Hydrogen set to be a critical part of the solution as the world’s energy transitions

Daryl Wilson, Executive Director of the Hydrogen Council, spoke to Energy Connects about the crucial role hydrogen is going to play in the energy world and the opportunities and challenges of using hydrogen as an energy carrier.

What is the view of the Hydrogen Council on the energy transition and the role of the energy industry within it?

Hydrogen is an absolutely critical part of the solution to climate change. In our report in October 2021, we showed that hydrogen will be 21% of the final energy use by 2050. That’s roughly the contribution of the electrical energy system today globally.

So hydrogen is a very critical part of the solution. It’s not a silver bullet and it is not going to do everything for everybody. But there are very critical applications where hydrogen plays an essential role in decarbonisation, especially in heavy industry and transport.

What are the opportunities and the challenges for using hydrogen as an energy carrier?

Hydrogen opens up a whole new opportunity for new areas in the world which are richly endowed with renewable energy resources to start to harvest those resources and move them internationally. So places like Chile and Australia will have a much bigger contribution in Africa as well than they’ve ever had before in the energy system because hydrogen allows them to move the renewable energy attributes they have through wind and solar and actually export it. It is an opportunity for heavy industry in the oil and gas sector to migrate and decarbonise their operations.

The main challenges are that these are very large-scale jobs to do. So hydrogen needs to scale up and that will bring the cost down. Cost reduction is a very critical part and that goes hand-in-hand with scaling up. The good news is that over the last four years we have seen a very substantial increase in the number of hydrogen projects. By our reckoning, we are about a quarter of the way to where we need to be by 2030.

The amount of investments currently is sitting at x but that needs to grow between now and 2030 to be on the right trajectory for a net-zero outcome.

In your view, what are the advantages of transitioning to a hydrogen economy?

We have been on a long journey of reducing the carbon intensity of our energy systems for many years as we move away from wood and coal, to oil and natural gas, so the decarbonisation process has been ongoing for decades. In effect, hydrogen is the last stop as it carries no carbon with it whatsoever. So it is a clean energy solution, whether it is derived from renewable energy sources or from decarbonised fossil fuel sources.

How can investors shape the future of hydrogen?

Over the last few years the investment community has shown more and more interest in hydrogen. Up until now there has not been much appetite for infrastructure financing of hydrogen, but we are now seeing that moving very quickly with a lot of interest on the project finance and the infrastructure financing side of things.

A great deal of education is ongoing with the investment community and I think it is happening at a good pace alongside the maturation of the industry.

How profitable is renewable hydrogen?

There are places in the world where renewable hydrogen is already in the money. I spoke about Chile earlier, which has the ability to produce 70 times more energy than they need domestically. The level of solar radiation and the availability of wind energy in Chile means that the input cost of the electricity is already very low, a few cents per kilowatt hour. 80% of the cost of producing renewable hydrogen lies in the input power, so regions like Chile and Australia that already have low renewable energy input costs are going to be the leaders in the deployment of profitable renewable hydrogen today.

That is also the case in the Middle East, and that is why we are seeing some very large-scale projects in the region.