Green hydrogen uptake slow in Asia due to high cost and lack of standards: experts

The amount of renewable energy needed to decarbonise a power grid to produce green hydrogen is a key barrier to scaling it, says think tank IEEFA.

hydrogen tank
Green hydrogen produced through electrolysis using renewable energy, can replace hydrogen produced from fossil fuels that further contribute to carbon emissions. Image: Heather PaulCC BY-ND 2.0, Flickr

High production costs and a lack of regulation and standards are slowing the uptake of green hydrogen in Asia, experts say.

But the world’s largest emitting region will need green hydrogen – that is, hydrogen produced from renewable sources – to decarbonise carbon-intensive industrial sectors such as steel and achieve regional climate goals, said Simon Nicholas, lead analyst, global steel, at think tank Institute for Energy Economics and Financial Analysis (IEEFA).

As the world’s largest consumer and producer of steel, Asia accounts for the majority of greenhouse gas emissions (GHG) from the sector, and hydrogen holds the potential to decarbonise the sector at scale, Nicholas said.

Speaking at IEEFA’s Energy Finance conference in Kuala Lumpur in September, Nicholas said high production costs are making it difficult for the industry to adopt its use, leading to the cancellation of projects and scaled back investments.

We need a reality check. There’s too much hype about green hydrogen.

Simon Nicholas, lead analyst, global steel, Institute for Energy Economics and Financial Analysis 

Green hydrogen is produced by electrolysis – splitting water molecules into oxygen and hydrogen – using renewable energy like wind and solar, which can effectively replace hydrogen produced from fossil fuels.

“Steel is one of those sectors where we do need green hydrogen supply at reasonable cost,” Nicholas said. He cited a new facility in Boden, Northern Sweden, which will be Europe’s first commercial-scale steel plant powered by green hydrogen. The plant, owned by H2 Green Steel, is expected to be operational by 2026.

Northern Sweden’s decarbonised power grid, which uses electricity from hydropower and wind, enables the production of relatively cheap green hydrogen. This clean fuel can be used to produce hydrated iron ore to make low-carbon steel.

Similar opportunities to use green hydrogen are on the horizon in South Australia. The state is set to plug electrolysis projects into the grid to produce affordable green hydrogen by 2027, Nicholas said.

However, the amount of renewable energy needed to decarbonise a power grid to produce green hydrogen is a key obstacle to scaling it in Asia.

“The difficulty is that there is a need for an awful lot more renewable energy just to decarbonise the grid, let alone produce green hydrogen. Trying to do both is difficult,” Nicholas said.

He said the biggest opportunities to deploy green hydrogen will be in jurisdictions where the grid has already been decarbonised, so doing so in fossil fuel-dependent Asia will be particularly challenging.

Standards and regulation

Besides the need for renewable energy, green hydrogen is difficult to scale due to a lack of common standards for the production and use of the fuel.

Kentaro Tamura, the climate and energy programme director at Japan-based research non-profit Institute for Global Environmental Strategies (IGES), said key standards and certification schemes for green hydrogen are necessary for it to become a more tradable energy commodity.

The lack of an internationally agreed standard for hydrogen has meant countries have developed their own standards and regulations for ensuring that the end product is truly climate-friendly, he noted.

“An internationally agreed [hydrogen] standard and mutual recognition of certification schemes requires political commitment, time and agreement on the minimum criteria for the standard,” he said.

“There was some progress at the G7 Hiroshima Summit last year where the respective leaders agreed on developing a common standard for hydrogen as well as mutual recognition of the need for a certification scheme. Then at COP28 last year, more than 30 countries agreed to work towards a hydrogen certification scheme.”

Kentaro noted that the standards body International Organization of Standardization (ISO) unveiled new technical specifications for assessing the hydrogen value chain at COP28.

Based upon this specification, a set of three international standards for hydrogen production, conditioning and transportation are to be developed by 2026.

However, government regulation will be needed to ensure the stability of the green hydrogen sector as it develops, he said.

“The predictability of the green hydrogen business relies on regulation. If the government changes regulations, it can risk disrupting green hydrogen projects,” he said.

He added that scaling green hydrogen should first focus on hard-to-abate sectors such as steel, transportation and mechanical. 

Nicholas noted that green hydrogen project developers cannot sign off-take agreements and implement projects due to high cost.

He said steel makers in Europe have pushed back on using green hydrogen to produce low-carbon steel because of cost, even after building facilities to make steel from green hydrogen.

In 2023, green hydrogen on average costs US$6.40 per kilogramme compared to blue and grey hydrogen, which cost only US$3.10 and US$2.13 per kilogramme, respectively. 

Blue and grey hydrogen are both produced from natural gas, the former using carbon capture and storage technologies, the latter releasing carbon into the atmosphere.

The use of renewable energy to produce green hydrogen contributes to the major difference in cost for green hydrogen, given that non-renewable energy sources are still cheaper and more readily available in much of Asia.

Nicholas added that while governments can help to reduce cost through subsidies and other incentives, there was a need for a green hydrogen “reality check”.

“We need to forget about some of the proposed uses for green hydrogen, because we actually don’t need quite as much green hydrogen as we think we do, and just focus on the key sectors where it’s really going to make a difference,” he said.

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