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Clean hydrogen is emerging as a pivotal energy carrier in the global quest for decarbonization, marking a notable shift in the variety of sustainable energy levers available. As the world grapples with the urgent need to reduce greenhouse gas emissions and combat climate change, clean hydrogen has risen to prominence as a low-carbon energy source.
Hydrogen is a versatile fuel with beneficial properties that make it a powerful low-carbon technology. It has the capability for quick refueling and a light payload capacity that make it an attractive option for the heavy-duty trucking industry. Hydrogen gives big trucks that haul long distances a lightweight but power-packed resource for their journey. Think of hydrogen as a super battery. It can store a lot of energy without being heavy, and it's more flexible than regular batteries. Hydrogens' high flame temperature also makes it an attractive option for decarbonizing high-temperature heating applications. Its high burn temperature makes it perfect for jobs that need a lot of heat without impacting the climate (as its subproduct is water, H2 + O2 = H2O).
Hydrogen also provides a unique financial opportunity in that it can be produced when there is extra clean energy (from solar or wind) and used to make electricity when it's in high demand. Some industries, like those making fertilizers, have used hydrogen for a long time. However, they used a form of hydrogen from a carbon-intensive, fossil-fuel-based production method. The emphasis now is on moving to a cleaner version of this fuel.
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While clean hydrogen is full of promise, it is still an emerging technology that is expensive, complex, and unclear to many. The implementation of a hydrogen valley has the potential to combat these barriers, driving the technology of clean hydrogen even further, and creating a virtuous cycle of growth and adoption.
Broadly defined, hydrogen valleys aim to enable the emergence of locally integrated hydrogen ecosystems spread across a defined geographic scope (a city, region, island, port, or industrial cluster). They are designed to cover a substantial part of the value chain—from clean hydrogen production, storage, and transport to its end use in various sectors (industry, mobility, energy)—with the goal of climate change mitigation and regional economic development. This is the central premise behind the recently announced U.S. Department of Energy Regional Clean Hydrogen Hubs. While these hubs are exciting and potentially transformational for the U.S. clean hydrogen market, it’s important to note that regions can develop and nurture H2 Valleys even without this scale of governmental support.
Just as a valley brings together different flora and fauna to be in symbiosis, a hydrogen valley would bring together the supply, distribution, and demand sides of the same area to create value together, allowing regions to overcome key barriers to utilizing clean hydrogen, including risk, complexity, and financial investments.
The establishment of a hydrogen value chain indeed presents a classic "chicken or the egg" dilemma, a situation where two interdependent factors, in this case, the production and utilization of hydrogen, rely on each other to succeed, yet neither can start without the other. The primary issue lies in the fact that hydrogen, as a clean energy carrier, requires a fully functional value chain spanning production, storage, transportation, and utilization to become economically viable and accessible to a wide range of industries and consumers. However, establishing this comprehensive value chain is an expensive and complex undertaking, and many potential investors and stakeholders hesitate to commit substantial resources without a guaranteed market for hydrogen products.
This predicament poses a challenge to the adoption of hydrogen as a clean energy source and necessitates a bold coordinated action to break the deadlock.
The hydrogen valley approach identifies supply, demand, and supporting infrastructure simultaneously. Otherwise, it's far less efficient, and potentially impossible to focus on one and expect the other two to follow on their own.
ENGIE Impact collaborated with a coalition comprised of the South African Department of Science and Innovation, Anglo American, Bambili Energy, and ENGIE. Together, we identified the Bushveld complex and the expansive region encompassing Johannesburg, Mogalakwena, and Durban to develop a hydrogen valley. This area naturally fosters green hydrogen initiatives because its varied sectors show potential for hydrogen adoption and ongoing hydrogen projects. The valley is home to numerous industrial entities and a significant freight route connecting major cities, ports, and public infrastructures where hydrogen fuel cells can mitigate regular grid disruptions. Notably, within this region, the petroleum behemoth, Sasol has been pioneering grey hydrogen ventures and integrating hydrogen into its chemical operations. The valley has also witnessed early applications of hydrogen-powered vehicles, including trials in the mining industry and warehouse forklifts. In essence, the valley's mix of potential hydrogen consumers and existing hydrogen initiatives sets the stage for a thriving large-scale hydrogen valley in the future.
The hydrogen value chain presents a multifaceted landscape, offering a wide range of technological alternatives for production, transportation, storage, and final utilization. The optimal choice for each segment hinges on a delicate interplay between regional contexts and the specific demands of end-users. It's important to recognize that what may appear as the ideal solution from the perspective of hydrogen producers might not align with the preferences and needs of hydrogen consumers.
For example, a hospital may need hydrogen for backup power during emergencies, but the suppliers may have already fully committed their hydrogen resources to customers with predictable needs. Hydrogen valleys help by bringing together more suppliers and customers in one place, making it easier to match supply with demand. This means the hospital can find hydrogen more easily in case of an emergency.
ENGIE Impact is partnering with the state of Connecticut to create a roadmap that will help define the role of clean hydrogen in the state’s economy and guide the industry’s growth there. ENGIE Impact is supporting Connecticut in establishing a definition of clean hydrogen so that producers have clarity on the carbon intensity and other attributes of the fuel the state and major customers are prepared to support and purchase. This definition takes into account the carbon intensity requirements established at the U.S. federal level that help determine which methods of hydrogen production qualify for tax credits and at what level. The ENGIE Impact team also held stakeholder interviews with a range of end users to understand which applications hydrogen makes the most sense for and in what volumes, so that producers can right size their plants and understand timing related to scale.
Establishing the necessary infrastructure for hydrogen production, storage, and distribution requires significant upfront investments. Electrolyzers, storage tanks, pipelines, and fueling stations all come with substantial price tags. Additionally, integrating renewable energy sources like wind and solar into hydrogen production can be costly, involving the installation and maintenance of renewable energy systems.
Although costs are dropping through both R&D and government funding, clean hydrogen today is still often not cost-competitive with incumbent technologies. It can be even more expensive when needed to transport or store, as both processes require cold temperatures and high pressures. To make clean hydrogen economically viable and scalable, regions must assess their own resources to find the least cost hydrogen value chain across a given region.
Following the work done in South Africa, our experts in ENGIE Impact worked for Anglo American and conducted hydrogen valley analysis in Chile and Peru to identify prime locations for green hydrogen development.
In Chile, the work led by Anglo American in collaboration with the Hydrogen Technologies Unit of the Catholic University of Chile found that establishing a green hydrogen valley in eight central areas could lead to an initial investment of U.S. $3.5 billion, create around 10,000 jobs, and reduce CO2 emissions by 3,000 Ktons annually.
In Peru, a partnership between Moquegua Crece and H2 Peru (the Peruviana Hydrogen Association) explored the potential of the country's southern region as a green hydrogen valley. The study highlighted opportunities for both local and international markets, with the potential to establish up to six green hydrogen hubs. This could create between 3,400 and 74,000 direct jobs and boost the regional GDP by US$ 800 million to 4 billion.
Partnering with an industry expert to spearhead the implementation of hydrogen valleys is key to ensuring the success of the solution. As a global energy leader, ENGIE boasts a deep understanding of the complexities involved in transitioning to sustainable energy systems. With a proven track record in renewable energy integration, ENGIE Impact possesses the expertise needed to bridge the gap between conventional and hydrogen-based energy sources.
In the face of climate change and the urgent need for innovative sustainable energy solutions, regions can utilize hydrogen valleys to unlock the full potential of clean hydrogen, driving its technology further, and establishing a virtuous cycle of growth and adoption. This solution represents a beacon of hope, offering a tangible pathway towards a greener, more environmentally friendly future.
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