Logistical Challenges
- Infrastructure Development:
- Cost and Time: Developing green hydrogen storage and transportation infrastructure, such as pipelines, is costly and can take years to design and construct. For instance, hydrogen pipelines may take up to 12 years to complete.
- Coordination Complexities: The development involves numerous actors and projects across different regions, leading to significant coordination challenges.
- Supply Chain Challenges:
- Demand Uncertainty: Uncertainty in demand increases project risk and deters investors from investing in necessary supply chain and infrastructure improvements.
- Forecasting and Market Size: Supply chain design is heavily influenced by demand forecasts, seasonal variations, geographic dispersion, and current market size.
- Production Costs and Grid Limitations:
- High Production Costs: Green hydrogen production is expensive, particularly due to the cost of electrolysis powered by renewable energy sources like wind and solar. Costs can range from £5.00 to £7.00 per kg in the UK.
- Grid Connection Issues: The limited capacity of national grids to accommodate large-scale renewable energy projects for green hydrogen production creates significant barriers. Many projects face long delays in getting connected to the grid.
- Financing and Market Signals:
- Investment Hurdles: Financing is a major challenge due to the high costs and uncertainty in market demand, which make it difficult to attract investors for infrastructure and supply chain investments.
- Market Signals: Lack of clear market signals hampers the growth of demand, as potential users seek reliable information about future availability and pricing.
Possible Solutions
- Lead Markets: Fostering lead markets in industries like transportation and manufacturing can drive demand and encourage infrastructure development.
- Grid Expansion: Investing in grid capacity to facilitate easier access to renewable energy for green hydrogen production can reduce costs and enhance scalability.
- Policy Support: Strong policy support and incentives can help stabilize market signals, attract investment, and reduce production costs over time.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-logistical-challenges-arise-from-matching-supply-with-growing-demand-for-green-hydrogen/
