IEA: Low-Carbon Hydrogen Needs Major Cost Cuts

The use of low-carbon hydrogen and ammonia in fossil fuel plants could be key to ensure security in electricity supply while the world is moving toward cleaner energy sources, the International Energy Agency (IEA) said in a new report. The agency noted, however, that production costs of low-carbon hydrogen and ammonia fuels need to fall significantly in order to be competitive with other forms of energy, including fossil fuels.

Low-carbon fuels can play an especially important role in countries or regions where the thermal fleet is young, or when the availability of low-carbon dispatchable resources is constrained, for example in East and Southeast Asia, the IEA said in its report.

“By 2030 the cost of low-carbon hydrogen and ammonia for use as chemical feedstock becomes comparable to those of unabated production from fossil fuels. However, for use as a fuel, they are expected to remain significantly more expensive than projected prices of coal and natural gas in 2030 in the SDS [Sustainable Development Scenario],” the international agency noted. 

By the end of this decade, low-carbon hydrogen and ammonia are likely to remain expensive energy carriers for power generation, the IEA says.

The agency’s findings also suggest that “a portfolio of policies is required to compensate for cost gaps.”

Decisive government action is necessary to support low-carbon hydrogen, the IEA said in its Global Hydrogen Review 2021 earlier this month.

Investments in hydrogen are growing, and interest is high, but additional supportive policies are needed to reduce production costs and incentivize hydrogen usage in various sectors, the agency said.

“Governments need to take rapid actions to lower the barriers that are holding low-carbon hydrogen back from faster growth, which will be important if the world is to have a chance of reaching net zero emissions by 2050,” the IEA Executive Director Fatih Birol said.

By Tsvetana Paraskova for Oilprice.com

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