While cost-competitiveness and an abnormally high cost involved in producing and transporting hydrogen are still major inhibitors, major renewables producer CWP Global has set out to construct a future where sustainable aviation fuel (SAF), green steel, and clean shipping fuels can become cost-effective and economical for entire supply chains.
Green hydrogen hubs to drive global shift in commodities production
Stable and global markets for green hydrogen are essential for the decarbonization movement, CWP Global chief product officer Bobby Pecotic told Fastmarkets.
This necessitates then that the production of hydrogen-derived commodities, such as green hot briquetted iron (HBI), ammonia and SAF, is located in regions where hydrogen production is the cheapest, according to Pecotic.
“It will always be easier to transport hydrogen-derived commodities than hydrogen itself. This means that future-facing sustainable commodities will be produced in regions with good renewal resources like Africa, North America and South America,” Pecotic said.
“However, the more complex downstream processes such as steelmaking may continue to stay in places like Europe and Asia,” he added.
Supportive governmental policies needed for price tipping point
Clear and long-term governmental regulations which favor green hydrogen and price in the environmental costs of fossil-fuel based commodities production are also needed to incentivize green commodities production chains, according to Pecotic.
“Falling renewable energy costs and increasing green hydrogen production capacity are key factors to driving green commodities production, but the biggest aspect is pricing in the economic burden of carbon dioxide emissions and ensuring they are reflected in the price of fossil fuels,” he said.
Carbon taxes and regulations that penalize carbon dioxide emissions are steps in this direction, he added.
“The European Union’s carbon tax on industries, for example, increases ship fuel costs. While this isn’t enough yet to make green alternatives competitive, it’s a significant step. Furthermore, regulations mandating the use of sustainable fuels, like the EU’s requirement for 20% sustainable aviation fuel in aviation fuel by 2035, are fostering a market for these solutions,” Pecotic said.
Organizations, such as the International Maritime Organisation, which are drafting regulations are likely to include a mix of factors such as stipulated greenhouse gas emissions reductions for each tonne of shipping fuel, credit trading systems, carbon taxes and green subsidies.
Tweaking traditional hubs and technologies
The shift toward green commodities production is not also just isolated to green hydrogen hubs; shaking up current fossil-fuel based production technology will also be necessary, Pecotic said, where retrofitting existing industrial plants and developing new infrastructure will be needed.
“These challenges are not insurmountable with the right economic conditions. Traditional integrated steel mills can gradually idle their blast furnaces and replace them with electric-arc furnaces, or retrofit existing basic oxygen furnaces with new smelting technology to take in green HBI,” he said.
The “drop-in” nature of some green hydrogen-based commodities is also an advantage; they can be blended with other conventional raw materials or fuels, requiring no additional costs or changes for steel mills, pilots or captains.
This means that commercial and business owners acting in their own interests are likely to increasingly choose green commodities over their fossil fuel equivalents in the future because of the increasing number of complex regulatory ecosystems which will act to reduce carbon emissions and close the price gap with green fuels.
“Green hydrogen hubs hold immense potential to revolutionize commodities production. By addressing cost competitiveness, creating stable markets and leveraging existing technologies, green hydrogen can pave the way for a sustainable future,” Pecotic said.
Discover how our suite of green steel prices can support your ‘green’ investment decisions while bringing transparency to the industry. Talk to our experts today.
