Hydrogen is considered a cornerstone in the transition to a carbon-free energy system. Its role is essential in moving away from fossil fuels, and its inherent flexibility makes it useful in a number of different applications. However, production capacities of low-carbon hydrogen have yet to be ramped up and a functioning market of sufficient size has yet to be established. In the meantime, natural gas will continue to play a big role, despite the recent market turbulence with high and highly volatile prices over the last two years. Gas will be needed in peaker plants, industrial processes and private households. Consequently, the according infrastructure will have to be maintained and, where necessary, extended for quite some time. In order to prevent this infrastructure from becoming stranded assets, many governments require the components to be "hydrogen-ready", i.e. they have to be able to process hydrogen with little extra investment. But what does this mean exactly? Is it technically feasible and what kind of adjustments and extra costs are involved?
In the Special Issue of the latest edition of our Technology Outlook we analyse what hydrogen-ready means for three specific parts of the value chain: Import terminals, distribution grids and gas power plants. We conclude that preparing the infrastructure already today where possible is imperative in keeping transition costs in check.
In the main body of the report, we give an overview of important drivers and barriers for key energy technologies. The drivers include technical but also political and market related factors. They are viewed in relation to the technologies’ historical and expected cost development. Additionally, we provide our insight into what role we think these technologies will have in the future power system and how this role is supported by innovation and technology development.
The technologies covered are:
- Solar PV
- Onshore Wind
- Offshore Wind
- Carbon capture and storage
After years with considerable cost decreases across all technologies, markets have turned and now show upward trends, driven by raw material prices and interrupted value chains as a result of the covid pandemic and political turmoil. The question is if the current turbulence will calm down quickly or if a real paradigm shift is at hand. While we lean towards the former, predictions of cost developments especially for the near future currently involve considerable uncertainty. Indeed, Europe's ambition to strengthen its renewable sector, especially as a reaction to the U.S. Inflation Reduction Act, has resulted in the Net Zero Industry and Critical Raw Materials Acts with concrete targets. These acts strive to give a reliable framework for the further development of the sector.
If you are interested in learning more about our Technology Outlook, please do not hesitate to reach out.