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Exploring the Role of Green Hydrogen in Decarbonization

March 27, 2023
Author: Prima Markets

Earlier this year, the European hydrogen sector was finally given some clarity regarding the status of regulations that will underpin green hydrogen’s desired breakneck growth. The European Commission released its views on Delegated Acts article 27 – the rules that will govern the industry going forward.

The new rules affect not only green hydrogen, but the entire industry aiming to manufacture Renewable Fuels of Non-Biological Origin (RFNBOs) that use hydrogen as feedstock. Green hydrogen is heavily impacted by this.

What Is Green Hydrogen?

So, what makes this production process green? Green hydrogen is produced using renewable energy sources, such as wind or solar power. They are used to generate electricity to power the electrolysis process that separates hydrogen from water. With today’s hydrogen coming primarily from fossil fuels – green hydrogen is a much cleaner and more sustainable energy source compared to its predecessor.

Research and development investments in green hydrogen are surging in numerous countries. It has emerged as a promising solution amid increased concerns around climate change and the need to transition to a low-carbon economy.

Potential applications for green hydrogen include transportation, heating and cooling, and industrial processes, among others. Hydrogen fuel and fuel cells offer an alternative to battery-driven electrification in the effort to deliver zero-carbon emission trucks and buses.

One downside to green hydrogen is its pricey cost point. According to EBA estimates issued in 2022, biomethane production costs as little as €55/MWh. Conversely, other renewable gas processes, such as green hydrogen, can cost four times more and require additional scale up. However, if green hydrogen can be made cheaply enough, demand for the alternative to make fuels could heighten severely.

Europe has extremely ambitious targets for green hydrogen. The Commission has high hopes that these rules will encourage domestic production of 10mn t of green hydrogen, while also allowing for the import of a further 10mn t of it as well.

Why Green Hydrogen Matters in Decarbonization

Understanding the value of green hydrogen and where it’s going is becoming increasingly critical. To reiterate what we discussed earlier, green hydrogen plays an extremely vital role in achieving a net-carbon economy.

However, reducing greenhouse gas emissions isn’t its only advantage. Green hydrogen also promotes energy security. As countries reduce their dependence on fossil fuels, their energy security increases.

Additionally, the increased development of green hydrogen technologies has also boosted economic growth and created new jobs – something that has been necessary during this time of economic turmoil.

Furthermore, it’s becoming imperative for companies to reduce their emissions as more countries have either passed or are in the process of passing legislation that requires a reduction of emissions for businesses to remain operational and profitable.

Some examples of this include:

  • At the beginning of December, the European Union reached an agreement to impose a tax on imports based on the greenhouse gases emitted to make them. This placed climate-change regulation into the rules of global trade for the first time.
  • Germany launched its national ETS for heating and transport fuels in 2021. It is being phased in gradually, with an increasing fixed price per tonne of CO2 from 2021 to 2025. In 2026, auctions with minimum and maximum prices will be introduced. All main fuel types (gasoline, diesel, heating oil, natural and liquid gases) were covered from the outset, while other fuels will gradually be phased in by 2024.
  • Last month, Washington state launched its complex carbon-pricing scheme that will allow most of the state’s biggest greenhouse gas emitters the opportunity to sell and buy carbon allowances. This new market is only the second of its kind in the United States. It demonstrates the efforts some US policymakers are putting forth to control climate pollution. If everything goes as planned, the state will be mostly carbon-free by 2050.

Prima Markets: Your Guiding Light to Decarbonization

Prima Markets, a ResourceWise company, is your source for trustworthy data, planning tools and tracking within the renewables marketplace. Our latest product, Prima CarbonZero, delivers dynamic, comprehensive data and analytics on low carbon feedstocks, fuels, and other renewables across the energy value chain.

Prima’s award-winning insights provide you with the key data needed to develop, institute, and successfully achieve your own decarbonization objectives.

You can access Prima’s historical datasets of biodiesel, renewable diesel, and sustainable aviation fuel (SAF) plants throughout the value chain – including feedstock optimization and process technology. You can map global pricing across Prima’s best-in-class low-carbon fuel and feedstock prices.

Best of all, you can better understand the international supply and demand balance in ESG reporting and fuel decarbonizing to implement investment strategies for your carbon transition.

Is your business interested in getting started with your own decarbonization strategy? Not sure how to start? Download our eBook, Mapping a Business Plan for Decarbonization: The Problem of Starting Now.

Download the eBook

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