Experts expressed optimism about the development of the hydrogen industry at an online conference last week (February 22).
At the World Hydrogen Leaders event, panelists - including the Institute of Export and International Trade’s (IOE&IT) Sandra Cooper - highlighted high levels of investment and government support while discussing the way in which regulation is shaping the industry’s development.
They also noted the need for cross-country collaboration on certification schemes regulating the industry that could ultimately boost trade and strengthen energy networks.
Many countries, including the UK, have adopted a hydrogen strategy as part of their net zero goals, with some allocating funding through green industrial subsidy programmes.
Investment drive
Daria Nochevnik, director for policy and partnerships at the Hydrogen Council, highlighted the rapid increase in investment in recent years.
Describing “continued momentum” around hydrogen deployment, she said that, in 2022, US$20bn of final investment decision funding was directed towards hydrogen projects, and this rose to $30bn last year.
“It used to take the industry 10 years to get to $1bn,” she said.
“It may not seem like these are the biggest numbers but when you take in the historical perspective, we’re making tremendous progress.”
Certificate collaboration
She also said the industry’s infancy was an opportunity to ensure national certification frameworks had strong “interoperability” between countries, enabling them to demonstrate compliance with regulations and access funding.
She emphasised the need for fungible, easily-tradeable certificates that can facilitate trade and build cross-border value chains, adding that this would ultimately help diversify the hydrogen economy and optimise energy systems globally.
She noted the success of COP28 in December, when 40 countries signed a declaration committing to securing mutual recognitions of their certification schemes.
However, in order to achieve this, she cautioned that greater collaboration between countries is required, ensuring standardisation of key terms across frameworks.
UK perspective
Annabel Sarling, energy certification manager at the Low Carbon Contracts Company, spoke about the UK’s approach to incentivising hydrogen production as “exemplary” for its combination of private contracts and government funding.
She praised the Low Carbon Hydrogen Certification Scheme, which will launch in 2025 as a strong approach to incentivising low-carbon methods of hydrogen production, characterising it as “ensuring the market can be competitive from day one, empowering producers from across the value chain to engage with government support”.
She ended by saying that the project is forecast to create £2bn from its first allocation round alone.
Like Nochevnik, she was optimistic for the future of the industry, saying that hydrogen was “punching above its weight” in terms of the newness of the industry and the scale of funding it attracts.
US perspective
Roxana Bekemohammadi, founder and executive director of United States Hydrogen Alliance, praised US government support for hydrogen projects, which she believed had contributed to a lot of international investment.
Beginning with the inception of Hydrogen Hubs – $7bn in funding for up to 10 hubs to form a clean energy network across the country – which were approved in 2021, she also raised the Inflation Reduction Act (IRA), the US green stimulus package which made $13bn available to the industry in the form of tax breaks.
However, she was critical of the introduction of stringent new eligibility criteria, such as the adoption of the EU’s ‘three pillars’ approach, requiring that hydrogen be produced with clean energy. This, she said, has “rattled and destabilised” projects that were funded through hydrogen hubs.
She described the new rules as “extremely restrictive” and having “compromised the cost-effectiveness” of existing projects initiated under Hydrogen Hub funding.
Reflecting on the difference between US and EU approaches to funding hydrogen projects, Bekemohammadi added that US businesses are used to operating in a far less regulated environment and adopting a European approach has “introduced an element of chaos” to the project.
CBAM
By contrast, Sandra Cooper, trade and customs specialist at IOE&IT, praised the EU for creating more robust measures to ensure high environmental standards.
She acknowledged the significance of the EU’s Carbon Border Adjustment Mechanism in the development of the industry globally, along with many other foundational products covered by the duty, such as electricity, cement, steel and iron.
She said that she “admired” the EU for its recent drive to “ramp up” efforts to address ‘carbon leakage’ – the emissions created when a company outsources high-polluting production processes to countries with less stringent environmental standards.
Addressing claims that the duty on higher-polluting imports has been perceived as protectionist, she said that ultimately CBAM is designed to act as a “safeguard” against carbon leakage to protect the environment.
IOE&IT members can learn more about CBAM at our Lunchtime Learning webinar tomorrow.
