Green Hydrogen: The energy opportunity for decarbonization and developing countries

Author(s): UNIDO

07 November 2022

Hydrogen is one of the most abundant elements on Earth, and it represents to us a unique opportunity for a clean energy transition. The past years show clearly just how close to a climate catastrophe we are living. Climate change is an existential threat to a sustainable future. Facing up to the climate challenge is an opportunity to promote prosperity and a brighter future for all.

Green hydrogen (GH2) and its derivatives will play a vital role in that transition. Hydrogen is classified as “green” – a clean and renewable energy carrier – when it is produced through electrolysis powered by renewable energy.

GH2 is a game changer for the hard-to-abate sectors such as steel, cement and the chemical industry, which cannot readily be electrified. It is currently the only way we have to decarbonize these sectors.

GH2 is versatile as it can be used as a combustion fuel or as feedstock for industrial processes. It can also be converted back into electricity in a fuel cell. Compared to grid renewable electricity, it can be more easily stored and transported over long distances for use further from the initial renewable energy source.

Because GH2 electrolysis does not need to be near geographically concentrated or hard-to-extract resources, it can be key in establishing energy security.

Derivatives of GH2, such as green ammonia and green methanol, are long-term energy carriers. They store surplus renewable electricity produced during periods of low demand. Just like GH2, its derivatives can be used as industrial energy source, be used as green feedstock, or used as green transportation fuel.

Green Hydrogen is a game changer for the hard-to-abate sectors such as steel, cement and the chemical industry, which cannot readily be electrified.

Green hydrogen needs green energy: the transition needs a huge increase in renewable energy generation.

Green ammonia is synthetically manufactured by combining nitrogen with hydrogen using renewable energy sources. Green ammonia can be applied in sustainable fertilizer production, thereby contributing to decarbonizing the food value chain, while supporting agricultural productivity and food security.

We still have our work cut out for us in making the energy transition a reality. No mature GH2 market exists yet. It is, however, encouraging that the number of countries with national hydrogen roadmaps has tripled over the last year. This shows that many countries are readying themselves to start using GH2 and planning how best to benefit from the economic opportunities it will provide.

At UNIDO, we are putting together development programmes to help developing countries achieve this goal and realize the opportunities for sustainable industrialization that follow.

Financing the transition

It is estimated that a real global hydrogen transition will need $15 trillion of total investment1. Green hydrogen needs green energy. The transition needs a huge increase in renewable energy generation – 85% of the total investment needs relate to this.

The remaining 15% come from investment in equipment and infrastructure: electrolysers, production facilities, and hydrogen transport and storage.

Given its early stage of development, the GH2 market needs encouragement to quickly and successfully scale up. This means further financial support mechanisms are needed to level out prices on the market for green goods compared to fossil-based intermediate and end-products.

Only a fraction of the required investment for the GH2transition will be directly financed by governments, with $70 billion committed to date. Private finance is absolutely necessary.

In this critical early period, governments nevertheless have a central role to play in making high-risk projects bankable, e.g. with grants, loans and guarantees. Through demand-side policies, government action can compensate for the current cost-gap to create the right market conditions for a GH2investment take-off.

The opportunity is too good to pass up. We need a worldwide investment offensive to find and secure this funding so that the environmental and economic benefits can be realized as soon as possible. UNIDO is working towards such funds mobilisation for GH2 projects.

Sustainable industrial development and agricultural opportunities

Beyond the widely acknowledged benefits of a GH2 transition, UNIDO views it as an opportunity for new industrial development pathways and skills upgrading. This is especially true for developing countries, many of which are well-positioned to be GH2 producers due to their vast renewable energy potential. This is why UNIDO is channeling its support to those countries to unlock their GH2 potential.

Beyond the widely acknowledged benefits of a green hydrogen transition, UNIDO views it as an opportunity for new industrial development pathways and skills upgrading.

Agricultural sectors can also benefit from the production of green ammonia for carbon-neutral fertilizer products.

Industrialization opportunities come from “complete value chain manufacturing”, which includes production along the entire GH2 value chain, including the production of renewable energy hardware, electrolysers and GH2 derivatives. We can create GH2 industrial clusters, where renewable electricity generation, GH2 production and GH2up-takers are brought physically closer together for inter-reliance.

This is part of the approach we promote in UNIDO’s Global Programme for Green Hydrogen in Industry. With it, we entice the hard-to-abate downstream industries to set up near the clusters. This reduces the need for energy storage and transport. And it reduces pressure on electrical grid infrastructure.

Agricultural sectors can also benefit from the production of green ammonia for carbon-neutral fertilizer products, further enabling sustainable food production and improving local food security by reducing reliance on imports.

UNIDO’s vision for a just transition

For a just GH2transition, we need to carefully manage resources and make sure the benefits are shared fairly. For example, areas with abundant solar energy potential are often arid and prone to water stress. The production of GH2 depends on water for electrolysis, even if the amounts needed are comparatively small (see chart below).

There must be oversight to avoid improperly diverting scarce water resources.

Green Hydrogen production water footprint (in billion cubic metres)

AgricultureIndustrialMunicipalDesalination production (2018)Hydrogen production (2050)06001,2001,8002,4003,000

Water quantity (cubic metres)

Notes: Water consumption footprint (in billion cubic metres) of Green Hydrogen in 2050 compared with selected sectors today. The footprint measure includes water consumption of required upstream energy generation. Figure considers only water consumption, not water withdrawals. Withdrawals cover water that is directly returned to the body of water from which it was taken. Consumption covers any water that is converted into another form or is not returned to the original body. Although most water can be recovered when hydrogen is combusted or used in a fuel cell, it is not generally returned to the original body of water and will be considered to be consumed.

Source: IRENA (2022).

Similarly, the energy required to process GH2should not come at the cost of the needs of the local population. Moreover, it is critical that the land needed for processing and storage should be fairly acquired.

Everyone involved must make sure that local communities benefit from GH2 infrastructure through appropriate skills development, job creation and better overall living standards.

The role of UNIDO in shaping the GH2transition

A key step for the global uptake of GH2 is developing the necessary policy and legal frameworks and coordinating international standards. UNIDO is a ready partner in this, and we will collaborate with stakeholders around the globe, including public and private sector actors, financial organizations and academia.

UNIDO launched its Global Programme for Green Hydrogen in Industry in July 2021. It fosters GH2 use use to decarbonize industry and promote low-carbon industrial development around the world. The first pillar of the programme are global partnerships to engage in policy dialogue and develop knowledge products to help member states with any bottlenecks identified and also to ensure that the GH2 transition is a fair one within each country we extend our support to.

We create technical guidelines and standards, develop joint projects and promote the adoption of innovative financing schemes. Throughout, UNIDO collaborates with public and private sector, financial organizations, and academia to ensure input from all stakeholders and along the GH2 value chain.

The programme’s second pillar consists of a technical cooperation component to help the production and uptake of GH2for industrial applications through the design and implementation of national industrial GH2 roadmaps.

I can see the results in pilot projects such as the International Hydrogen Energy Metallurgy and Chemical Demonstration Zone in Inner Mongolia. It is the world's first comprehensive demonstration project on GH2 production. It also has applications for the metallurgical and chemical industries, initiated by UNIDO’s International Hydrogen Energy Centre (IHEC) together with its partners Shuimu Mingtuo Group and Hualu Group.

Progress by innovation for people and planet

The GH2transition will rely on the development of an entire ecosystem of clean, renewable energy generation and equipment for GH2 production, storage and transmission. Factories and vehicles need to be modified to accommodate the new fuel or feedstock.

Such changes are nothing new. New technologies have always brought new ways of doing business, from the redesign of industrial processes, to skills development, to the distribution of costs and benefits.

With green hydrogen, we are igniting the clean energy revolution. We are empowering future industry leaders. We are nurturing the workforce of tomorrow. We are working towards the just transition of industry: evolution from pollution to solution. We are building a sustainable future for all powered by innovation.

I am proud to lead UNIDO through this GH2 transition for people and planet.

With green hydrogen, we are igniting the clean energy revolution.

Gerd Müller is Director General of the United Nations Industrial Development Organization (UNIDO).

Disclaimer: The views expressed in this article are those of the authors based on their experience and on prior research and do not necessarily reflect the views of UNIDO (read more).