Roman Kramarchuk on the greatest challenges that face the development of hydrogen economies

What are the key points about your organisation’s involvement with hydrogen? 

Hydrogen and related energy carriers such as ammonia offer decarbonization solutions for hard-to-abate sectors. S&P Global Platts is responding to this by providing analytics and pricing solutions to support the development of a globally traded market, as well as helping key actors direct and adapt their businesses alongside it. We do this in two main ways:

Platts analytics has been working to incorporate hydrogen into our Global Integrated Energy Model – balancing global energy demand and providing forecasts for 143 countries, 10 end use sectors and 30 commodities out through 2050. Helping guide our nearer term views, our Hydrogen Production Asset Database tracks global announcements of low carbon hydrogen projects. The database collates the expected timing, production technology, and announced offtake sectors for over 850 hydrogen projects worldwide - So in essence, we help stakeholders make intelligent, hydrogen-related investments by identifying key challenges and addressing uncertainties. Most recently we released our views on the production and end use uptake in 10 key European countries – analyzing and balancing key policy, technology and market drivers. 

Supporting analytics - and forming the bedrock of our business for over a century - Platts is the market leading price reporting agency for the global energy and commodity markets. What this means in practical terms is that we harness a rigorous and respected methodology to provide accurate daily price assessments for hydrogen as it is traded between producers and end users. This provides the trust and transparency market participants need to commit capital and grow the market as quickly as possible. In 2019 we launched the world’s first-to-market hydrogen prices which now cover USGC, California, NW Europe, Australia, Japan and the Middle East. Our new Carbon Neutral Hydrogen assessments will first and foremost reflect the value of the hydrogen molecule, irrespective of production pathway or colour. Extensive feedback from market participants has illustrated that for a nascent global hydrogen market to grow, its price should be determined by a methodology that focuses on hydrogen as a commodity, not one that is based on its production pathway.

What, in your view, are the greatest challenges that face the development of hydrogen economies?

A Stakeholders in the emerging hydrogen economy face high costs (both explicit and implicit) at all stages of the value chain. Traditional hydrogen production processes have unacceptably high carbon emissions but switching to low-emissions hydrogen requires accepting an increase in costs - Incumbent technologies are less expensive than hydrogen-focused options such as water electrolyzers, CO2 capture and storage, hydrogen storage, and fuel cells. Additionally, major investments in retrofits for existing facilities and hydrogen transportation infrastructure are required for widespread adoption. In addition to explicit costs, companies and governments face high implicit costs, particularly around project coordination. Supply, demand, and infrastructure need to grow together, but it is challenging for individual firms to gauge the market. Platts Analytics is tracking cost trends across the hydrogen value chain to provide usable investment insights for stakeholders and clients.

What government policies or funding arrangements would be helpful?

Governments that represent over 70% of global GDP have decarbonisation road maps that include a central role for hydrogen. Many of these road maps provide guidelines on growing hydrogen’s role in key sectors across industry, transportation power generation. At this stage policy suggestions have ranged from government procurement commitments for hydrogen to mandated volumes of hydrogen in certain sectors. At present, policies tend to focus on addressing supply costs. Approaches include: (1) access to government grants or low-interest loans; (2) stimulation of renewable energy deployment through Guarantees of Origin or virtual PPAs; (3) Direct carbon taxation; and (4) Subsidies for low-emissions hydrogen production. It is too early to say which policy approach will be the most effective. While many supply-side approaches have been tried, in conversations with market participants, investors are also looking for clear government policies that can support demand. Platts Analytics regularly reports on policy updates through our Policy and Net-Zero Tracking offerings.

What are your hopes in this area? 

We believe hydrogen has a key role to play in decarbonization – with both clean molecules and clean electrons being part of a low carbon solution. We are not hydrogen evangelists. Its versatility is clear - but where exactly and to what extent we will see uptake is far from clear. Platts Analytics does see clear potential in sectors such as ammonia synthesis, oil refining, industrial heat, steel production, heavy duty road transport, marine shipping, and power sector generation and balancing. However, depending on the pace of technological development, alternative clean approaches such as direct electrification or biofuels may out-compete hydrogen in some sectors. The hope is to develop a comprehensive understanding of where hydrogen fits into an integrated, low-carbon energy system by providing clear insights based on the facts on the ground, especially trends around costs and technology development.