Let’s talk about Hydrogen III

This is a the last of a series of 3 articles on hydrogen. You can access the other 2 parts here and here.

Green hydrogen is chemically indistinguishable from natural gas that has gone through steam methane reforming to extract hydrogen. There is a need to properly certify the origin and volumes of these hydrogen produced to verify their carbon footprint (or lack thereof). This is the first piece of the puzzle.

And in order for this certification, standardisation must happen. Sustainable Aviation Fuel (SAF) has more or less taken off because of this ability to standardise at least technically. And then lots of different additional sustainability requirements are layered upon them to ensure that the green credentials and identity are more established. Standards for SAF are still not exactly super stringent from the sustainability perspective but the prescribed standards and associated pathways allow for a completely separate value chain developed from the A1 jet fuel.

Green hydrogen must go through the same; and its derivative products, such as green ammonia must itself be standardised and certified in order to succeed becoming another low-carbon fuel, whether it is for co-firing in power stations or as a maritime engine fuel.

Development of the separate value chain from the grey or brown hydrogen is the second piece of the puzzle. This means that a lot of work must go into the supply chain players getting together, jointly marketing their newly standardised product, and reflecting to the world that there’s actually some kind of established activity and industry with its associated transparency in pricing.

Final piece of the puzzle is in terms of financing. As there is no clear long-term commitments, the projects must first be funded by equity; likely at slightly smaller scale so that the subsequent scaling-up can enjoy the benefits of falling prices of electrolysers or batteries. The equity players who would come in on these projects would be the impact investors, the offtakers of these green hydrogen (including steelmakers, power-to-liquid e-fuel producers, green ammonia producers, etc.). They should be helping with kickstarting these projects because they will need the green hydrogen – and since they will require more of it over time, the cost of production can be averaged down and they don’t have to worry about being locked into higher prices.

Government can step in to fund the first projects using revenue raised from carbon taxes. By pricing carbon, raising its price over time and using the revenues to push ahead greener technologies and applying innovations, the world can move forward with the energy transition.