The renewable hydrogen situation has advanced significantly in recent years; driven to a large extent by all the public financing opportunities derived from the Next Generation funds, as well as by a multitude of private investments and the commitment of companies and public bodies to the energy transition.
In recent years there has been an ideal framework that has favored the deployment of and interest in this energy vector, which promotes energy independence by reducing dependence on imported fossil fuels, thus improving the energy security of countries.
Advantages of renewable hydrogen
The advantages of renewable hydrogen are numerous and range from environmental sustainability to its contribution to the country’s economic fabric and technological development:
- As it is produced from renewable energy sources, green hydrogen does not emit greenhouse gases, making it a key option for decarbonizing sectors that are difficult to electrify, such as heavy industry and long-distance transport, while also contributing to climate change mitigation.
- In addition, it can act as a form of energy storage, allowing excess energy generated by renewable energy sources to be stored and released when demand is high, thus balancing the electricity supply and demand curve. It helps, therefore, to manage the intermittency of renewable energy sources such as solar and wind, providing a much more stable source of energy.
- On the other hand, it can be used in various applications and in a multitude of sectors, including power generation, heating, transportation fuels (light and heavy vehicles, trains, and aeroplanes), as well as raw materials in industry (especially in the chemical, oil refining and fertilizer industries).
- It can also be blended with natural gas in the existing infrastructure (blending), facilitating a much smoother transition to a hydrogen-based economy.
- On the other hand, it contributes to job creation, since the entire deployment of the infrastructure needed to produce renewable hydrogen offers numerous jobs in sectors such as electrolyser manufacturing, operation and maintenance, and project engineering.
- Finally, it drives innovation and the development of new technologies, fostering the growth of the renewable energy industry. Universities, research centres and companies have been collaborating for years in R&D projects to improve efficiency and reduce green hydrogen production costs.
Main challenges of renewable hydrogen
However, and in spite of its great potential, renewable hydrogen presents a multitude of challenges that will have to be overcome for it to really become a fundamental part of the energy future.
The main challenges are the following:
- First, for renewable hydrogen to be an effective lever in decarbonization, it is necessary not only to produce it, but also to create the necessary demand. This connection between supply and demand is a major challenge facing all projects today.
- Tackling the high cost of producing renewable hydrogen compared to conventional alternatives is also proving difficult. Fundamentally, this high cost will depend on the price of electricity, since it is necessary to cover the energy demand in the time periods in which the renewable installation associated with the electrolyser is not supplying energy.
- In this sense, in order to deploy the hydrogen market and, above all, for it to be competitive, access to financing is necessary, it is currently very difficult for a company or an industry to ensure the consumption of renewable hydrogen in a period of 20 or 25 years. This is a very complicated commitment, since it is not known how the market will develop in the coming years. In terms of financing, more support is also needed for the hydrogen consumption side, not just the production side.
- The entire infrastructure required for its production, storage, transport, and distribution is not yet fully developed.
- The energy efficiency of the electrolysis process and the end uses of hydrogen may be lower compared to other storage and energy alternatives, which may make it an unattractive option for many companies.
- On the other hand, large-scale green hydrogen production still presents technological and economic challenges that must be overcome to become a competitive alternative, so scalability is another challenge that must be taken into account.
- Finally, and derived from all of the above, it is important to highlight the enormous difficulty in executing projects. There are viable and very powerful projects at a technical level that have been winners of some calls for public grants from the Recovery, Transformation, and Resilience Plan aimed at promoting renewable hydrogen published in recent years. However, it is happening that many of them are having to give up the grants, either because they do not find firm commitment from hydrogen consumers (offtakers), or because of the high cost of hydrogen production, or in some cases also because it is very difficult to meet the requirements of the administration. Very mature projects are needed, with advanced administrative and environmental procedures. Anticipation is the key.
Therefore, renewable hydrogen has great potential to contribute to the energy transition and emissions reduction, but still presents significant challenges that need to be addressed for its proper deployment.
In summary, renewable hydrogen, despite the challenges it still presents, offers a number of advantages that position it as a crucial component in the transition to a more sustainable, low-emission economy. As the technology develops and the scale of production increases, costs are expected to decrease, making renewable hydrogen a more viable and competitive option.
Its versatility in diverse applications and its potential to drive energy independence and technological innovation make it a promising option for the future of the energy sector.
Blanca López
Energy Sector Leader
