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The growth of national and supranational "net zero" goals has been one of the most prominent aspects of climate policy over the last couple of years. Europe, the UK, China, South Korea, Japan, Canada, South Africa, and a handful of US states are countries and regions that started implementing these goals.
Although these are long-term targets their effects are significantly greater than for example 80% decarbonisation target. The problem with 80% decarbonisation is that a big range of carbon-intensive industries will presume they are in other 20% that don't have to change. There is nowhere to hide, and no opt-outs, once a net-zero goal is adopted.
That takes us to green hydrogen: the technology that is likely to be key to tackling carbon emissions that are more difficult to eliminate. It is possible to decarbonise power generation and the automotive industry with renewables and batteries. Heating, too, can be decarbonized in some regions by the use of heat pumps powered by renewable energy.
Such developments alone need a large build-up of renewables. But the technical solution seems likely to include green hydrogen in heavy transport and shipping, industrial processes such as steel manufacturing, long-term energy storage for the grid, and certain types of heating.
When hydrogen is produced by electrolysis of water, with electricity coming from renewable energy, only then it can be classified as 'green'. Usually, hydrogen used today is produced by coal gasification or from natural gas. In these cases, it's certainly not green. Ramping up green hydrogen, therefore, has a multiplier impact on the latest renewable energy predictions, which typically concentrate on direct electrification and decarbonisation rather than 'indirect' electrification and hydrogen decarbonisation.
A recent Bloomberg New Energy Finance (BNEF) study lays out a potential energy transition path, looking at how the world could decarbonise to a sustainable level (1.75 degrees of warming) based on the production increase of clean electricity and green hydrogen. Hydrogen makes up less than 0.001 percent of the final energy today, but it rises to about 25 percent under the BNEF scenario: a huge expansion.
The global power sector is expanding to 43 terawatts (TW) in 2050 under the sustainability scenario, from 7.4TW in 2019 as electricity takes share from other energy sources. Solar PV capacity increases from 0.64TW in 2019 to 16TW, and onshore wind capacity increases from 0.6TW in 2019 to 11TW. To achieve the 1TW goal of combined solar PV and wind installations took nearly 20 years.
This scenario requires almost 1TW of renewables (375 gigawatts (GW) of wind and 540 GW of solar PV) to be integrated every year for the next two decades. BNEF predicts about 72GW (0.07TW) of wind installations and about 127GW (0.13TW) of solar installations for 2020. It is clear that in the coming years, renewable deployments need to accelerate considerably.
Even accounting for continuing cost decreases, to sustain this development of renewables, a step-change in capital spending is required. BNEF estimates that in the next 30 years, only concentrating on the growth of the power system under the renewable scenario requires about $35.1 trillion in investment in batteries and power generation.
For industries that can not be decarbonised by direct electrification, layering on the additional capacity will require yet another $11.6 trillion to produce green hydrogen.
Expansion of the scale of the renewable sector will help not only the suppliers of renewable equipment (turbines, supply chain solar panels, inverters) but also the beneficiaries of ancillary equipment spending needed to incorporate all of it into the system, such as cables and networks. Now the question is how much has already been priced in?
Although there is a lot of uncertainty around the above-mentioned route, and the green hydrogen economy will have to be carefully watched, what is obvious to us is that predictions do not yet take into account this possible growth.
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