Hydrogen has become relevant in recent times, due to its ability to decarbonize the sectors of the economy that are most difficult to electrify and allow the fulfillment of the climate commitments acquired by countries worldwide, as well as potentially being a new vector for energy exports.
Conceptually it seems simple to understand, hydrogen is generated from renewable sources (solar, wind, hydroelectric, biomass) to replace the use of fossil fuels in areas difficult to decarbonize such as heavy transport, maritime, aviation, heavy industry, etc. And as a result, the energy use of hydrogen generates water and oxygen.
At the end of the day, hydrogen molecules are identical regardless of whether they were produced by renewable energy or fossil fuels, there are no chemical characteristics that allow differentiation from how they were produced. But for the purposes of decarbonisation and the reduction of emissions associated with economic activity, we are particularly interested in how the production process of hydrogen molecules was.
How do we ensure that hydrogen comes from sustainable sources? Or how to quantify the impact on the sustainability of the hydrogen used?
In a recent blog post we began to dig into the answer, highlighting the importance of hydrogen sustainability certification.
Sustainability certification guarantees the required characteristics of hydrogen. There are three fundamental reasons why a hydrogen consumer would be interested in buying a product with sustainability certification:
Image of companies and their commitment to sustainability. The H2 certification provides certainty and security about the characteristics of the product in the market, agreed between all the participants of the market (producers, intermediaries, and final consumers). Many companies are betting their strategy and image as leaders in sustainability. For these companies, having a product that is certified sustainable has strategic value.
Strategies that consider the expected price of CO2 for the next decades. Considering the net emissions target for 2050, there are many discussions about which are the best mechanisms to achieve them depending on the context. However, the vast majority of forecasts expect a substantial increase in the price of CO2, both in existing and new markets that are expected to be created. The price of CO2 will impact the competitiveness of hydrogen. In this way, the certifications will be able to define the segmentation of the H2 market according to the environmental attributes and these will have an impact on the setting of prices. And to verify the final emission of CO2, it is expected that a premium will be paid for hydrogen that this certificate was generated by renewable sources – Green Hydrogen – compared to that generated by fossil fuels – Gray Hydrogen.
Regulations and restrictions on emissions in production chains. H2 certifications will serve as a reporting and verification tool to demonstrate and analyze the fulfillment of renewable energy goals or the reduction of emissions. The long-term strategies of many countries are beginning to have emission reduction goals not only in the energy sector, but also for industries and products. With these rules of the game, they can negatively impact, for example, the export of products from some industries that do not decarbonise their production.
Hydrogen sustainability
Hydrogen sustainability beyond colors: the certification process
December 17, 2021 by Federico Goldenberg – Cecilia Correa – Eric Daza – Michelle Hallack Leave a Comment
Hydrogen has become relevant in recent times, due to its ability to decarbonize the sectors of the economy that are most difficult to electrify and allow the fulfillment of the climate commitments acquired by countries worldwide, as well as potentially being a new vector for energy exports.
Conceptually it seems simple to understand, hydrogen is generated from renewable sources (solar, wind, hydroelectric, biomass) to replace the use of fossil fuels in areas difficult to decarbonize such as heavy transport, maritime, aviation, heavy industry, etc. And as a result, the energy use of hydrogen generates water and oxygen.
At the end of the day, hydrogen molecules are identical regardless of whether they were produced by renewable energy or fossil fuels, there are no chemical characteristics that allow differentiation from how they were produced. But for the purposes of decarbonisation and the reduction of emissions associated with economic activity, we are particularly interested in how the production process of hydrogen molecules was.
How do we ensure that hydrogen comes from sustainable sources? Or how to quantify the impact on the sustainability of the hydrogen used?
In a recent blog post we began to dig into the answer, highlighting the importance of hydrogen sustainability certification.
Sustainability certification guarantees the required characteristics of hydrogen. There are three fundamental reasons why a hydrogen consumer would be interested in buying a product with sustainability certification:
Image of companies and their commitment to sustainability. The H2 certification provides certainty and security about the characteristics of the product in the market, agreed between all the participants of the market (producers, intermediaries, and final consumers). Many companies are betting their strategy and image as leaders in sustainability. For these companies, having a product that is certified sustainable has strategic value.
Strategies that consider the expected price of CO2 for the next decades. Considering the net emissions target for 2050, there are many discussions about which are the best mechanisms to achieve them depending on the context. However, the vast majority of forecasts expect a substantial increase in the price of CO2, both in existing and new markets that are expected to be created. The price of CO2 will impact the competitiveness of hydrogen. In this way, the certifications will be able to define the segmentation of the H2 market according to the environmental attributes and these will have an impact on the setting of prices. And to verify the final emission of CO2, it is expected that a premium will be paid for hydrogen that this certificate was generated by renewable sources – Green Hydrogen – compared to that generated by fossil fuels – Gray Hydrogen.
Regulations and restrictions on emissions in production chains. H2 certifications will serve as a reporting and verification tool to demonstrate and analyze the fulfillment of renewable energy goals or the reduction of emissions. The long-term strategies of many countries are beginning to have emission reduction goals not only in the energy sector, but also for industries and products. With these rules of the game, they can negatively impact, for example, the export of products from some industries that do not decarbonise their production.
What are the potential benefits of certifying hydrogen?
Both producers and consumers will be able to benefit. They may have financial benefits such as access to tax incentives or tax reductions, subsidies and special financing programs. The certification provides traceability, transparency and trust to the process, and in particular the final consumer for the contribution with the fulfillment of obligations.
Certifications may facilitate access to sustainable financing, thus impacting the cost of capital and profitability of projects. And they will be able to allow the industry to guarantee the low carbon content of its products, generating a comparative advantage or even a need to remain in some markets, such as Europe.
In addition, for the countries of Latin America and the Caribbean that are emerging as potential H2 exporters, it must be considered that the certification schemes will allow them or not to enter certain markets or jurisdictions that have restrictions regarding emissions associated with H2.