Low-carbon hydrogen: Timely for Singapore to deepen research

SINGAPORE is deepening research on low-carbon hydrogen as an energy source – a timely move even with mixed sentiment around the fuel.

On Aug 6, the Energy Market Authority called for a study on developing laws and policies related to hydrogen fuel, The Straits Times reported. The study could touch on aspects such as hydrogen imports and infrastructure, and financing schemes.

This comes after Singapore launched a national hydrogen strategy in 2022 to develop the fuel as a major decarbonisation pathway. Hydrogen could even supply up to half of Singapore’s power needs by 2050.

Unlike fossil fuels, hydrogen does not produce any carbon emissions when combusted, instead only releasing water.

Hydrogen fuel – if produced in a low-carbon manner – could decarbonise emissions-heavy sectors such as aviation and shipping, both major economic drivers for Singapore. It could also diversify the city-state’s power sources, beefing up energy security.

Cost vs emissions

The challenge however is in balancing costs with emissions. Most hydrogen today is produced from coal or methane. This so-called “grey” hydrogen is cost-competitive, but releases substantial carbon emissions during the production process.

A much cleaner alternative is “green” hydrogen – produced by electrolysis, or the splitting of water with electricity. The electricity has to be derived from renewable sources, such as solar or wind power, resulting in emissions-free hydrogen fuel.

However, green hydrogen is much more expensive, costing between US$4.50 and US$12 per kilogram, according to a 2023 BloombergNEF analysis. In contrast, grey hydrogen costs as little as US$0.98 to US$2.93 per kilogram.

A middle-ground alternative is “blue” hydrogen, where the gas is still produced from fossil fuels, but coupled with carbon capture and storage (CCS) technologies.

However, blue hydrogen has drawbacks. It still relies on fossil fuels and does not mark a transition away from them. And even with CCS, between 5 per cent and 15 per cent of carbon emissions could still be released into the atmosphere, said a 2021 report by the International Renewable Energy Agency (Irena).

From an emissions perspective, green hydrogen is likely the best option. But it remains to be seen if costs can come down sufficiently for it to be commercially viable.

While there has been plenty of optimism in recent years, sentiment has cooled. The S&P Kensho Hydrogen Economy Index – which represents listed companies in the hydrogen supply chain – fell 28.3 per cent over the past year as of Aug 12.

Some companies have had to pare down hydrogen ambitions in light of unfavourable economics, such as Australian miner Fortescue. The company wants to produce 15 million tonnes of green hydrogen, but has cast away its commitment to do so by 2030, according to the Financial Times.

Governments are also getting a reality check. Last month, the European Union’s targets to produce and import green hydrogen were deemed unrealistic by the European Court of Auditors.

Breakthroughs

Despite the tepid sentiment, it is prudent not to write off hydrogen fuel, for new breakthroughs could yet improve its economics.

For one, the cost of solar and wind power have come down 80 per cent and 40 per cent, respectively, in the last decade, according to the Irena report. These costs are expected to continue falling, which could make green hydrogen production cheaper.

Technological innovation could also bring down the cost of equipment such as electrolysers, or introduce more efficient means of producing or importing hydrogen.

The global transition to a hydrogen economy could also bring fresh opportunities for Singapore, as a trade and financing hub.

Taking a cautious but open-minded approach towards hydrogen fuel thus serves Singapore’s interests. The lightest element in the periodic table could well turn out to be the next global energy heavyweight.