Amid the buzz around green hydrogen, the market’s growth is frustratingly slow. Although Australia aims to harness green energy export by banking on widespread demand for this fuel and its byproducts like ammonia, the market’s evolution is slower than anticipated. As of 2022, a mere 0.7% of global hydrogen demand was for the eco-friendlier variety, leading to CO2 emissions of over 900 million tonnes annually, according to the International Energy Agency (IEA). The current hydrogen production rate makes it more a part of the climate issue than a solution. To align with net-zero emission goals, its production and use must surge over 100 times by 2030.
Most of the demand is within the refining and industrial sectors, with scant demand from sectors essential for decarbonisation, like heavy industry, transport, and power. A familiar conundrum arises: global projects are set to produce 38 million tonnes of low-emission hydrogen by 2030, but only 4% have secured final investment, primarily due to escalating costs and weak demand.
The IEA warns that without strong demand, the future of the low-emission hydrogen industry is at risk. They’ve identified a significant mismatch between government targets for production and actual demand creation.
IEA’s recent forecast for 2030 projects a demand of 150 million tonnes, with a boost to 215 million tonnes by 2035 and a significant leap to 430 million tonnes by 2050. Transport is expected to be the largest consumer by then.
Some remain sceptical about the limited role of green hydrogen in the early transition phases, questioning the strategies of proponents aiming for faster adoption.
However, Bernstein, a Wall Street research firm, maintains a long-term optimistic stance, projecting a five-fold demand increase over the next three decades, with the bulk of this demand post-2030. They believe hydrogen will be crucial for energy giants in the future, especially in sectors like heavy industry and transport.
On the cost front, while green hydrogen’s cost is expected to decrease significantly by 2030, its adoption in transport hasn’t been as rapid as anticipated.
Bernstein predicts a gradual growth in demand until 2025, followed by a more pronounced growth from 2025 to 2035. It anticipates China and the European Union to lead demand, with Japan, Korea, and the US following.
In Australia, the Hunter Valley Hydrogen Hub, a green hydrogen project, looks to power generators in Japan and Korea as primary external markets. However, costs remain a hurdle, with renewable hydrogen in New South Wales expected to be pricier than in the US by 2025.
Other Australian green hydrogen endeavours target the transport sector, with companies aiming to supply hydrogen for trucks, buses, and even US heavy transport from various projects.
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