The rise of hydrogen as a renewable energy source has stood out globally as a key piece in the transition to cleaner energy sources. According to the Global Hydrogen Review 2024, published by the International Energy Agency (IEA), hydrogen has become one of the main candidates to drive decarbonization in sectors where reducing emissions is challenging, such as heavy industry, long-distance transport, and electricity production. This article will explore the prospects of this technology and its growing relevance, focusing on its global implementation and challenges.
The IEA report reveals that in 2023, global hydrogen demand reached 97 million tonnes (Mt), an increase of 2.5% compared to the previous year. However, much of this demand is still concentrated in traditional industries such as refining and chemical production, where hydrogen is produced from fossil fuels without carbon capture. While low-emission hydrogen production is still limited, projections indicate that production could reach 49 Mt by 2030, a nearly 30% increase from the previous year.
Latin America emerges as a region with enormous potential for low-emission hydrogen production due to its abundance of natural resources and renewable energies. According to the report, the region could produce more than 7 Mt of hydrogen by 2030, with a significantly lower carbon intensity compared to production from natural gas without mitigation. However, for this production to be viable, Latin America will need to increase its electricity generation capacity by up to 20% of its current production.
One of the major challenges faced by hydrogen project developers is the high cost of producing low-emission hydrogen. Although electrolysis technology, which uses renewable electricity to produce hydrogen, has advanced, its costs are still higher than hydrogen produced from fossil fuels. According to estimates from the Global Hydrogen Review 2024, the cost of renewable hydrogen production could fall to $2-9 per kilogram by 2030, half of the current value. Even so, many projects still rely on government subsidies and incentive policies to be economically viable.
Additionally, hydrogen infrastructure is still in development. Despite advances in electrolysis and carbon capture projects, the necessary infrastructure for producing, transporting, and storing low-emission hydrogen is still limited, which may delay large-scale implementation. Hydrogen infrastructure projects are largely in the planning phase, with few initiatives moving into the construction phase.
An interesting comparison raised by the report is China’s rise as a leader in the production of electrolyzers for hydrogen, similar to what happened with solar panels and batteries in the past. China holds 60% of the world’s electrolyzer manufacturing capacity, which is helping to reduce global technology costs. This presents a challenge for other regions seeking to compete in large-scale hydrogen production.
The transportation sector, particularly shipping and aviation, is beginning to adopt hydrogen-based fuels. The adoption of supportive policies, such as the European Union’s aviation fuel mandates, has driven supply agreements for hydrogen-based fuels. However, market penetration is still slow, with some ambitious projects being canceled due to economic and logistical difficulties.
Generating demand for low-emission hydrogen is another critical point. Public policies that create demand, such as Carbon Contracts for Difference in Germany, have played an important role in market development. However, there is still a significant gap between the potential supply of hydrogen and actual demand. The difference between production targets and current demand reflects the urgent need for governments and industries to strengthen low-emission hydrogen supply agreements to unlock investments in production.
In the industrial sector, the greatest opportunities for using low-emission hydrogen are in refining, ammonia production, and steel production. These industries are the ones that have signed the most firm hydrogen supply contracts in recent years. The steel sector, for example, is primarily concentrated in Europe, where hydrogen is being used to replace fossil fuel-based synthesis gas in the direct reduction iron (DRI) process.
Despite the challenges, technological innovation in the hydrogen sector is advancing. The number of patent applications for hydrogen-related technologies jumped 47% in 2022. Most of these applications are related to technologies driven by concerns about climate change, demonstrating that both the public and private sectors are investing in developing new solutions.
In conclusion, low-emission hydrogen has the potential to become a key player in the global energy transition, especially in regions like Latin America, which have large reserves of natural resources for renewable energy production. However, for this transition to be successful, significant increases in infrastructure investments, production cost reductions, and more coordinated global collaboration will be necessary.
