Hydrogen is the future, but managing complex risks is key, Allianz warns

Hydrogen has the potential to morph from a niche power source into big business, and with the right approach to risk management, could be key to the global energy transition.

This is the message from Allianz Global Corporate & Specialty, whose latest bulletin highlights the operational risks that need to be addressed around the production, storage and transportation of hydrogen, including fire and explosion hazards, impact of embrittlement and business interruption exposures.

While hydrogen technology has been in use for some decades, plans to scale up mega projects require an equivalent scaling up of risk management. As an alternative to fossil fuels like oil and coal, hydrogen solutions could be key for tackling climate change in future, helping many industries to reduce their carbon emissions.

“Hydrogen (produced from low-carbon or even renewable energies) is of growing importance for the substitution of fossil fuels in the fields of energy, supply, mobility and industry,” says Chris van Gend, global head of energy and construction at AGCS. “It has the potential to morph from a niche power source into big business, with countries committing billions to scale up their infrastructure and with projects being introduced around the globe. Despite these successes, there are challenges to overcome for hydrogen to become a major part of the energy transition, such as the cost of production, supply chain complexity and a need for new safety standards.”

Over 30 countries have produced hydrogen roadmaps. The global shift toward decarbonisation has triggered strong momentum in the hydrogen industry. Hydrogen offers several options for the transition towards a low-carbon economy: as an energy carrier and storage medium for conversion back to electricity, as a fuel for all means of transport and mobility and as a potential substitute for fossil hydrocarbons in industries such as steel production or petrochemicals.

Around the world, there is strong governmental commitment for hydrogen initiatives, backed by financial support and regulation: As of the beginning of 2021, over 30 countries have produced hydrogen roadmaps and governments worldwide have committed more than £50bn in public funding, according to McKinsey, for more than 200 large-scale production projects.

The UK government has said it will unveil a hydrogen strategy in 2021 to help reach its 2050 net-zero goal, and the European Commission’s “hydrogen strategy for a climate-neutral Europe”, released in July 2020, includes an ambitious target of 40 gigawatts of European electrolyser capacity to produce ‘green’ hydrogen by 2030.

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