The consequences of COP26 have been framed as existential for our planet. For the energy sector, hydrogen has been a central focus of the conference, and Baringa Partners believes that industry must partner with the government to kickstart investment in it.
To harness hydrogen’s extraordinary potential, three key elements will need to be addressed:
- A clear regulatory framework, which includes a body with oversight for ensuring we meet hydrogen commitments
- Industry buy in – particularly focussed on demonstrating the use cases for hydrogen with customers
- Government support - Joe Biden’s Build Back Better Bill, for instance, pledges to create a tax credit for clean hydrogen production starting in 2022
Global renewables will form the bedrock of a low-carbon future, but hydrogen could be an essential stepping stone on the path to Net Zero. To unleash its potential, action is needed both from industry and governments around the world,
State-backed pathway projects could kickstart a hydrogen-powered renewable revolution. But industrial stakeholders must play a role too. As Shell CEO Ben van Beurden noted, oil and gas majors will underpin hydrogen growth in years to come. However, until the sector reaches independent commercial viability, such companies will continue to rely on carbon-intensive legacy projects as a revenue source. Governments could provide an initial financial injection for hydrogen projects, but industry also needs to play its part.
Holding unique expertise and industrial scale, oil and gas giants are well-positioned to accelerate our transition to renewables. By investing in hydrogen-based pilot projects, the UK Government could build on the impressive decarbonisation progress it has made to date. For their part, industry must clearly identify customer use-cases, to drive market demand for hydrogen over the long-term.
Construction giant JCB recently signed a multi-billion pound deal to power its machines with hydrogen energy. But its uses go well beyond transportation, holding strong potential for sectors which are hard to decarbonise, such as steel production, marine fuels, and heating. Hydrogen’s development remains at an early stage, but with the right level of attention from governments and industry, it may form a cornerstone of our low-carbon future.
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