AUGUST 20258EUROPEEUROPEMY OPINIONINHydrogen is increasingly seen as a critical product for the energy transition as it offers the flexibility to decarbonise parts of the global energy economy that renewables cannot reach, including mobility, industrial processes and domestic heating. Indeed, the European Commission view clean hydrogen as ".... the missing part in the puzzle to a fully decarbonised economy". However, those active in the energy sector for a while will get the feeling that we have been here before, so will hydrogen now really develop as a key product in the energy transition and realise its full potential as a globally traded commodity rather than remaining a local, or at best, regional alternative for traditional energy sources?The answer to the first question seems to be an increasingly confident yes. Electrification of the energy sector with renewable energy is making significant inroads into decarbonisation targets but despite the increasing competitiveness (and scale) of renewables, it is not on its own the entire solution. It is increasingly evident that in order to meet climate change goals and the associated "net zero" targets being announced by an increasing number of governments and corporates around the world, we need to go beyond renewables and electrification to broaden the range of tools we bring to bear on the problem. Clean hydrogen offers something close to the flexibility that has made fossil fuels so indispensable in today's energy economy as it can be used as a feedstock or a fuel; it can be transported as an energy carrier and it can be stored for future use. Hydrogen is a clean alternative to the fossil fuel currently being used for many applications. However, the first challenge is what do we mean by clean hydrogen? Hydrogen produced thorough electrolysis of water (splitting the H2 from the O) using renewable electricity ("Green hydrogen") produces no CO2 emissions from the process. In comparison hydrogen produced by traditional thermal processes ("Grey hydrogen) emits CO2 from both the production of the heat required for the reaction (steam methane reformation - SMR) and as a by-product of the process itself. Adding carbon capture and storage enables some of the CO2 emissions (65-90 percent depending on the technology) to be captured to create cleaner hydrogen ("Blue hydrogen), but defining where a source of hydrogen sits on a sliding scale of clean(emission intensity) and valuing this will be important for international trade. The second challenge is how the market will be developed. A substantial amount of Grey hydrogen is already produced for use in various processes including the chemical industry, fertiliser CAN HYDROGEN DEVELOP INTO A GLOBAL COMMODITY LIKE LNG?By Allan Baker, Global Head of Energy Transition (Energy+ Group), Societe Generale Corporate & Investment BankingAllan Baker
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