The Role of Hydrogen in Sustainable Growth

Key Messages:

• Hydrogen is considered a key catalyst towards energy sector integration and sustainable growth due to its versatile role as an energy carrier that can be stored, transported, and used in various forms.
• Hydrogen will play an important role in enabling sector coupling, energy efficiency gains, and uncovering new possibilities for a cleaner and more sustainable future envisioned by net-zero growth strategies such as the European Green Deal or Circular Carbon Economy.
• While providing a load balancing option for renewable power and feedstock for industry, hydrogen also has the potential to decarbonise hard-to-abate sectors that are dependent on fossil fuels such as transport and industrial heat.
• Facilitating investment in green hydrogen production technologies, industrial ports, Carbon Capture, Use and Storage infrastructure to blue hydrogen facilities (e.g. through bold greenfield investments by first-movers in Saudi Arabia or by building on existing infrastructure and permits to drive down costs in European markets) will set new standards that will build momentum in the long-term.
• Enhanced collaboration on "all of the above" energy sector transformation strategies can ramp up both green and blue hydrogen production and have cost benefits for various industries that use hydrogen either as fuel or feedstock.
• The future role of hydrogen will depend on dialogue and collaboration, government policies incentivising investment in research and development, building new cross border partnerships, removing market barriers, and encouraging new business models that make hydrogen technologies viable.

Context:

Governments are strengthening their commitment towards sustainable growth in the various recovery measures to overcome the COVID-19 pandemic. The need for policy cohesion to accelerate deployment of new innovations and bring smart technology to scale remains imperative. This includes various new policy concepts to reduce greenhouse gas emissions and advance circular economies and technology choices that may assist in these endeavours. It also involves thinking beyond the current energy paradigm and incorporating pathways that integrate existing and new energy systems. Successful transformations depend on dialogue and collaboration on how all technologies can work together to help achieve shared goals towards a sustainable energy future.

Hydrogen is a key catalyst towards such energy integration given its versatile application as an energy carrier and one that can be produced without carbon dioxide (CO2) emissions. Significant advances have been made in hydrogen production through electricity from renewables though many market hurdles have yet to be cleared. Today, most hydrogen is produced via steam methane reforming with end-uses ranging from ammonia production for use in fertilisers to applications in the refining sector.

Hydrogen production from surplus renewable energy may become a more viable proposition through sector coupling, applications in hard-to-abate sectors, and integrating renewables, hydrocarbons and carbon capture use and storage. In this way, hydrogen can spur holistic energy and sustainable growth solutions. The future for hydrogen growth will depend upon government support including but not limited to the stimulus measures that are currently being considered as part of a post-COVID-19 recovery strategies.

Framework

Hydrogen's integrated energy system potential is depicted above as part of a whole system solution as it pertains to the circular models. Hydrogen plays a multi-dimensional role as a versatile fuel that has an application to the entire supply chain. Already part of the energy mix with uses as feedstock in the chemical industry, fuel for transportation/power, and applications in the heating sector, the introduction of hydrogen into an integrative energy model opens up growth opportunities along with a cleaner and more sustainable energy future.

The production of green hydrogen from renewables reduces carbon emissions that would otherwise be emitted by gray or blue hydrogen options. Hydrogen production can also be recycled through gasification by using heat, steam, and oxygen to convert biomass to hydrogen and other products without combustion. CO2 emissions from blue hydrogen created through steam methane reforming, is removed by carbon sequestration such as Carbon Capture Use and Storage (CCUS). This CO2 can be reused for enhanced oil recovery and in the creation of products such as cement and certain chemicals. In this way, hydrogen runs across the entire energy value chain integrating renewables, hydrocarbons and decarbonisation efforts as part of a streamlined and technology neutral approach towards greater sustainability and growth.

Implications:

1. Green hydrogen production on a mass scale will pave the way towards efficiencies in both renewable power and the oil and gas industry – As technology breakthroughs and cost reductions, particularly in solar PV and wind, make green hydrogen production possible on a larger scale, more of it can be stored as a reserve for other potential uses. This includes providing a storage option for excess renewable energy which can then be reconverted to electric power when needed. From an industry perspective, instead of relying on outside merchants for blue hydrogen, industry can use green hydrogen for petroleum refining and for sustainable production of ammonia, methanol, and steel.
2. Hydrogen's versatility has the potential to decarbonise hard-to-abate sectors – Hydrogen is applicable to more than just the power sector and can have real impacts in decarbonising hard-to-abate sectors such as transport and heating. In transport, hydrogen may be considered for use in heavy duty vehicles such as buses and trucks or trains, and ships that require faster refueling and operate longer distances. From a heating standpoint, an "all-electric" solution is not feasible due to costs associated with infrastructure upgrades. Hydrogen, however, can be blended into existing natural gas infrastructure and natural gas power plants to decarbonise industrial processes.
3. Greater hydrogen quantities will enable other industries to reduce costs for hydrogen products – Economies of scale will drive down costs for hydrogen which will inevitably drive down costs of hydrogen products. One example of this is ammonia use to make fertilisers. Cost savings from cheap hydrogen production will cascade down the entire value chain to the benefit of the end user. Taking all hydrogen products into account, more hydrogen on the market could mean greater global food security, cost efficiencies in building infrastructure, and decreased petroleum refining costs for premium products.
4. Hydrogen will create opportunities for international trade and create new energy relationships between producers and consumers – Facilitating investment and collaboration on hydrogen-related infrastructure and technologies to increase economies of scale will translate into more hydrogen supply and demand traded on the global market. In the short-term, blue hydrogen production in combination with CCUS will be the likely source of hydrogen production. Longer-term development of water hydrolysis and other Power to Gas technologies will see hydrogen become cheaper and more widespread thereby helping producer and consumer countries to optimise energy sector transformations. This will give rise to a robust hydrogen market that will increase investments and enhance energy sector integration.

Recommendations:

1. Cooperate on competitive technologies that can increase hydrogen production, enhance the role of hydrogen in energy sector integration, and continue the momentum towards smart and orderly energy transitions.

   As the potential of hydrogen is reevaluated, governments can build on this momentum to advance the role hydrogen can play in accelerating energy sector transformations. This should include exploring an "all of the above" approach to hydrogen production, transport, use and storage. This includes Power to Gas technologies such as water electrolysis, photoelectrolysis, and methanation; production of blue hydrogen from fossil fuels in combination with CCUS; and exploring alternative nuclear, biomass, and plastic to hydrogen technologies. Exploring multiple options will help to balance risks while working towards viable and sustainable outcomes.

2. Improve global energy data transparency by establishing standards and best practices on hydrogen production data and storage through the Joint Organisations Data Initiative (JODI).

   To restore energy market stability and meet globally shared goals, energy data requirements will demand greater transparency to deepen market insight across countries, market segments, and organisations. JODI improves energy market data visibility and transparency including by building on existing datasets. This includes data on hydrogen production, transport, use, and storage. In dialogue with government and industry, JODI can gather best practices and collaborate on how new standards for hydrogen are set and how data can be collected, compiled, and reported to the benefit of all stakeholders.

3. Continue to engage in inclusive energy dialogue on the IEF platform with industry and government stakeholders through upcoming events including but not limited to:
   • The 7th IEF-IGU Ministerial Gas Forum hosted as a virtual event by Malaysia in Kuala Lumpur on 3 December 2020
   • The 17th IEF International Energy Ministerial and International Energy Business Forum hosted by the Saudi Arabia in 2021
   • The 5th IEF-EU Energy Day scheduled to take place in February 2021

   Integrating hydrogen in the energy system will require greater alignment between electric and natural gas and other energy market segments. Dialogue on market mechanisms and frameworks that regulate investment, trade, and technology transfer for both electrons and molecules will have greater importance. As a neutral facilitator of energy dialogue, the IEF provides the platform to balance industrial policies with open and well-regulated global energy markets.