'Not even a carbon price of €200 would make green hydrogen cost-competitive this decade'

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Datum: 10-12-2021

Governments will therefore need to subsidise the ramp-up of renewable H2 — and it would be a 'bad idea' to use the fuel for cars and heating, says think-tank report

Green hydrogen will be so much more expensive to produce than grey H2 from unabated fossil fuels, on average, that not even a carbon price of €200 ($237) per tonne — roughly four times higher than today — would make it cost-competitive this decade, according to a new report from German think-tank ?Agora Energiewende?.

Governments will therefore need to subsidise the required ramp-up of renewable hydrogen “for a considerable time” — at an annual cost of €10-24bn across the EU in the 2020s, says the study, Making renewable hydrogen cost-competitive, which was co-produced by analyst Guidehouse and legal firm Becker Büttner Held.

This means that the use of green H2 should be limited to only those sectors that “urgently need renewable hydrogen to become climate-neutral” — namely ammonia, chemicals production, steel, long-term energy storage, long-haul aviation and maritime shipping (the latter two using fuels derived from clean hydrogen).

Using green hydrogen for cars, the heating of buildings and low-temperature industrial heat is therefore a “bad idea” the report says.

It describes the use of renewable H2 for high-temperature industrial heat, trucks and buses, short-haul aviation and shipping as “controversial”.

And the notion of blending up to 20% hydrogen into the gas grid “would divert renewable hydrogen from uncontroversial applications that truly require hydrogen to become climate-neutral” and would therefore be “unsuitable for catalysing a renewable hydrogen ramp-up” — an argument that the natural-gas industry has been using to get government support for blending.

“Using taxpayer money to support renewable hydrogen in an era of already strained public budgets will require compelling justifications,” the report explains. “In particular, it will necessitate a basic agreement on where to prioritise investment and what kinds of projects are beyond question in terms of their compatibility with the goal of climate neutrality.

“Therefore, renewable hydrogen needs to be channelled into uncontroversial applications (as outlined above) with high priority.”

The study explains that “carbon pricing will be a cornerstone of the needed policy framework… getval.parsetemplate:Column 'but' does not belong to table Table.: fields:id, article_id, datum, title, shortname, summary, article, article_url, article_imageurl, article_imagecredit, externalurl, imageUrl, imageDescription, article_imageWidth, article_imageHeight, article_imageAlt, bron, siteid, created, creator, changed, changer, locked, locker, article_approved, article_approver, changedfields, keywords, facebook, twitter, article_type, article_comment, article_onstartpage, article_views, article_lastview, article_area, article_rank, article_onsubsites, article_entity, img_thumbnail, bcols, article_subject, article_name, href, breadcrumb, subject_name, subject_theme, theme, themeid, entity_name, entity_shortname, subjectshortname, reference_name, referenceshortname, article_reference, theme_name, theme_shortname, articletype_name, author, alternator, rowid, it is important to acknowledge its limits in the short to medium term”.

“When renewable hydrogen competes with fossil-based hydrogen, the lowest-cost renewable hydrogen in 2030 would need CO2 prices of around €100/tonne to break even. However, on average, renewable hydrogen technologies would need CO2 prices of around €300/tonne in 2030 to reach the break-even threshold.”

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