While hydrogen is a booming industry, there are still some challenges it faces. While hydrogen is gaining attention from all over the world, from large companies to governments investing in making hydrogen as an energy source a reality, there is still a lot of work that is left to be done.
1. Overall price and costs
Renewable hydrogen is about 2-3 times more expensive to produce when compared with fossil fuels which have a long-term average price of $4-6/GJ for and natural gas $75/bbl for oil. Furthermore, hydrogen pipelines can also be about 10-50% more costly (IRENA, Hydrogen Overview).
For the fuel itself, cost is a big green hydrogen challenge because of the limited infrastructure to support it. It is important to note that depending on the market or country, the cost also varies for the different types of hydrogen. As of July 2023, the following ranges show the fluctuations of price of production across different markets for:
Gray hydrogen: $0.98-$2.93 per kilogram
Blue hydrogen: $1.8-$4.7 per kilogram
Green hydrogen: $4.5-$12 per kilogram
In all markets surveyed, green hydrogen was more expensive than gray hydrogen (BloombergNEF)
Even though the price difference between the different types of hydrogen is obvious, policy is playing a large role in incentivizing the use of green hydrogen over the other options (explained further below under the ‘Policy’ section), such as the US’s Inflation Reduction Act.
By 2030, the price of green hydrogen is expected to decrease significantly to $2-6 per kilogram as a result of improved hydrogen technologies, infrastructure expansion, and lowered costs of renewable electricity. The price is expected to further fall to about $1.5-5 per kilogram by 2050, potentially even down to $1 per kilogram or lower in countries that have excellent renewable resources (World Energy Market: Hydrogen Demand and Cost Dynamics).
2. Limited infrastructure
The limited amount of infrastructure is indicative and ultimately impacts the hydrogen market size, the adaptability of hydrogen as an energy source and ultimately the cost of hydrogen. Globally, there are roughly 4500 km (~2800 miles) of hydrogen pipelines (IRENA, Hydrogen Overview). The use of pipelines is expected to become more predominant in the next few years which would mean that hydrogen users can benefit from economies of scale and have hydrogen at a lower cost.
However, until then, smaller and more local use is more common but even this has its infrastructure challenges as this requires both space and investment for transport infrastructure, storage, and even liquefaction units. When comparing pipelines with trucking for the transportation of hydrogen, as mentioned previously, pipelines are more economical as trucking can add more than $1 per kg to the cost of hydrogen (with increase in price being affected by factors like distance and capacity) (Hydrogen Council, Hydrogen Insights Report 2023, p.25).
3. Lack of transparency / differentiation
Currently, consumers have no way of determining the environmental impact or origin of the produced hydrogen, ie. there is no standard to differentiate between fossil-based (blue or gray) hydrogen and green hydrogen. This lack of transparency indicates a gap between the market and policy. However, this gap may be addressed in the near future as there is a lot of effort being placed into creating an international standard for hydrogen certification (German Energy Agency/World Energy Council – Germany (publisher) (dena/World Energy Council – Germany, 2022), Global Harmonisation of Hydrogen Certification, Berlin 2022, p.17).
4. Policy
International commitment to zero-emission hydrogen as an energy source is growing rapidly. In 2017, only one country (Japan) had a national hydrogen strategy in place. In 2023, over 30 countries are preparing or have created a national hydrogen strategy (IRENA, Policies for Green Hydrogen). National strategies revolve around the development of hydrogen production, technological improvements, supply targets, infrastructure expansion, and industry uptake and adoption.
Some examples of the outcomes of hydrogen strategies include the $8billion program for developing regional hubs across the USA, known as the H2Hubs program. And also the recent mandate by the European Commission requiring a hydrogen refueling station every 200 km across the TEN-T core network. Such activity demonstrates how hydrogen market size can be influenced and propagated by policy.
Policy is also driving change through ‘punishing’ carbon emissions, but also ‘rewarding’ the use of clean energy. An example of the latter is the US Inflation Reduction Act where producers receive a tax credit of up to $3 per kilogram of green hydrogen produced. With this economical incentive, clean hydrogen remains slightly more costly than natural gas, yet much cheaper than gray hydrogen. This is an attractive incentive for industries, such as ammonia or refining, where the use of gray hydrogen is already commonplace, to make the adoption of green hydrogen a more economical route (Financial Times, May 2023).
5. Lack of Standardization
Another example of a hydrogen challenge, on the systems integration side, is lack of standardization. As hydrogen is a volatile gas, the equipment that is required to monitor it must be suited for a hydrogen-based environment. Plus, the extended and growing use of the hydrogen in new sectors (such as mobility) opens new requirements for hydrogen quality monitoring.
Furthermore, the growth of distributed hydrogen hubs, which are based on multiple hydrogen production methods, brings in new challenges with regards to hydrogen quality monitoring. While most of the equipment used to analyze the quality of the hydrogen was located in centralized laboratories, there is still a growing need for more in-line, on-the-spot analyzers that could quantify the hydrogen quality within minutes.
Moreover, currently, the majority of analyzers, which aim to measure the hydrogen quality of the supply for contaminants like moisture or oxygen, were not developed in a hydrogen-based environment. For this purpose, VOCID® H2Confirm, which has been validated to work with hydrogen using hundreds of measurements, is helping hydrogen producers monitor their supply for contaminants like moisture or oxygen at the ppm level.