PAYNE INSTITUTE COMMENTARY SERIES: COMMENTARY

By Anna Littlefield and Siddhant Kulkarni

Link to Part 1: Production Pathways, Applications, Storage & Transportation

November 13, 2024

Hydrogen is emerging as a cornerstone of global energy policy, with nations across the world setting ambitious goals to integrate hydrogen into their clean energy strategies. In Part One of this two-part commentary, we explored the production pathways and associated ‘color wheel’ of hydrogen, in addition to applications and methods for transporting and storing hydrogen.  Building on that foundation, here we explore the policy incentives, regulatory frameworks, and the viability of hydrogen markets.

Global Hydrogen Policy

Nations around the world are investing in hydrogen as a solution for decarbonizing key industrial sectors. Policies have focused on boosting production, stimulating demand, fostering innovation, and creating international cooperation frameworks, to ultimately position hydrogen at the forefront of the global transition to sustainable energy.

The European Union for instance, has launched an ambitious Hydrogen Strategy targeting the production of 10 million tons of renewable hydrogen as well as importing an additional 10 million tons by 2030. Other EU initiatives include the Clean Hydrogen Partnership, which allocates €2 billion for research and innovation from 2021 to 2027, and the European Clean Hydrogen Alliance, designed to unite stakeholders in accelerating hydrogen deployment. Through these measures, the EU aims to establish a hydrogen ecosystem and lead in the global shift towards sustainable energy.

Both Japan and South Korea have also set ambitious roadmaps and provided government support for hydrogen development. While Japan attempts to establish a “hydrogen society,” with a concentration on fuel cell vehicles and power generation, South Korea issued the “Hydrogen Economy Roadmap” in 2019, that sets a goal of producing 6.2 million fuel cell vehicles and building 1,200 refilling stations by 2040.

Various federal policies within the United States offer a helping hand to hydrogen development. The Inflation Reduction Act created the 45V tax credit for clean hydrogen production. The Department of Energy has also issued funding to establish 7 regional clean hydrogen hubs (H2Hubs) across the nation. The DOE also released the US National Clean Hydrogen Strategy and Roadmap, which outlined goals for hydrogen development.   Additionally, several state-level initiatives complement federal efforts to spur the rapid adoption of hydrogen.  Many states have developed their own hydrogen roadmaps or studies, while others have formed multi-state collaborations such as the Midwest Hydrogen Coalition. The National Association of State Energy Officials (NASEO) maintains an interactive map to track these state-level hydrogen activities, providing a comprehensive overview of policies, initiatives, and partnerships led by or involving state government entities.

Australia’s National Hydrogen Strategy outlines the country’s ambition to become a competitive hydrogen exporter by 2030, supported by significant financial commitments to major hydrogen projects. Meanwhile, China included hydrogen in its 14th Five-Year Plan (2021-2025), highlighting the technology as key for decarbonization, with a particular focus on hydrogen fuel cell vehicles and industrial uses.

These examples, though certainly not exhaustive, underscore the broad deployment of incentives by governments all over the world to accelerate hydrogen development. There are countless other examples of support for hydrogen projects through credits, grants and subsidies, R&D funding, and demonstration project funds.

Hydrogen Safety and Regulatory Frameworks:

The use of hydrogen poses several risks which necessitate specialized regulatory frameworks. The primary issue is that hydrogen is highly flammable and can form explosive mixtures with oxygen, burning much faster than other fuels. Moreover, its invisible flame and lack of odor make leaks and fires difficult to detect early, a challenge for rapid mitigation.

Hydrogen can also cause metals to become brittle, and more prone to failures such as cracks, corrosion, and buckling.  This risk, in addition to the high pressures required for hydrogen transportation, requires specialized materials and oversight in storing and transporting hydrogen. ASTM International has researched and tested the issue of hydrogen embrittlement thoroughly and established standards for metallic materials in contact with hydrogen and outlined measures to prevent failures.

In addition to these highly technical guidelines for industrial operations, several international initiatives have been established to complement the development of hydrogen markets, through common standards and regulations. The Hydrogen Council, Mission Innovation, and the International Partnership for Hydrogen and Fuel Cells in the Economy (IPHE) all aim to promote collaboration through the sharing of best practices and developing international trade standards for  hydrogen and related technologies.

Regulatory bodies within the Department of Energy (DOE), Environmental Protection Agency (EPA) and Federal Energy Regulatory Commission (FERC), are formulating standards to ensure hydrogen is safely produced, stored, and transported in the US. These include the standardization of hydrogen technologies under ISO/TC 197: regulations concerning hydrogen refueling stations, fuel cell vehicles, and safety protocols for the production and storage of hydrogen.

Hydrogen Market Development and Viability

The hydrogen market is experiencing significant shifts as cost and demand are evolving. Production costs for green hydrogen have dropped dramatically, from $10-15/kg in 2010 to $4-6/kg in 2020, with projections suggesting further reductions by 2030. This decline is driven by falling renewable electricity costs alongside technological advancements, with electrolyzer capital costs expected to decrease 60-80% by 2030. Simultaneously, global hydrogen demand is set to surge across various industries. The International Energy Agency predicts demand could increase from 94 million tons (in 2021) to almost 200 million tons by 2030 in order to be on track for a net-zero emissions scenario. This growth would be fueled by the need for clean feedstock in chemical and steel manufacturing, hydrogen fuel-cell vehicles for transportation, and the use of hydrogen as an energy storage solution in the power sector.

Future predictions aside, technical advancements in efficiency and scale are already underway. Proton Exchange Membrane (PEM) electrolyzers, which use a solid polymer electrolyte membrane to split water into hydrogen and oxygen, are reaching up to 80% efficiency and laboratory solid oxide electrolyzers have demonstrated over 90% efficiency. Fuel cells have also progressed, achieving 60% efficiency for automotive applications, far surpassing the 20-35% efficiency of internal combustion engines. These gains are critical for reducing production costs and meeting the aggressive hydrogen demand predictions. Simultaneously, large-scale projects are being deployed globally to demonstrate industrial feasibility. Notable examples include the Australian Renewable Energy Hub, aiming to produce 10 million tons of green hydrogen annually, and the NortH2 project in the Netherlands, targeting 4 GW of green hydrogen capacity by 2030. These initiatives will increase production capacity while also driving innovation in transportation and storage technologies, contributing to the rapid growth of the global hydrogen market.

The transition to a hydrogen economy faces undeniable challenges in infrastructure development, supply chain integration, and environmental sustainability. Building the necessary production facilities, storage systems, and distribution pipelines is estimated to require $15 trillion in global investments.  Additionally, the limited availability of critical minerals (platinum, iridium, palladium and other rare earth elements) may create production bottlenecks for electrolyzers, fuel cells, and specialized hydrogen handling equipment. Finally, ensuring environmental sustainability is essential for the long-term viability of a hydrogen economy. While green hydrogen offers significant ecological benefits, scaling production without straining the grid or competing for renewable resources poses challenges. In the US, green hydrogen production cost ranges from $3-6/kg, exceeding the competitive target of $1-2/kg.  The 45V tax credit provides $3/kg but is still insufficient for many projects to generate favorable economics.

Currently, the lack of harmonized regulations across jurisdictions creates unnecessary complexities and the state of carbon markets and carbon credits creates inherent uncertainty for hydrogen. Opportunities for improvement lie in strategic partnerships, vertical integration in addition to developing alternative materials, enhancing manufacturing processes, and standardizing components across the value chain. The industry is focusing on advancing water electrolysis technologies, utilizing industrial waste heat, and integrating hydrogen production with renewable energy systems to maximize resource efficiency and minimize environmental impact, all of which are vital in addressing the existing challenges to a hydrogen ecosystem.  New markets are emerging in green steel, sustainable aviation fuels, and clean shipping and employment opportunities are expected to follow across the value chain. The concept of the ‘Clean Hydrogen Ladder’ from Michael Liebreich, graphically represents the applications for which hydrogen is best suited, as well as the competition it faces from other energy sources. Though there is little certainty in emerging markets, recent technical advancements, private and governmental investment, and the widespread applicability of hydrogen tech is promising.

Conclusion

Hydrogen is a versatile energy carrier.  Despite the challenges in scaling production and utilization, hydrogen could be foundational in achieving net-zero goals.  Hard-to-abate industries like steel manufacturing, chemical production, and heavy-duty transportation are positioned to benefit from hydrogen use and its potential to store renewable energy and provide grid stability further enhances its relevance to the clean energy transition. Realizing this potential requires overcoming economic, technical, and regulatory barriers to ensure that hydrogen can compete in a fossil fuel reliant world. As countries invest in hydrogen strategies and establish hydrogen hubs, the global energy landscape could be fundamentally transformed.  A successful transformation will depend on coordinated efforts in scaling up infrastructure, driving down costs, and implementing supportive policies.

ABOUT THE AUTHORS

Anna Littlefield, Payne Institute CCUS Program Manager and Research Associate
PhD Student, Geology and Geological Engineering, Colorado School of Mines

Anna Littlefield is the Program Manager for Carbon Capture Utilization and Sequestration for the Payne Institute at the Colorado School of Mines. As a current PhD student in the Mines geology department, her research focuses on the geochemical impacts of injecting CO2 into the subsurface as well as the overlap of geotechnical considerations with policymaking. Anna joins the Payne Institute with 8 years’ experience in the oil and gas industry, where she worked development, appraisal, exploration, new ventures, and carbon sequestration projects. Her academic background is in hydrogeology with an M.S. in geology from Texas A&M University, and a B.S. in geology from Appalachian State University. Anna is passionate about addressing both the societal and technical challenges of the energy transition and applying her experience to advance this effort.

Siddhant Kulkarni, MS Student, Mineral and Energy Economics, Colorado School of Mines

Siddhant is a student researcher at The Payne Institute at Colorado School of Mines.  Currently pursuing his M.S in Mineral and Energy Economics, his research focuses on the commercial and insurance side of CCS projects and their risk management, as well as government incentive programs and schemes promoting the use of renewable energy. Additionally, he holds a B.S Honors in Economics from Symbiosis School of Economics, Pune. He is dedicated to advancing energy transition to renewables while addressing the various societal challenges that may come with it.

ABOUT THE PAYNE INSTITUTE

The mission of the Payne Institute at Colorado School of Mines is to provide world-class scientific insights, helping to inform and shape public policy on earth resources, energy, and environment. The Institute was established with an endowment from Jim and Arlene Payne and seeks to link the strong scientific and engineering research and expertise at Mines with issues related to public policy and national security.

The Payne Institute Commentary Series offers independent insights and research on a wide range of topics related to energy, natural resources, and environmental policy. The series accommodates three categories namely: Viewpoints, Essays, and Working Papers.

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DISCLAIMER: The opinions, beliefs, and viewpoints expressed in this article are solely those of the author and do not reflect the opinions, beliefs, viewpoints, or official policies of the Payne Institute or the Colorado School of Mines.