Global warming is an alarming issue and fighting it is proving to be a real challenge. In a recent interview with the BBC, Bill Gates commented that ending the current COVID-19 pandemic is easy in comparison to solving climate change which would be "one of the most amazing things humanity has ever done" (link). We have already witnessed a number of effects on the environment caused by climate change with the recent natural disaster in India, a glacier breach which caused a massive flood, being attributed to global warming.

Although the world’s focus has been on the COVID-19 pandemic, climate change also needs equal attention and immediate action. In 2020, the current global temperature was 1.28 degrees Celsius (°C) warmer than the average temperature of the 20th century. To meet the goal set in the Paris Agreement in 2015, 195 signatory countries have committed to decarbonization and to hold the global temperature rise below 2°C above pre-industrial levels, and ideally to keep it closer to 1.5°C above pre-industrial levels. By 2030, the goal is for the world to reduce carbon dioxide (CO2) emissions by 25% and to achieve net zero carbon emissions by 2070.

Thailand is also a signatory country to this Paris Accord and to meet its commitment, the draft bill on climate change is being considered by the government. We will discuss this in more detail in our next issue of this series.

To achieve decarbonization, energy transition will be the path way towards transformation of the global energy sector from fossil-based to zero-carbon. Hydrogen will play a key role in this process as relying on renewable energy such as solar and wind power or capturing emissions using Carbon Capture and Storage (CCS) alone will be too late.

With increased global awareness and collaboration for clean energy, businesses should seize the moment and get on the bandwagon of the global hydrogen market via de-risked investment for sustainable growth.

Why hydrogen?

Soon all energy supplies, whether it is for electricity generation, transport or industry sectors, will need to come from zero carbon sources. When renewable energy alone is not enough to combat climate change and meet the demands for energy, hydrogen is the key solution to significantly complement the path of decarbonization and increase energy supplies.

Hydrogen is vital to complement and balance the intermittent renewable energy sources, providing flexible electricity balancing services. Hydrogen is an energy carrier and it can be produced, among other ways, using water and electricity or natural gas. When used, hydrogen does not produce greenhouse gases and emits nothing but water when used in a fuel cell. Further, hydrogen can be combined with other chemicals to produce "hydrogen-based fuels". However, converting electricity into hydrogen, shipping, storing and converting it back using a fuel cell can entail a 70% loss of the original energy content, making it costlier than the electricity or the natural gas used to produce it. Though this could be offset by the fact that it can be used with high efficiency and can be produced without CO2.

In sectors difficult to decarbonize, e.g., industry and heavy transport, hydrogen is an appealing option due to its potential to address electricity network constraints.

Why now?

We have been at the forefront of renewable energy work through our Climate Change practice. Our Climate Change practice has worked on joint implementation projects under the Kyoto Protocol worldwide as well as a first-of-its-kind forest bond thus guiding our energy clients who are "looking around the corner" to an issue that will drive the future of the energy business.

Hydrogen was discovered as an energy vector long ago but it can be quite complicated to produce, use and store. With the limited innovations and immature technological developments in this area, though hydrogen is very useful and provides tremendous benefits, the electrolyser[1] technology used for creation of green energy without CO2 emissions is incredibly expensive. However, as global economies aim to become carbon neutral, competitive hydrogen produced with renewables has emerged as a key component of the energy mix. Falling renewable power costs and improving electrolyser technologies could make "green" hydrogen cost competitive by 2030[2].

An increase of financial challenges around the world, specifically the growing global urgency regarding climate change, have led experts to predict that many industries will move towards seeking more incremental value from operations. In the future, capital is likely to be tighter, which will add to the urgency with which companies respond to their strategic issues. This presents significant opportunities for businesses to keep an eye on government policies and deploy funding from a government subsidy when available.

There are technological, economic and regulatory challenges to overcome for the widespread use of hydrogen. However, interest among governments and industries in the opportunities to support and invest in hydrogen is rising, just as it has been for renewables. An increasing number of governments are developing hydrogen-focused national policies and roadmaps or are setting out initiatives, e.g., Japan, France, the EU, Australia and South Korea. In China, a similar council was created by Chinese companies, the China Hydrogen Alliance.

Growing and incentivizing a clean hydrogen market will be a necessary step to enable decarbonization across multiple industries and will also be necessary to lower the costs of the new technologies supplies, to increase the power systems' flexibility. Moreover, different governments’ hydrogen strategies will greatly affect what opportunities can be taken advantage of. Making use of government policies, regulations and sources of funding, first-movers will be able to reap the benefits of de-risked investments and establish a stronghold in the clean hydrogen market and the path to full energy transition.

Development of hydrogen industry in Thailand

Thailand started embracing the significance of hydrogen more than a decade ago and has been planning to create a hydrogen-based ecosystem. In 2012, hydrogen and fuel cell technologies have been put in the government's 15 year-renewable energy roadmap with the intention to increase the production and use of hydrogen. The 15 year-roadmap has set a mission to create the hydrogen network to study the energy transformation to fuel cell with the use of hydrogen. The network's mission is to collaborate among stakeholders both from the public and private sectors to help shape the industry framework. This includes the study of legal and regulatory frameworks to assess if existing laws and policies are sufficient and identify changes required to drive the clean hydrogen industry forward, in order to design the government subsidies policy required to elevate the interest in the hydrogen-related space into future growth.

The Electricity Generating Authority of Thailand (EGAT) built a wind hydrogen hybrid power plant in north eastern Thailand and started electricity generation in 2017. This is the first pilot project hydrogen power plant in Thailand and is the first in Asia to use a wind hydrogen hybrid system.

Earlier this year, Phi Suea House in Chiang Mai, the world's first solar-hydrogen residential development sustainable residence project, was selected by the European Commission for its Hydrogen Valley Mission Innovation[1] platform.

BOI Incentives

Investors in Thailand's hydrogen market can enjoy investment promotion from the Board of Investment (BOI), such as corporate income tax exemption and exemption of import duties on machinery, depending on the promoted activities. Current available categories include hydrogen production and hydrogen-based renewable energy power plants. In addition, earlier this year, the measure to promote energy conservation, use of alternative energy or reducing environmental impact came to effect. It offers eligible investors additional privileges granted to the promoted projects, for example, a 3 year extended corporate income tax exemption and exemption of import duties on machinery.

We believe more incentives programs in this space are soon to be expected from the public and private sectors, both locally and globally, to support the fast growing needs for clean energy. A thorough analysis on regional and sectoral funding, government policies' focus can provide some insight as to the subsidy and funding patterns.