Headwinds for green hydrogen must not knock us off course - three things to look out for in 2025
December 20 2024
2024 was marked by major political change, rising geopolitical tensions and this year is on track to be the hottest on record. In many regions, green hydrogen projects are not getting off the ground quick enough and customer uptake has been slower than many of us hoped two or three years ago.
However, this year the IEA also said that global investment in clean energy in all of its forms was almost double that of fossil fuels and we have almost reached peak emissions in the power sector. Amid this shift, green hydrogen needs to find its place if we are going to achieve the last mile of decarbonisation that direct renewable electrification cannot reach.
In the year ahead we need to redouble efforts to ensure hydrogen production is truly clean, convince governments to further support green hydrogen financially so it can scale, and ensure customers choose green hydrogen over highly emitting alternatives when it comes to sectors like food and agriculture, shipping, aviation and steelmaking. Some regions are moving forward quickly while others desperately need support.
Truly clean hydrogen must be assured
There are a number of key processes in play which will determine how accurately the emissions associated with hydrogen production are measured and if green hydrogen with strong climate credentials can compete fairly with fossil pathways. Next year (or perhaps even in the last days of 2024 in some cases) the EU will publish its definition of low carbon hydrogen, the US treasury will release its final regulations for the Inflation Reduction Act’s clean hydrogen production credit, and the International Organization for Standardization (ISO) will finalise a standard on emissions measurement associated with hydrogen production. Every hydrogen production pathway will need to demonstrate its climate impact of course. When it comes to fossil hydrogen we need accurate and verified site-specific information on carbon emissions, methane leakage, and carbon capture and storage. Estimated national averages simply won’t do. They are usually far too conservative, rewarding laggards and failing to incentivise best practice.
Governments must give green hydrogen a fair chance to compete with fossil fuels
We appreciate that inflation and macroeconomic challenges are a reality, but for many governments the smart choice must be to step up support for green hydrogen to secure energy security in an increasingly volatile world and fully decarbonise their energy systems. In November we helped convene an Industrial Transition Accelerator open letter together with the World Economic Forum and others urging governments to implement stronger policies to stimulate demand for green hydrogen, advocating for mechanisms including carbon pricing, mandatory quotas, and green public procurement.
Just today we have seen progress in the UK with three contracts for difference schemes providing 15-year subsidies for green hydrogen production. The European Commission has just approved EUR 3 billion in German-Dutch H2Global funding for imports of green hydrogen into the EU. As new EU Commissioner Teresa Ribera, Executive Vice-President for Clean, Just and Competitive Transition said, the “scheme will help to address the increasing demand for renewable fuels in the EU by supporting their development throughout the world. It will lead to the creation of international value chains that will substantially reduce greenhouse gas emissions”.
Countries like China, India and Brazil with their large markets will forge ahead on green hydrogen no matter what the EU decides to do, and we should celebrate this. However, more needs to be done to help finance large projects in countries like Morocco, Mauritania and Egypt where the conditions for competitive green hydrogen and green hydrogen projects are favourable. In 2025 we must help get some of these projects closer to FID to capture value like jobs and manufacturing in country and benefit from export opportunities.
Convincing customers
In 2025 we will focus relentlessly on convincing customers that green hydrogen derived products are the right choice with programmes supporting green fertilisers (through a funding mechanism to support projects in emerging markets and lower income countries), green marine fuels (with a big focus on the UN's shipping agency, the International Maritime Organization’s negotiations on a carbon levy and incentives for the uptake of zero-emission energy) and green iron in Australia and elsewhere.
At a recent meeting bringing together the Asia Pacific Green Hydrogen Alliance the role of green hydrogen in our power systems was also a big focus. While countries like Japan and South Korea may deprioritise co-firing ammonia with coal or gas given recent auction results, there will still be a role for green hydrogen to help balance grids which rely more and more on variable renewables like wind and solar, as well as a crucial clean power backup to replace diesel generation for data centres which are becoming more energy hungry with the advent of Artificial Intelligence.
We wish you a wonderful end to 2024 and look forward to working with you in 2025!
Jonas Moberg
CEO, Green Hydrogen Organisation