuels and technologies also play an important role, particularly hydrogen and hydrogen-based fuels, bioenergy and CCUS, especially in areas where emissions are often hardest to reduce.

In the ETC’s scenario, Final energy mix in a zero-carbon economy: electricity will become the dominant energy vector

Source: ETC - Making the Hydrogen Economy Possible – Accelerating Clean Hydrogen in an Electrified Economy

Comment: The ETC’s illustrative scenario for the projection of the final energy mix in a decarbonised global economy is shown in the figure above. Total final energy demand would be in the range of 355 to 495 EJ per annum. There would be a dramatically changed mix of final energy sources, with:

- The direct use of electricity accounting for about ~65% to 70% of final energy demand, versus 19% today;

- The use of hydrogen, or fuels derived from hydrogen, accounts for another 15% to 20% of final energy demand;

- The use of alternative liquid or solid hydrocarbons – whether derived from fossil fuels or from bio-feedstocks – accounting for just 10% to 15% of total final energy.

Total annual hydrogen production would increase from about 60 million tonnes (Mt) today to 500 to 800 Mt by midcentury, to meet the demand for hydrogen, ammonia, or synfuels in end-use applications. But total hydrogen production and electricity production would increase still further if hydrogen production and storage were used to provide seasonal flexibility in the power sector. For example, an additional 80 to 110 Mt of hydrogen per year would be required to store and shift 2% of the total global power generation.

The role given to green hydrogen in existing regional and global energy transition scenarios can differ greatly due to a number of factors, which include GHG reduction targets, assumed set of enabling policies, assumed technology options available between scenarios, end-uses considered and cost assumptions (IRENA, 2020b). For all these reasons, the role of green hydrogen varies widely among scenarios. However, as more scenarios are developed to reach zero or net-zero emissions, green hydrogen’s presence will be more prominent in scenarios and public discourse.

II/ But why would green hydrogen play particularly a significant role in the future?

Take the example of the transport sector, electric motors are the best solution in terms of efficiency and cost for powering trains, cars, light utility vehicles, municipal buses, and trucks operating over short distances and with good charging options. With respect to heavy trucks operating over extended distances, the situation is different:

• Vehicle batteries in mass production are not sufficiently strong as a single source of power, nor are they expected to become strong enough in the coming years.
• As a result, heavy trucks operating over long distances will need to be operated with overhead power lines or alternatively with combustion engines or fuel cells.
• A combination of various propulsion technologies might make sense to handle geographic areas in which overhead wires have not yet been installed. In the absence of a comprehensive overhead wire network, the decarbonised transport system of the future will necessarily contain long-distance trucks that are reliant on synthetic fuels.
• Figure: Individual and overall efficiencies for cars with different vehicle drive technologies

Source: Agora Verkehrswende, Agora Energiewende and Frontier Economics, The Future Cost of Electricity-Based Synthetic Fuels.

Note: Individual efficiencies are indicated in parentheses. Multiplied together, the individual efficiencies yield the overall cumulative efficiencies in the boxes.

According to current expert opinion, direct electricity use is also not an option for air or maritime transport, except on an extremely limited basis. These two subsectors will thus require climate-neutral synthetic fuels, namely H₂ to power fuel cells as well as CO₂-based synthetic methane or liquid fuel to power combustion engines. Synthetic fuels will also be required to operate construction equipment and heavy agricultural vehicles, as it will only be possible to directly power these vehicle types with electricity in select cases.

From there as well it can be inferred that in addition to direct renewable energy electricity like wind and solar power, Green Hydrogen is only second to Energy Efficiency and Electrification on the road to the future. Green hydrogen, however, is indispensable. While direct electrification via renewable energy and energy efficiency is the most efficient path to reducing emissions in easier-to-abate sectors such as buildings, low-temperature industries (e.g., agriculture, pulp, and paper) as well as some transport (mainly light and short-haul freight vehicle, but also long-haul transport in cases where charging infrastructure can be deployed).

However, the use of green hydrogen represents the only low-carbon alternative for these industries in hard-to-abate sectors where it is difficult to reduce emissions and impractical to apply electrification, such as iron and steel, non-ferrous metals (e.g., aluminum), chemicals and petrochemicals (e.g., refineries, ammonia production), and non-metallic minerals (e.g., cement). In addition, blue hydrogen will eventually replace other sectors that currently use it, including those that refine petrochemicals, make ammonia, and make methanol.

Source: IRENA Coalition for Action, Decarbonising end-use sectors: Practical insights on green hydrogen

III/ Development situation of the H2 industry market

Accelerated deployment of certain key hydrogen technologies was evident in 2021. It was a record year in electrolysis deployment, with more than 200 megawatts (MW) of additional installed capacity, three times more than the previous record year (2020) and bringing total operational capacity above 500 MW. We track a portfolio of projects and note progress; if all these projects are realized, that are in operation, under construction, with a final investment decision, the undergoing feasibility studies, electrolysis capacity could be 134-240 gigawatts (GW) by 2030. This compares to the outlook of 54-91 GW by 2030 in the 2021 edition of the Global Hydrogen Review. However, only a small fraction of the projects (around 9 GW) have reached the final investment decision stage. The favorable outlook for growth in electrolyzer demand has stimulated a boost in electrolyzer manufacturing capacities, which has reached around 8 GW/year worldwide. Announced expansions could push this to nearly 50 GW by 2025.

In other areas, the pace was slower. For example, in carbon capture associated with hydrogen production. In 2021, 0.6 Mt of hydrogen was produced from fossil fuels with CCUS, capturing roughly 10 Mt. This was the same production and capture level as in 2020 as no new projects started operation. The outlook for 2022 is boosted by a project in China (with the capacity to capture 0.7 Mt CO2 annually) that was commissioned in January 2022 and should start operation during the year. The project portfolio is increasing and if realized, the projects would represent 80 Mt CO2 captured annually in association with hydrogen production by 2030. Some key hydrogen technologies, such as direct reduced iron (DRI) for steel manufacturing, the use of ammonia in shipping vessels, and the use of synthetic fuels in aviation, are not yet commercially available.

In the IRENA report Geopolitics of the Energy Transformation-The Hydrogen Factor, there are the following barriers currently prevent clean hydrogen from making a larger contribution to the energy transformation:

• Cost: The cost of clean hydrogen, particularly green hydrogen, is still high relative to high-carbon fuels. Not only the cost of production but the costs of transporting, converting, and storing hydrogen are also high. Adopting clean hydrogen technologies for end uses can be expensive and CCS is yet to be deployed at scale.

• Technological maturity: Some technologies in the hydrogen value chain required for decarbonisation still have a low level of technological readiness and need to be proven at scale. For instance, gas turbines that operate exclusively with hydrogen are not currently available off the shelf, and when it comes to maritime trade, there is only one prototype vessel that can transport liquid hydrogen.

• Efficiency: Hydrogen production and conversion incur significant energy losses at each stage of the value chain, including production, transport, conversion, and use. Moreover, the production of blue hydrogen is energy-intensive, adding to overall energy demand.

• Sufficient renewable electricity: By 2050, the production of hydrogen with electrolyzers may consume close to 21 000 TWh – almost as much electricity as is produced globally today (IRENA, 2021a). As more end-use sectors are electrified, a lack of sufficient renewable electricity may become a bottleneck for green hydrogen.

• Policy and regulatory uncertainty: Although over 140 countries have pledged to achieve net zero emissions within the coming decades, the speed with which these goals will be achieved remains uncertain. Stable, long-term policy frameworks are needed to support development and deployment at scale.

• Standards and certification: Countries lack institutionalized mechanisms to track the production and consumption of any shade of hydrogen and identify its characteristics (e.g. origin and life-cycle emissions, named the “Guarantee of Origin” system.  It is considered a pillar of green hydrogen policy-making) (IRENA, 2020b; IRENA, IEA and REN21, 2020). Moreover, hydrogen is not counted in official statistics of total final energy consumption and the economic value of clean hydrogen’s contribution to emission reductions are not recognised.

• Chicken-and-egg problem: There is a chicken-and-egg problem in building out the necessary infrastructure for hydrogen. Without demand, investments remain too risky for wide-scale production that could reduce costs, but without economies of scale, the technology remains too costly.

IV/ What lead to the sudden expansion of the H2 industry during the last two years?

Before the 2020s, the global H2 market faced a typical “chicken-and-egg” dilemma. On the supply side (green H2 production side), investors believe that the consumption has not reached the required scale, while on the demand side (green H2 consumption side) potential customers (such as airlines) difficult when there is not enough stable supply at affordable prices (e.g. E-Kerosene electricity-based synthetic kerosene). To expand the scale of the green H2 market, it requires parallel development from both supply and demand sides, and both economically and technically. The market mechanism by itself is insufficient to bring about a breakthrough and effective transformation; policies supporting the legal framework, research and development (R&D), financing for both supply and demand and the establishment of a climate change offset fund are all required to activate the market.

The countries of the European Union (EU) have developed a long-term strategy to establish a comprehensive value chain of a hydrogen economy, thereby establishing a supporting governance system and policy framework to promote hydrogen deployment. The ambition of EU policymakers is to make the European industry a global leader, both in green hydrogen equipment and zero-carbon heavy industry. For this reason, the strategy identifies green hydrogen as the only shade of hydrogen compatible with a net-zero emission system. The strategy aims to create at least 6 GW of electrolyzer capacity by 2024, enough to produce up to 1 million tonnes per year (Mt/yr) of green hydrogen. That would increase to 40 GW in EU countries by 2030, with an additional 40 GW of electrolyzer capacity in southern and eastern neighbors, from which the EU could import green hydrogen.

The strategy outlines a number of specific actions not only for H2 (supply-side) producers, but also changes to regulatory standards, support for investments, and development of applications. using green H2. The strategy has a specific phased approach roadmap:

1^st phase (2020-2024):  

• promote 1 million tons of renewable H₂, with at least 6 GW of renewable H₂ electrolysers installed. 
• new end-use application fields: industrial processes and possibly heavy-duty transport.

2^nd phase (2025-2030): 

• 10 million tons of RH and at least 40 GW of RH electrolysers installed.
• New applications: steel-making and shipping, balancing energy system. 
• “Hydrogen Valleys” (regional H₂ clusters) will develop, relying on local production of H₂ based on decentralised renewable energy production and local demand, transported over short distances. 
• EU-wide Infrastructure emerges.

3^rd phase (2030-2050): 

• Large scale deployment reaching all hard-to-decarbonise sectors, including aviation.
• Biogas will also play a role.

The EU's policymakers have recommended utilizing simultaneously five of the following instruments in order to successfully encourage the green H2 market's growth:

• Long- term policy signals
• Demand creation
• Investment risk mitigation
• Removing barriers
• Research, Development and knowledge sharing

With the 1^st instruments " Long- term policy signals", EU will map out a roadmap for green H2 and PtX, establish specific targets and milestones, develop industry transit strategies, and achieve International agreements and commitments. The following legal bases govern the 1^st  instruments: NDCs Paris Agreement; EU Green Deal; Germany’s National Hydrogen Strategy; Japan’s Basic Hydrogen Strategy; China’s Ecological Civilisation commitment; Make in India, …

The 2^nd instrument “Demand creation” is the pricing of CO2 and pollution, mandates and bans, performance standards, tax/exemption imposition, and implement the reverse auctions. The following legal bases are required for the implementation of the 2^nd instrument: RED II, Canadian Clean Fuel Standard; EU Emissions Trading System, Dutch public procurement provisions for low carbon materials; UK Renewable Transport Fuel Obligation (RTFO); US 45Q tax credit for CCUS, …

To use the 3^rd instrument "Investment risk mitigation", the governments will allow loans + export credits, risk guarantees and tax reductions for items in the Hydrogen value chain, applying using the "guarantees of origin" trading mechanism, and Contract for Carbon Difference (CCfD). The 3^rd instrument is regulated to be implemented in the following legal bases: Chinese policy bank loans; Australia's Clean Energy Finance Corporation; EU projects of common European interest; EIB Energy Lending Policy; multilateral bank financing; EU Connecting Europe Facility,…

“Removing barriers” is an instrument that needs to be sought to be applied synchronously on a global scale, that is, setting safety + sustainability standards, avoiding double taxation of energy, certification of CO2 intensity and provenance, benchmark for all processes. The 4^th instrument is regulated in the following jurisdictions: International Partnership for Hydrogen and Fuel Cells in the Economy (IPHE); International Organisation for Standardisation (ISO); HySafe; EU CertifHy, RED II Delegated Acts, …

The “Research, Development and knowledge sharing” process should be funded directly, concessional loans, launched multilateral cooperation initiatives, conduct communication campaigns, and award prizes/incentives if feasibility for practical application. This is specified in Japanese NEDO Roadmap for fuel cells and hydrogen; EU Horizon 2020; Germany National Innovation Program for Hydrogen and Fuel Cell Technology; US Department of Energy Hydrogen and Fuel Cells Program and H2@Scale,...

It is clear that developed countries have been establishing a framework for completely developing the green hydrogen sector over an extensive amount of time.

This demonstrates the extremely intricate design of the EU's policy instruments to meet the climate target by 2030. Some of these practical tools can be used by Vietnam and other nations. The policy attempts are meant to lower the buyer's business risk while increasing the supply and demand of green H2!

V/ Lessons for Vietnam

Mr. Patrick Haverman, the UNDP Resident Representative in Vietnam, made a comment during the consultation workshop on the overall evaluation of green hydrogen production from solar and wind energy sources and their prospective usage in Vietnam that Vietnam is one of the nations that has an advantage in manufacturing green hydrogen power because it has a lot of potential for renewable energy, favorable trade ties, stable political conditions, and is close to important exporters in the Asia-Pacific area. Therefore, Vietnam is a promising country for both the producer side and the consumer side. Vietnam should start developing a sustainable and long-term policy structure in order to link and operate equitably for both sides (supply and demand). In order to ensure that Vietnam is included in the import and export flow of hydrogen products that are spreading around the world, Vietnam must develop in tandem with the pioneer nations like the EU and China that are ahead in creating the hydrogen economy.