Elements of a green hydrogen future

Vietnam’s economy and sustained growth rate, has attracted attention, achieving a swift economic expansion.

This economic growth is coinciding with increases in energy demand that require innovative solutions to ensure energy security. Though dependence on coal production is still expected in 2030, Vietnam has set commitments to stop building new coal-fired power plants after 2030. And since 2019, Vietnam has quadrupled its solar and wind capacity.

The successful delivery of targets such as net-zero by 2050 and the Just Energy Transition Partnership will entail a small but meaningful role from green hydrogen, which will grow in the coming years. Globally, green hydrogen from water electrolysis plays a small role, having contributed only 0.03 per cent of global hydrogen production in 2020. However, improving electrolyser technologies and falling renewable energy costs are poised to make green hydrogen cost competitive by 2030.

Crucially, countries with high renewable energy potential, preferential trade relationships, political stability, and proximity to major importers in the Asia-Pacific region, such as Vietnam, stand to benefit.

Green hydrogen has broad application uses, which include but are not limited to shipping, transportation, steel, fertilisers, and chemicals, many of which are sectors that are difficult to decarbonise. Its production and use remain a novel field in Vietnam, but the energy medium has garnered interest. Notably, Vietnamese company TGS Green Hydrogen is poised to build the country’s first electrolyser with an $840 million investment, signalling that efforts to build a cohesive national strategy must occur sooner than later.

Our joint study with the Institute of Energy study takes the preliminary steps to assess the potential role of green hydrogen production from water electrolysis, the use of green hydrogen for the purpose of reducing greenhouse gas emissions on a large scale, and accelerating the clean energy transition in Vietnam.

Preliminary findings include economic and statistical analysis using the most up-to-date data on domestic electricity and renewable electricity projections, utilising assumptions from the International Renewable Energy Agency, the International Energy Agency, and the Vietnam Energy Outlook.

These projects provide estimates of Vietnam’s current and future green hydrogen and ammonia demand, a discussion on the national policy and legislative framework for green hydrogen development, and compare against global developments both in use and policy.

To address the potential for hydrogen production from water electrolysis in Vietnam, there are three key elements from our findings. Firstly, to provide a realistic estimate of green hydrogen, three different scenarios were developed, based on a fully decentralised solar and wind generation, the provision of renewable electricity from a supply utility, and the mixed provision of grid electricity and some dedicated onshore wind and solar power.

Our findings highlight that, if the electrolysers run at 90 per cent capacity throughout the year, at least 11.49 million tonnes of green hydrogen could have been produced in 2020 and as much as 18.78 million tonnes could be produced by 2050.

Secondly, the levelised cost of hydrogen is projected to decline significantly in each of the three scenarios. The cost serves as a key metric to assess the costs to produce one kilogram of hydrogen, on average, over a specified period of time.

Here, the costs are projected to decline from as high as $11.81 per kilo at 65 per cent capacity to as low as $2.42 per kilo at 90 per cent capacity by 2050. The reduction in costs can be attributed to the rapidly declining costs in key input technologies such as storage batteries. Even after accounting for the rapid decline in costs over the coming decades, the costs are comparatively higher than the objectives set in other economies, as exemplified by the United States seeking $1 per kilo by the end of the decade.

Thirdly, it is important to highlight the important role played by governments in setting targets, developing strategies, regulation, and providing market-based incentives towards decarbonisation. As a major challenge, the global development of legislation, standards, and trade rules on hydrogen remains in the early stages.

Many countries have opted for stop-gap measures to ensure a robust investment environment which can first be developed, driven by falling renewable energy costs and a reliance on existing fossil fuel regulation.

Among the 40 or so governments that have developed national hydrogen strategies, key actions include the pursuit of MoUs to advance cooperation on research and development, working groups to address harmonisation of standards and regulations, engagement in public-private partnerships, and information sharing on the development of secure value chains and guarantees of origin, among other activities.

Industry investors must also be able to set technical targets for electrolyser production cost reductions based on capacity building, research and development, and appropriate sectoral applications.

Green hydrogen is considered a new generation energy source, and an optimal alternative energy source soon. The production of green hydrogen and energy carriers such as ammonia and renewable energy plants can partially meet Vietnam’s energy storage and consumption demand in transportation and other sectors. It can also help Vietnam achieve its net-zero commitments.

We will continue working with the Institute of Energy in green hydrogen production and use, as well as accelerating the green energy transition in Vietnam.

Vietnam Investment Review