PE Live: Hydrogen policies must evolve with ‘ecosystems’
Governments should adapt their strategies as the hydrogen economy develops, gradually moving from direct financial support to an oversight role
Governments need to adapt their strategies as the hydrogen economy develops—changing from direct financial support for building industrial ecosystems to a looser facilitation and oversight role—the panellists agreed on a recent PE Live webcast.
“It is a very complex topic so there is no one-size-fits-all solution or role for the government… and governments need to be flexible,” says Tobias Merten, senior manager strategy, transaction advisory services, future of green & smart economy, at professional services firm EY.
“The objective is to bring interests together to enlarge the demand pattern, focus knowhow and competency as well as the production of hydrogen,” he says. “Industrial clusters can be an important starting point to develop national reach.”
The building of a hydrogen economy is likely to start in clusters, tight geographical areas that are suitable for producing hydrogen as well as home to sources of demand. There is a clear potential role for governments in bringing together diverse types of companies.
Government policies need to be tailored to the specific attributes of the economy and the stage of development of hydrogen use. In regions where hydrogen is at an early stage, the role of government “is more to get support for concepts, bringing people together and steering developments in a way that the whole region can profit from”, says Merten.
44 – Hydrogen fuelling stations in US
Beyond this stage it is “very important” that the government financially supports the key actors, “reducing, specifically, capex costs for infrastructure or plants for the production of hydrogen, such as large-scale electrolysers and connecting up to renewable energy sources.”
Some countries are progressing quickly down this pathway. Even before the German national hydrogen strategy was released in June “a lot of companies had already thought for a long time about hydrogen, about how it could be used in heavy industry processes”, says Merten.
“We see specific regions where hydrogen is naturally a big topic, because there is surplus renewable energy or big demand clusters. There, the role of government is more in supporting the ecosystem and supporting and smoothing the processes… Certain regions are meant to be forerunners because of the natural concentration of hydrogen activities.”
The technology for utilising hydrogen in the mobility sector is clearly established, but building up supply and demand at the national level would still entail significant financial risk for the private sector. Companies can be “almost prepared, but sometimes their reach is not far enough,” says Merten.
“In mobility, the technological development is already advanced… so the activity of the government is more to look at how it can positively influence business models,” such as by reducing certain taxes.
Scott Greer, partner at law firm King & Spalding, says the key is to help develop green hydrogen ecosystems economically before they are expanded to a commercial scale.
For example, governments could support the first wave of hydrogen fuel-cell vehicle refuelling stations to create a market—as there is little incentive for consumers to purchase fuel-cell vehicles if there remains very few hydrogen stations compared with the number of electric vehicle (EV) recharging points.
“There are only 44 hydrogen refuelling stations in the US—with most of them in California—and there are many more EV charging stations,” says Greer.
“In many cases, green hydrogen projects currently need additional support in governmental incentives to be economic, as we are seeing countries such as Germany. But we are starting to see the economics of green hydrogen get dramatically better every day.”
There was already momentum behind reaching the 2050 Paris Agreement target before Covid-19, but the pandemic has significantly strengthened resolve.
“Now we are talking about billions or even trillions of new investment to be released for the economic recovery,” says Christian Bergins, strategic marketing manager, new technologies, Mitsubishi Hitachi Power Systems.
Industrial clusters can be an important starting point to develop national reach” Merten, EY
“Governments are trying to put an obligation on industry to use this money for clean development… [post-Covid-19 it will] speed up with more money and faster timelines.”
Everybody accepts that low-carbon energy will be more expensive in the near-term, he says. “But if you look to the long term—based on solar PV, wind and hydropower—we can manage to have an overall energy system that will probably not cost more than today's energy system.
“This is getting support from politicians and also the public. Hydrogen is seen as a big piece of the solution so public perception is positive, which is needed when introducing a totally new technology.”
Bergins sees a role for both blue and green hydrogen solutions. “It has to be done in tandem—otherwise we will be too late for the 2050 targets,” he says.
A single blue hydrogen project can deliver power “on the gigawatt scale” simply by storing the CO2 of a conventional grey hydrogen facility, while “the world would need more than a year to build 1GW of electrolysers because we do not have the manufacturing capacity”.
European countries have the opportunity “not only to implement renewable energy and electrolyser plants” but also to “invest in manufacturing and build up the whole value chain for the production of equipment”.
The PE Live webcasts on the uses and production of decarbonised hydrogen, PE Live 8 and PE Live 9 respectively, are available on demand here.