Hydrogen has been labeled the ultimate clean fuel for decades, but until now there has been no path towards developing it economically and cleanly. All that can now change due to the growth in clean alternative energy generation from Wind, Solar, and even controversial Carbon Capture technology.
Hydrogen is most commonly produced by electrolysis or Steam Methane Reforming (SMR). The electrolysis process itself is a clean process, the challenge has been obtaining clean energy to power the electrolysis process. With the world now having significant power generation from Wind and Solar, it now becomes feasible to create hydrogen from these new sources of power.
Why Hydrogen?
Why would you want to create Hydrogen from renewable power instead of just using renewable power? Well, you can think of hydrogen as stored energy that can be used later on demand. The disadvantages of Wind and Solar center around matching generation with demand. By converting the storing that energy in the form of hydrogen, it solves that matching problem.
Types of Clean Hydrogen
Green Hydrogen
Green Hydrogen is defined as hydrogen produced entirely from clean energy such as Wind or Solar.
Blue Hydrogen
Blue Hydrogen is defined as hydrogen produced from fossil fuel sources such as Natural Gas, but paired with technologies such as Carbon Capture so as to effectively remove the pollution from the process. The main bottleneck to adoption of Blue Hydrogen has been economically viable solutions to integrate Carbon Capture.
Market Outlook
Due to the Inflation Reduction Act, 2022 is expected to be the start of major investment growth in the hydrogen market, up to 4 Trillion dollars invested by industry according to some estimates.
Currently, the market for hydrogen is localized to industries that require it as input – industries such as petrochemicals and refining. However, if hydrogen can be created cheaply then it can be used as a replacement for fossil fuels, which means the worldwide applications are enormous. Before that transition can take place, the full supply and demand markets must be created.
With the IRA offering a $3/kg credit for the production of clean hydrogen, companies now have a viable economic incentive to create a supply of hydrogen, thus spurring correlated investments in the demand markets. Ultimately the hope is for engineering efficiencies to be leveraged and the $3/kg credit will no longer be needed to support the investment in supply.
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