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Green Hydrogen Economy Far Away

Hydrogen will play no significant role in decarbonising the global economy for at least a decade, and its success beyond that remains uncertain, according to a new report by Moody’s. Hydrogen is an energy-rich combustible gas that releases no carbon dioxide when burnt, and is widely seen as a promising clean energy source in a net zero world. Moody’s said green hydrogen – which is made by splitting water into hydrogen and oxygen using a renewable-powered electrolyser – could be used in the near term to decarbonise oil refining and the chemicals industry. Longer term, it could be used in aviation, trucking, shipping, cement, steel and the power sector. But to fulfil this potential, “substantial” advances will be needed to remove technological, commercial and logistical obstacles, the report found. Well-designed policy support will also be necessary, Moody’s added. Despite the hype around hydrogen, today the majority of its use is in oil refining and chemicals production. Just 5% is used in steelmaking – a sector overwhelmingly dominated by coal – and negligible amounts are used in transport, energy generation, and other industrial applications. In addition, today most hydrogen is manufactured using fossil fuels – in a process that extracts hydrogen from fossil methane gas, producing CO2 as a byproduct and contributing 3% of global carbon emissions. Moody’s said replacing this so-called “grey hydrogen” with currently much more expensive “green hydrogen” made with water and electricity will require cost reductions. It also found that of the 1400 low-carbon hydrogen projects announced globally, only 7% have reached final investment decision. The report warned that those 1400 projects would require vast amounts of renewables to be built – equalling a quarter of all renewable capacity globally. It could also put a worrying strain on water sources, Moody’s added.

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