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International Collaboration is the Key to Accelerating Clean Hydrogen

Isabella Notarpietro | Climate Change Fellow

Image credit: Gary Killian via Freepik

In the recent May budget, the Australian government announced a further AUD$2 billion to support clean hydrogen initiatives. The announcement follows a global trend of government investment in clean hydrogen; in 2022, the US announced tax credits of up to USD$3 per kilogram for the production of low-emission green hydrogen while numerous European countries, including France and Spain, doled out multi-billion dollar investments.

These significant public investments are driven by a desire to win the green hydrogen race. Countries want to become global supply leaders and capture crucial export markets, such as Japan and South Korea. However, with the realisation of cost-competitive clean hydrogen production at scale still presenting many challenges, focussing on international collaboration–rather than competition–could be the key to accelerating clean hydrogen trade and its decarbonisation benefits.

What is clean hydrogen and why do we need it?

Clean hydrogen refers to hydrogen with a low emissions intensity produced using renewable energy sources. At present, only around one per cent of the almost 100 Mt of hydrogen produced every year is derived from renewables. The remaining ~99 per cent is derived from fossil fuels, which produce over 900 Mt of carbon dioxide annually. Hydrogen is currently used in a range of industrial applications, including fertiliser production, food processing, and metal treatment.

National and international decarbonisation commitments have resulted in significant interest in shifting hydrogen production away from fossil fuels to renewables. The International Energy Agency predicts that in a Net Zero scenario, hydrogen demand in 2030 will almost double to 180 Mt, with over half of this demand deriving from new applications associated with hydrogen’s decarbonisation potential. Clean hydrogen currently fetches a price at least two to three times higher than fossil-fuel-derived hydrogen, meaning that realising these new applications requires rapid declines in production costs.

With a potential hydrogen market exceeding US$1 trillion by 2050, countries are in a "global race" to rapidly realise low-cost, at-scale clean hydrogen production. Doing this in the timeframes desired, however, comes with a host of technical and economic challenges. International collaboration is the only solution for overcoming many of them, particularly those related to hydrogen trade, production costs, and demand.

1. Global Hydrogen Certifications

Despite adjectives such as clean, green and low carbon attached to many national hydrogen schemes, there are no global standards qualifying hydrogen’s emissions intensity. While some regional and national schemes have emerged, such as the EU’s CertifHy and Australia’s Guarantee of Origin initiative, the International Renewable Energy Agency cautions that “none of the existing hydrogen certification systems are suitable for cross-border trade.” The international community must develop an internationally recognised and harmonised hydrogen certification scheme to build trust in and facilitate the global trade of genuine, low-emissions hydrogen.

2. Electrolyser Costs

Unlike fossil fuel-derived hydrogen, green hydrogen is produced by an electrolyser, which uses electricity to split water into hydrogen and oxygen. Much of the price difference between hydrogen produced from fossil fuels and renewables largely stems from the cost of purchasing these electrolysers. While costs are decreasing, this trend needs to accelerate to meet decarbonisation goals.

The Oxford Institute for Energy Studies found that scaling up electrolyser production and encouraging companies to specialise in the production of certain electrolyser elements will be critical for driving prices down the cost curve. Though many countries are trying to advance domestic electrolyser manufacturing, including Australia, not enough attention has been paid to how combining existing manufacturing capabilities could assist at the regional and global levels. The potential benefits of this approach are highlighted by the EU’s European Electrolyser Partnership which seeks to “bring together electrolyser manufacturers and suppliers of components and materials.” Similar initiatives in other regions, such as the Indo-Pacific, need to be investigated.

3. Advancing Demand-Side Technologies

Despite healthy projections for green hydrogen demand in the future, there are currently significant technological and economic barriers associated with end uses in industry. Many agree that the primary role of hydrogen in a net-zero future will be for “fuel switching” with fossil fuels in hard-to-abate industries, such as steel, alumina and ammonia production. McKinsey, however, notes that currently, the technical feasibility of fuel switching is yet to be proven at scale and carries high risks and costs.

With widespread reluctance to make the large investments needed to trial the scale-up of these technologies, fostering global partnerships amongst public and private sector organisations would reduce risk exposure and enable more ambitious technology pilot programs.

These sorts of initiatives are already beginning to take place. Australia, for example, has partnered with South Korea and the UK to advance industrial technologies which use clean hydrogen. Expanding these bilateral partnerships to more regional initiatives and involving more private-sector organisations, who will likely own and operate the hydrogen production facilities, will be an important step to improving the feasibility of hydrogen fuel switching while reducing costs.

Competition Versus Collaboration – Mutually Exclusive?

Competition has played an important role in driving down the costs of clean technologies to date. But so too has international collaboration. With a large supply-demand gap for clean hydrogen and numerous challenges to realising clean hydrogen production, countries should stop trying to win the race and instead help everyone get across the line. Doing so would help win the real race of rapidly reducing global emissions.

Isabella Notarpietro is the Climate Change Fellow for Young Australians in International Affairs.


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