WoodMac: Carbon intensity regulation to make or break global hydrogen market

The future of low-carbon hydrogen hinges on global policymakers introducing regulations and subsidies that focus on the carbon intensity of the hydrogen produced rather than its color, according to Wood Mackenzie’s (WoodMac’s) Horizons report ‘Over the rainbow: Why understanding full value-chain carbon intensity is trumping the color of hydrogen.’

Blue and green emissions, 2023; Source: Wood Mackenzie Lens Hydrogen and Ammonia Service; Courtesy of Wood Mackenzie

Flor De La Cruz, Principal Analyst, author of the report, said: “The push for better measurement of efforts to cut emissions globally is shining a spotlight on the precise carbon intensity of different sources of hydrogen supply. Because of its potential to deliver almost carbon-free hydrogen, green hydrogen is generating the most industry interest, but it is important exporters and developers look more closely at the full value chain as more regulation is put in place.”

“For green hydrogen, nearly all emissions are attributable to the electricity used by the electrolyzer. In principle, it should only be called ‘green’ if it uses 100% renewable power. However, the variability of renewables means that multiple electrolytic hydrogen projects are planning grid connections to maximize the utilization of electrolyzers and lower hydrogen unit costs. However, if the availability of renewable power is limited, there is a high risk that green hydrogen projects will need to connect to grids with very high carbon intensity,” the report stated.

According to Wood Mackenzie’s hydrogen value chain emissions model, emissions from green hydrogen produced from 100% grid power could be as high as 50 kilograms of CO2 equivalent per kilogram of hydrogen (kgCO2e/kgH2) if the electrolyzer is connected to a grid-powered by fossil fuels, and currently, at least 30% of the 565-gigawatt electrolysis (Gwe) of announced or operational green hydrogen projects are expected to be grid-connected, as shown in Wood Mackenzie’s Lens Hydrogen project tracker, Wood Mackenzie noted.

In the case of blue hydrogen, emissions can come from upstream natural gas production, transportation, reforming and energy use, and in principle, almost all these emissions can be captured and stored, Wood Mackenzie said but pointed out that capturing more than 60% of the carbon dioxide from hydrogen production is costly and has yet to be proven at scale.

Hydrogen’s carbon intensity isn’t just limited to its production, the report further stated, emphasizing the importance of understanding its full life-cycle emissions, including processing ammonia and transportation.

De La Cruz said: “If transport is required, production emissions for hydrogen only tell part of the story, as unaccounted, often substantial, emissions occur through the rest of the value chain. For example, any future trade in hydrogen between Australia and Northeast Asia or the Middle East and Europe requires hydrogen to be shipped across significant distances.”

According to the report, for future developers and buyers of blue and green hydrogen, it is critical to consider emissions abatement strategies across each step of the value chain, and emissions from transport and processing can make a critical difference in whether hydrogen sources can meet regulatory requirements.

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