Low-carbon hydrogen has been a major buzzword over the last couple of years. We have heard of different colours, carbon intensity and multiple end uses and applications of hydrogen and its derivatives, such as methanol and ammonia.
In this article, South Pole's Low-carbon Hydrogen & Industry Transition expert, Gokce Mete and Associate Director and Principal Consultant for Climate Strategies, Matt Sprague, discuss how companies can integrate low-carbon hydrogen into their net zero journeys and some of the challenges they may face.
The terms renewable hydrogen, low-carbon hydrogen and green hydrogen are currently used interchangeably. However regulators, verification standards and market participants are moving towards distinguishing low carbon and renewable hydrogen from fossil based production methods through standards and definitions that are based on life-cycle emissions. In this article we use the term low-carbon hydrogen to represent electrolysis based hydrogen production method with GHG emissions intensity of 20gCO2e/MJLHV of produced hydrogen or less using the
UK green hydrogen standard as a reference.
How and where low-carbon hydrogen is technically or economically viable differs across locations and businesses. But we know low-carbon hydrogen can decarbonise a number of hard to abate sectors and can add flexibility to the renewable electricity sector by providing seasonal storage solutions.
Choosing the right technology for the right application will be important to consider total value chain emissions, costs and technology maturity. For example hydrogen can be used for domestic heating, but
research clearly shows that heat pumps provide a cheaper, more efficient, and lower carbon solution.
The sectors where hydrogen is looking the most promising are for hard to decarbonise sectors such as heavy industry, steel production, long distance transportation (heavy duty road or shipping) and chemical processes. Converting low-carbon hydrogen to low-carbon ammonia is also an exciting opportunity to decarbonise the fertiliser and agriculture sector.
A growing number of projects have been announced to develop this approach. These include a
500MW electrolyser at Incitec Pivot's Gibson Island facility developed by Fortescue Future Industries, a project from Yara Pilbara to produce 3,700 tonnes of low-carbon ammonia per year and a Hive Hydrogen/Linde project in South Africa to produce 780,000 tonnes per year.
The other application that is being explored is the use of hydrogen to develop low-carbon, synthetic or e-fuels. These are typically direct replacements for fossil fuels such as diesel or for fuel switching from heavy marine oil to low-carbon methanol for example.
It's important to see hydrogen, as a low-carbon fuel, not as a zero emission fuel. There are emissions during the construction of the plant, operation, transportation, and - if applicable - production of final products (ammonia, methanol etc). When companies purchase hydrogen or its derivatives, these emissions sit in their scope 3 - or supply chain - footprint.
As these fuels have zero emissions at the point of use they are often called zero emission fuels, however this can be wildly misleading. The source of hydrogen has a significant impact on the total scope 3 emissions as shown in the chart below. Hydrogen emissions can range from 0.3kgCO2e/kgH2 (hydro-based) to 11.0 kgCO2e/kgH2 (steam methane reforming (SMR) natural gas).
Hydrogen is often used to replace onsite emission sources (e.g. natural gas, heavy fuel oil, coking coal etc). Taking this action can reduce a company's total emissions significantly when compared to the lifecycle emissions from diesel and fuel oil. Companies need to account for the full impacts of the hydrogen production, by considering their scope 3 footprint, and setting targets and roadmaps. As scope 3 accounting is required for Science-Based Target and Net Zero Target setting - as well as reporting emissions in accordance with the Greenhouse Gas Protocol -understanding the impacts of hydrogen on your carbon footprint needs to be established before starting to procure hydrogen.
Debate around hydrogen applications can cause confusion amongst industry leaders, waiting to see where the market and public policy goes before making an investment decision. Switching to hydrogen can have costs, especially while low-carbon hydrogen is coming down the cost curve. Locking in a project, often with long life cycles, can have significant impacts on the operations of a company. As many manufacturers run at low profit margins, this can have serious impacts on their profitability.
To counteract this, companies are looking to develop strategic partnerships and sign long-term offtake deals to reduce negative risks, and support their decarbonisation journey while leveraging the knowledge base of hydrogen producers. Off-takers (companies looking to buy hydrogen) are waiting for costs to decrease through technology maturity or subsidies and cooperation among producers, technology providers and regulators or governments is urgently needed.
There is no doubt that hydrogen is a fuel of the future. South Pole's market shaping initiatives, advocacy and climate experts are working to ensure more companies are able to integrate hydrogen into their decarbonisation strategies.
The Hydrogen for Net Zero Initiative (H2NZ), brings industrial hydrogen producers, users and regulators together to unlock carbon finance for low-carbon hydrogen projects by developing the first methodologies for the voluntary carbon market that will credit the full suite of low-carbon hydrogen activities.
Co-developed by South Pole, Perspectives Climate Group, Verra and Gold Standard,the goal of the initiative is to create an enabling environment for projects, especially in regions where there are no functioning carbon trading or carbon taxation systems. By enabling revenues to be generated for avoided emissions, we can narrow the cost gap, and increase the uptake of low-carbon hydrogen for heavy emitting industries.
In addition, South Pole's climate experts can assist in identifying the opportunities for hydrogen in your business and provide recommendations and advice regarding suitable emission reduction levels, costs and procurement strategies to enable you to be an early mover in the hydrogen space. This needs to start with complete greenhouse gas accounting to consider scope 1,2 and 3 emissions, and it needs to start today.
Our climate solutions experts can also support your company with detailed analysis of hydrogen solutions in your markets and their implementation as an emission reduction intervention.
Contact our team for more information.