What’s driving investment in hydrogen technologies?

The signs of market readiness for hydrogen abound. Advancements in hydrogen production, storage and utilisation technologies are notable, with significant progress seen in advanced electrolysis methods, efficient fuel cells, technical and regulator understanding and cost-effective hydrogen blending. Establishing dedicated hydrogen delivery infrastructure within existing gaseous networks can deliver reliable hydrogen transportation to end users, facilitating the industry’s scalability and market penetration.

Today, blend rates of five to 20 percent hydrogen in existing gas distribution networks can be achieved without adversely affecting existing end-use industrial equipment and commercial and residential appliances. For conventional natural gas consumers, hydrogen and methane can be used for power generation and heating, effectively introducing hydrogen into society.

The demand for hydrogen is not confined to a single sector; it extends to challenging industries like steel, transportation, cement, heating and agriculture. These sectors actively seek clean energy solutions, creating a strong market pull for hydrogen-based alternatives. Hydrogen blending, alongside other hydrogen applications such as fuel cell-powered vehicles for heavy transport, marine and rail, plays a pivotal role in decarbonising these emissions-intensive industries.

The increasing financial support from the government, private investors and venture capitalists, coupled with the large-scale deployment of hydrogen technologies highlights the market’s confidence in hydrogen’s potential.

Policies such as the United States’ (US) Inflation Reduction Act create incentives for hydrogen production, distribution and consumption, fostering a conducive environment for market growth and stability, and an influx of investment on the private side.

Collaborative partnerships are forming between key industry players, research institutions and governments to address technical, regulatory and market challenges — helping to align stakeholders and propel the industry forward.

The urgency to invest in mature hydrogen projects today is greater than ever, with carbon emissions at above pre-COVID levels and the rebound of supply chain issues caused by geopolitical tensions. However, Canada and the US, for example, still need greater investments to be on track for net-zero emissions by 2050.

Developing globally recognised standards and certifications for hydrogen production, storage, transportation and utilisation can enhance confidence in the industry’s safety, reliability and interoperability. These standards can streamline regulatory processes, encourage investments and maintain consistent application and quality across the hydrogen value chain.

The research and development of hydrogen hubs have been progressing steadily over the past several years. There are now dedicated research and development centres focused on hydrogen technologies to foster innovation and accelerate breakthroughs. Research institutions and organisations serve as collaborative spaces where researchers, industry leaders and policymakers come together to address technical challenges, explore novel applications and facilitate knowledge exchange.

Reduced production costs of blue and green hydrogen, achieved through advancements in renewable energy sources, carbon capture and storage technologies and economies of scale, demonstrate the industry’s progress. While the technologies aren’t mature enough to compete with transitional energy sources yet, as mass production and usage scale up — in tandem with government incentives — the economy of scale will kick in.

The overall cost of transitioning any natural gas delivery system, whether by blending hydrogen into existing pipelines or directly incorporating hydrogen into end-user applications, involves two main components. First is the capital component, covering the expenses of blending equipment, pipeline modifications, and evaluation and testing to demonstrate safe and reliable use. Second is the delivered hydrogen cost component.

To assess the cost-effectiveness of this transition, compare the cost of hydrogen per kilogram at the blending point to the total cost of natural gas on an energy equivalence basis per million British thermal units (MMBtu). Once this energy equivalence is established, any additional cost of hydrogen above this equivalence reflects the expense of reducing carbon emissions, measured in dollars per ton of CO2 removed.

Parameters affecting blending equipment capital costs:

• Hydrogen storage (either cryogenic or gaseous)
• Compression
• Blending equipment, including hydrogen and natural gas flow control and measurement, hydrogen leak detection, instrumentation and controls, electrical, piping, and other mechanical equipment, structural and any new buildings
• Civil and other site preparation
• Site permitting and any other hydrogen-specific codes and standards

Hydrogen can be sourced from third-party suppliers as gaseous or cryogenic liquid hydrogen. On-site hydrogen can also be produced via electrolysis and can be stored for further blending or blended directly into the natural gas delivery system. Producing hydrogen on-site can reduce overall hydrogen costs and, in turn, overall decarbonisation costs if the hydrogen can be created and blended directly into the natural gas distribution system, thus eliminating the need for compression or significant hydrogen storage.