Momentum builds for CCUS and hydrogen. Is the hype warranted?

There was huge momentum behind both hydrogen and carbon capture, utilisation and storage (CCUS) in 2021. Project pipelines ballooned, new policies and funding pots were announced and COP26 spurred net zero targets. Will that momentum gather pace in 2022? What could stand in the way?

2022 will be critical as energy transition technologies move beyond hype to delivery
This year companies and governments will need to make good on the pledges they made on energy transition technologies, including carbon capture, utilisation and storage (CCUS) and low-carbon hydrogen, says Wood Mackenzie, a Verisk business.

In a new report, CCUS and hydrogen: 5 things to look for in 2022, the global energy consultancy points out the huge momentum behind both CCUS and low-carbon hydrogen in 2021, with announcements of new projects, policies and investment as COP26 spurred companies’ net zero targets.

We hear from analysts for Wood Mackenzie who highlight the key issues for CCUS and low-carbon hydrogen in 2022 as companies and governments switch to delivery mode.

From growth to maturity

The project pipeline for both CCUS and low-carbon hydrogen saw record growth in 2021. Companies were galvanised by increased net zero targets, new policy support and technology advancements. The CCUS pipeline of announced projects grew seven-fold, with 50 new hub projects globally. The low-carbon hydrogen pipeline more than doubled, with green hydrogen projects making up 75% of the announcements.

Mhairidh Evans, principal analyst, CCUS and Emerging Technologies, and co-author of the report said: “We don’t believe we will see the same growth rate for the CCUS and hydrogen pipelines in 2022.

“The coming year will be about maturing projects and securing funding. About 75% of the CCUS pipeline is in early development. For hydrogen, almost 40% of the project pipeline does not have an estimated date of operation and 25% does not have an estimated capacity. A mark of success for 2022 will be more projects in advanced development or under construction.”

Wood Mackenzie is tracking 15 CCUS projects aiming for FID this year which, if developed successfully, will add approximately 35 Mtpa of new CO2 capture or storage capacity and will require investment of around US$18 billion. Large volumes of CCUS are not expected to come online in 2022.

More than US$66 billion was invested in hydrogen in 2021, with projects looking at every aspect of the value chain from R&D to refuelling infrastructure.

More capital flow is needed for hydrogen production projects, Wood Mackenzie suggests, which will require an uplift in offtake agreements. This could mobilise the US$3.5 billion– to US$22 billion necessary for hydrogen production projects to reach FID in 2022.

“In 2022, 33 projects – mainly in Europe and Asia – should begin operation,” Mhairidh says. “This will see 0.1 Mtpa of low carbon hydrogen and 50 ktpa of green ammonia enter the market.”

Turning hydrogen and CCUS policy support into reality

Flor Lucia De La Cruz, senior research analyst, Hydrogen & Emerging Technologies, and co-author of the report said: “2021 was a big year for policy announcements in CCUS and low-carbon hydrogen.

“We see 2022 as an important year for translating policy into reality, but it’s a tough political ask in some countries and we expect drawn-out negotiations to mean delays.

“In the US, for example, the Infrastructure Investment and Jobs Act passed in November 2021 provided a combined US$15 billion to support CCUS and low-carbon hydrogen production. It’s a much-needed shot in the arm for the infrastructure required to scale up both technologies.

“This year, COP27 will be held in Egypt and promises to be a radical turning point for climate policy in Africa. Africa has the opportunity to make a stand and showcase its unique advantages in renewables and green hydrogen.”