Blind spots for policy makers

Realising the promise of green hydrogen requires significant progress across its entire value chain: from research and innovation actions to make green hydrogen competitive, rapidly scale up electrolyser manufacturing and build the infrastructure needed to produce, store and transport hydrogen and its derivates, to new business models that attract new actors, and market design and regulations that allow setting up an international reliable market.

Apart from these main challenges, the development of sound, smart and safe strategies for a green hydrogen economy must navigate some blind spots. The following points may help guide the way forward.

Matching supply and demand can reduce the uncertainties and risks of investing in the hydrogen value chain.

Given the uncertainties surrounding future demand for hydrogen, identifying stable demand sources will reduce the risks of building hydrogen production facilities. For example, industrial hubs already have a substantial fuel and feedstock demand, which could be met by hydrogen or its derivatives. The risk associated with investments in on-site electrolysers would therefore be relatively low.

Long-term signals and commitments are necessary to kick-start a clean hydrogen economy.

These can include national hydrogen road maps, adequate regulatory frameworks, streamlined permitting, carbon taxes or the removal of fossil fuel subsidies.

Regulatory sandboxes are critical for a new sector like green hydrogen.

Regulatory sandboxes allow new innovations to be tested in real-life projects under a regulator’s oversight, enabling assessments of not only the technology itself but also of operations, business models and potential regulatory frameworks.

Power and hydrogen markets need to work together to encourage smart electrification and renewables’ integration.

Creating a hydrogen market will require greater integration and co-operation among gas and power transmission system operators, which needs to begin at a very early stage. A successful green hydrogen strategy requires joint development of strategies for electricity and gas systems, which have historically worked in silos.

Internationally harmonised technical standards and certificates are among the main pillars of the future hydrogen economy.

Codes and standards for the construction, operation and maintenance of hydrogen facilities must be developed and implemented internationally. In addition, hydrogen sources must be certified to validate claimed carbon dioxide emissions reductions and allow appropriate renumeration.

Electrolysers will require additional renewable generation capacity, beyond the surplus generation that would otherwise have been curtailed.

Electrolysers must be operated for at least 4 000 hours per year to be cost competitive (Ansari et al., 2022). They will thus require diversified renewable generation resources and a well-connected network. One promising approach is combining off-grid electrolysers with PV generators to avoid the expense and complexity of grid connections (Bellini, 2020).

Green hydrogen production requires water resources.

Hydrogen requires significant amounts of (pure) water as a feedstock. The electrolysis process uses 9 m3 (9 000 litres) of purified water to produce a tonne of hydrogen (Collins, 2021). As the effects of climate change continue to exacerbate water stress, a growing number of countries may need to consider whether hydrogen production is suitable in the longer term. However, the projected green hydrogen needed by 2050 in IRENA’s 1.5°C Scenario would require around 7-9 billion m³ of water a year – less than 0.25% of current freshwater consumption (IRENA, 2022e). Regions with water scarcity could increase their water supplies using desalination where economically feasible.

Measures are required to detect and prevent hydrogen leakage.

By 2050, green hydrogen production, transportation and storage are expected to become major sources of leakage. Under high-risk scenarios by 2050, leakage rates could represent 5.6% ¹⁴ of the hydrogen economy (Fan et al., 2022). Data-driven research and monitoring initiative programmes on hydrogen leakage detection, prevention and mitigation are essential to avoid leakages in a large-scale hydrogen economy.