Road to COP28 – IFC’s Green Hydrogen Vision

Welcome to this special episode of IFC Audio Stories. I'm your host, Lindy Mtongana . This year’s UN Climate Change Conference or COP28 is expected to convene over 70 000 participants - from heads of state to industry leaders, academics, experts and climate-conscious youth - from all over the world.

For IFC, the focus will be on catalyzing the private sector and mobilizing private capital to accelerate an inclusive transition to low-carbon, resilient emerging market economies.

As we embark on the Road to COP28, IFC Audio Stories brings you a quick, informative look at some of the big ideas IFC is taking to this year’s summit. Starting with Energy – specifically, green hydrogen – a nascent industry that has the potential to accelerate the world’s journey to net-zero.

Today, I’m in conversation with Ignacio De Calonje Chief Investment Officer for Global Energy. And the co-lead of IFC’s Green hydrogen hub.

Lindy: Ignacio, thank you for Joining me. Can you explain  what green hydrogen actually is and how it's made?

Ignacio: Green hydrogen is hydrogen which is basically produced using renewable energy. And using electrolysis to split essentially, a water molecule into a hydrogen atom and an oxygen atom and produce hydrogen.  

Lindy: Why do we want green hydrogen, and what does it mean for the journey to net zero?

Ignacio: So, one reason to produce green hydrogen and want green hydrogen is to displace gray hydrogen, because when you produce grey hydrogen, you create a lot of pollution. So, the first thing you do is: you produce green hydrogen to displace the existing grey hydrogen in the fertilizer industry or the chemical industry. In addition to that, there can be new uses of hydrogen. So, hydrogen is a molecule that carries a lot of energy. So, you could potentially use hydrogen for long term storage of energy or production of energy as a fuel, for example, in maritime and shipping or in land transportation. The reality is, it's probably going to be, I wouldn't say impossible, but extremely difficult to get to net zero without green hydrogen. Electrification is going to be a key component of the decarbonization, but hydrogen, the hydrogen molecule, is going to be another key tool to get to net zero by 2050.

Lindy: So we have all this potential, what are the key obstacles in realizing it?

Ignacio: I would say the first obstacle is that green producing green hydrogen is, on average, significantly more expensive currently, than producing grey hydrogen. To produce green hydrogen, you need a lot of renewables. So there are a number of obstacles in in deploying more renewables quicker at a larger scale in many countries. And that's not just producing the renewables, but transmitting that renewable energy through transmission lines. You also need a lot of water to produce green hydrogen. So in certain water scarce regions, it's how do you get that water? The key thing that will be required is a lot of government action, at least during that first phase of the green hydrogen sort of scale up.

Lindy: And what is IFC doing to de-risk the sector and attract those key investors?

Ignacio: As IFC we’re really excited to work across the value chain of green hydrogen. So, looking at the renewable energy, looking at the electrolyzer side, the infrastructure side, that is required, and then the end users of green hydrogen, and see how we can bring all those players to the table to really create bankable projects today. Where we're you're also putting a lot of emphasis is around working also with governments and regulators to make sure that the first movers in this space aren't disadvantaged that they, you know, have the regulatory clarity, potentially the subsidies to allow them to take that first step. Because we need those first movers to scale up this industry, and to bring down the costs and really ramp it up.

Lindy: We may still be a little far off from realizing all of that potential. What's getting you excited about it now?

Ignacio: So you're right, I think one can get excited, but let's not get overexcited because a lot of this 10 years 15 years from now. But what is exciting in the in the shorter to medium term is we are seeing projects which are doable, where the risks are manageable, and where actually green hydrogen or green ammonia can actually be even competitive with relatively lower levels of subsidies. And there are a number of countries where in emerging markets, places like Brazil plus place like South Africa, and many others, where you've got very good potential to do low cost green hydrogen, and you've got industrial hubs which need that hydrogen. And so I think that those are immediate opportunities, which are scalable, you don't have to do a big bang approach, you can do it little by little, scale it up, make sure the industries are comfortable with taking that green hydrogen, and then developing and starting to scale up. you're like. The other place we feel is interesting is green fertilizers, in in locations, which may be in land where they don't have domestic fertilizer production, and where the green fertilizer will be used locally, and will displace imported grey fertilizer. And again, those are instances where we feel the green fertilizer produced with green hydrogen could be competitive with the grey alternative today or in the very short term.

Lindy: That’s it for today! Thanks again to my guest - Ignacio DeCalonje. Join me again next month as we continue the Road To COP28 series with a look at Climate Financing.

In the meantime, visit ifc.org to learn more about how IFC is addressing climate change as the WBG doubles down efforts to end poverty on a livable planet.

I’m Lindy Mtongana, thanks for listening.