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What measures should the Norwegian government introduce in order to develop hydrogen value chains in Norway?

31.05.2023 - Resources and sustainability

Society is facing significant transformations if we are to achieve our climate goals, and hydrogen can become an important part of the solution. The Norwegian government aims to contribute to the development of a connected hydrogen value chain in Norway, with hydrogen production for domestic use and exports.

Oslo Economics, in collaboration with SINTEF, Greensight, and NTNU, has conducted an analysis of hydrogen value chains in Norway. The assignment was commissioned by the Ministry of Petroleum and Energy. The study includes:

  • A technology and market status for hydrogen production, transportation, and usage.
  • Description of market failures.
  • Development of three scenarios for a future hydrogen market in Norway.
  • Evaluation of hydrogen integration into the overall power system in Norway.
  • Assessment of market opportunities for hydrogen exports and an overview of existing measures.
  • Evaluation of enhanced measures in the field.

Given that there is scarcity of renewable energy, grid capacity, skilled workforce, and land, increased emphasis on hydrogen must be prioritized against other initiatives and considerations for nature and the environment.

To promote hydrogen value chains, we recommend using measures that foster markets for climate technologies in general. This includes exploring the possibilities for increased and more comprehensive CO2 pricing (quotas and taxes) as well as introducing requirements for low- and zero-emission solutions, if technologically feasible and cost-effective. Such requirements should be introduced with sufficient transitional periods, in order to provide predictability and increase the profitability of low- and zero-emission technologies, including hydrogen. However, it may not necessarily make a significant contribution to the development of hydrogen value chains where other, cheaper climate measures exist. There are also limits to the size and cost of fees and requirements that can be introduced nationally without the risk of relocation, carbon leakage, or business closures.

Other important measures will focus on ensuring access to key inputs for hydrogen value chains. Public support and facilitation of renewable energy production and grid infrastructure development will indirectly support green hydrogen production. Continued payment of CO2 compensation will also reduce the costs associated with the energy consumed in production. Measures for education and further training to increase the availability of skills demanded in hydrogen value chains will also be relevant.

Although there are mature technologies for hydrogen production and certain forms of hydrogen utilization today, there is still a need for technology development in various parts of the value chains and in the composition of new value chains. Therefore, existing support schemes for research and technology development should be continued. Consideration should also be given to increased efforts in standardization work to remove barriers to distribution, storage, and usage. In the long term, there may be a need for increased use of instruments to develop infrastructure for maritime and land-based transport applications. State ownership in infrastructure companies should be utilized in relevant sectors.

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