The global hydrogen economy in 2023 – Ditching the colours in favour of quantifiable standards

In 2023 there is wide consensus and momentum forming on the standardised definition of hydrogen production for international trade based on its Greenhouse Gases (GHG) emissions intensity. With many companies looking to export their renewable hydrogen product(s) overseas, more importance is being placed than ever before on quantifying a project’s GHG emissions intensity. It makes good commercial sense when strategically considering a competitive market position (particularly for gigawatt-scale projects) in the years ahead.

For trading with or within the EU, Rules are already in place, which include a shift away from designating hydrogen production processes by colour to one that defines it as either “renewable”, “low-carbon” or “fossil-based”. The European Union (EU) Rules also set standards for its GHG emissions intensity by virtue of the emissions intensity of the electricity it is derived from.

Through the Inflation Reduction Act (2022), the United States is incentivizing lower carbon hydrogen production with financial rebates/credits being inversely proportional to the hydrogen production emissions intensity (i.e., lower GHG emissions intensity = higher rebate). Together with Scope 3 emissions coming into greater focus, these regulatory frameworks and incentives promote the active marketing of low carbon hydrogen and hydrogen-derivative products, such as ammonia, based on their quantifiable emissions intensity. It’s a means of achieving competitive advantage.

Several industry documents have been produced over the last few months that support our recommendation for quantifying a renewable hydrogen project’s GHG emissions intensity:

EU Rules for Renewable Hydrogen produced from Renewable Electricity (April 2023)

In relation to hydrogen production, these Rules state that if, “the emission intensity of electricity is lower than 18 gCO2e per MJ (3.4 kgCO2e per kg H2), it may count as renewable if hydrogen producers conclude one or more renewables Power Purchase Agreements fulfilling temporal and geographical correlation”. The equivalent rules for hydrogen produced in jurisdictions outside the EU would need to apply if a proponent was wanting to sell EU-compliant renewable hydrogen to the EU.

International Energy Agency - Towards hydrogen definitions based on their emissions intensity (April 2023)

This report was prepared for G7 members for their latest Summit. “An internationally agreed emissions accounting framework is a way to move away from the use of terminologies based on colours or other terms that have proved impractical for the contracts that underpin investment. The adoption of such a framework can bring much-needed transparency, as well as facilitating interoperability and limiting market fragmentation, thus becoming a useful enabler of investments for the development of international hydrogen supply chains.”

International Partnership for Hydrogen and Fuel Cells (IPHE) - Hydrogen Certification 101 (July 2023)

“In the emerging global hydrogen economy, robust tradeable certification schemes for hydrogen and derivatives are due to play a key role to.... evidence their sustainability attributes, such as carbon footprint (CFP) - meaning greenhouse gases (GHG) – as well as the use of land and water, and social impacts – in a reliable and consistent manner internationally”.

International Standards Organization (ISO)/Developing Technical Standard 19870 - Methodology for Determining the Greenhouse Gas Emissions Associated with the Production, Conditioning and Transport of Hydrogen to Consumption Gate

The scope of this ISO technical specification’s development is to establish a method and analytical framework to determine the GHG emissions related to a unit of produced hydrogen up to the consumption gate. It will include 3 Parts:

• Part 1: Hydrogen production
• Part 2: Hydrogen conditioning
• Part 3: Hydrogen transportation

This technical specification is due for publication in December 2023, with the intent of using it as a seed document for the development of 3 individual standards – one per each part noted above – belonging to the same family of standards. The standards are being developed with input from the following 3rd party organisations:

• European Industrial Gases Association (EIGA)
• Hydrogen Council
• CSA Group (relating to the IECEx - IEC System for Standards Certification to Equipment for Use in Explosive Atmospheres)
• International Partnership for Hydrogen and Fuel Cells in the Economy (IPHE)
• International Renewable Energy Agency (IRENA)
• United Nations Industrial Development Organization (UNIDO)

Hydrogen Standards & Certification in Australia

There are more than a handful of gigawatt scale renewable hydrogen export projects proposed within Australia. Will they be designed to meet the emerging international standards and regulations or choose to fall in line with the new Australian rules?

While the Australian Government’s intentions of supporting a decarbonized economy are similar to those of the new EU Rules and international standards for hydrogen production, Australia’s proposed Guarantee of Origin (GO) Scheme for hydrogen does not provide definitions for terms such as ‘green’ or ‘low-emission’. The GO scheme, as it applies to hydrogen production, does not specify an emissions limit (as in the EU Rules); rather, it will provide a ‘certificate’ stating the emissions associated with the product, i.e., the electricity to power the hydrogen production process (e.g., water treatment and hydrogen electrolysis). This will leave the commodity off-takers with a range of emissions intensity options that may become available from different suppliers. Presumably most will look to select the products with an emissions intensity that fits with their Net-Zero-by-2050 ambitions.

Hydrogen Standards & Certification in Canada

In contrast to the EU, Canada’s 2020 Hydrogen Strategy is light on details when it comes to standards and certification, and therefore, deserving of a refresh to reflect the international market landscape in 2023:

“The deployment of hydrogen is in the early stages across many jurisdictions and sectors in Canada, and there are some gaps in existing codes & standards that need to be addressed to enable adoption. Complex local and regional issues related to the certification of new hydrogen deployments may take significant time and effort to resolve. Harmonizing codes and standards across jurisdictions (provincial and international) will ensure that best practices are applied across the domestic and international hydrogen economy to facilitate the growth of trade and export markets.”

Further to the Hydrogen Strategy offering no detail on emissions limits, Canada’s own Commissioner of the Environment and Sustainable Development audited the Strategy and found significant limitations in the basis for hydrogen’s GHG reduction potential. Emissions standards aside, their audit also brings into question the role of hydrogen in a zero-emissions economy in Canada – which is the subject for a future SLR Insights article.

Private Hydrogen Certification Schemes

The GH2 Green Hydrogen Organisation is a Swiss Foundation that has been established to “promote green hydrogen in collaboration with government, industry and other stakeholders”. It is also one of the more prominent organisations with both a corporate and governmental membership base that aims to establish a certification scheme for green hydrogen as a commodity for international trade.

Launched in May 2022, the GH2 Standard requires hydrogen production projects to be accredited and certified by GH2 through the provision of supporting evidence that meets with a 17-point list of technical requirements developed from several other sustainability guidelines, such as the UN’s Sustainability Development Goals. With regards to GHG emissions, the GH2 Standard states that “accreditation and certification requires the project operator to demonstrate that hydrogen is produced through the electrolysis of water with 100% or near 100% renewable energy” and “the overall threshold for the GHG intensity of produced hydrogen (1kg CO2 / kg H2) must not be exceeded in a given calendar year”. This makes it a more stringent standard than the new EU Rules and therefore may be an attractive proposition to some off takers in the years to come.

With new rules, regulations, and standards in place or well on their way, and wherever your geographic interest may be, SLR is well positioned to assist with the experience and capabilities to fully quantify the GHG emissions footprint of your hydrogen/ammonia project (Scope 3 emissions included). Water management and environmental/social impact assessment and approvals are some of other critical success factors to renewable hydrogen projects where SLR is also at the forefront.