Green Hydrogen Expands, but Not Without Challenges

As Taiwan races toward decarbonization, the pursuit of green hydrogen as a sustainable energy solution raises questions about economic feasibility and the role of legislative support. 


Long before the Tsai administration announced its goal of achieving net-zero emissions by 2050, private companies and government agencies had been making strides in developing a domestic renewable energy sector. Increasingly, discussions on the future of this industry have included the potential role of hydrogen as an energy source.  

Despite being part of the proposed future energy mix, Taiwan doesn’t currently produce much hydrogen. According to the Ministry of Economic Affairs (MOEA), in 2022 Taiwan’s energy mix consisted of about 0.4% hydrogen, falling significantly short of its 2050 target of 9-12%.  

Hydrogen comes in many forms, or “colors.” Gray hydrogen, which is produced using fossil fuels, accounts for about 95% of global production. Blue hydrogen is similar to gray but stores emissions in the ground using carbon capture and storage technologies. There is also red, pink, yellow, turquoise, and white hydrogen. But the one that has been generating significantly increased interest in recent years is green hydrogen. 

In many ways, green hydrogen appears to be an optimal environmentally friendly fuel source. Unlike its blue and gray counterparts, green hydrogen is extracted from water using renewable energy sources.  

“The green hydrogen industry in Taiwan is not mature – it is like a new ‘baby’ industry, so it is still very expensive,” says Jayne Lee, a senior project manager at Hephas Energy Co., a Taiwanese hydrogen supplier. “Companies not compelled by low or zero carbon demands are hesitant to invest in this costly solution. Profitability is a distant prospect for companies employing green hydrogen technology. The government needs to take the next step. Only with their increased involvement can investing in green hydrogen become truly attractive in Taiwan.” 

EA Deputy Director-General Lee Chun-li says the government encourages industry to develop green hydrogen capabilities.

Still, hydrogen is a priority for the government, says Lee Chun-li, deputy director-general of the Energy Administration (EA) under the Ministry of Economic Affairs. The government established the Hydrogen Energy Promotion Task Force in 2022 to promote the development of the energy source. The EA also dedicates a fluctuating budget of NT$400-600 million to supporting green energy projects through subsidies covering up to 50% of expenses. 

This commitment is starting to yield results. In January, GE Vernova, a subsidiary of the U.S. multinational General Electric Co., announced that its energy-efficient gas turbines at the gas-fired Tung Hsiao Power Plant in Miaoli County had begun grid-connected trial runs. Meanwhile, German multinational Siemens Energy is implementing a hydrogen blending system at Kaohsiung’s coal-fired Hsinta Power Plant. The testing phase, beginning in December 2023, will involve co-firing using up to 15% hydrogen. Taipower is also implementing methane pyrolysis technology, a blue hydrogen manufacturing process, in a project set to begin generating energy at Hsinta in 2024. 

Amid the development of hydrogen production technologies, green hydrogen projects are noticeably scarce. Industry experts say investing in green hydrogen is challenging for several reasons. For one, it’s a resource-intensive endeavor. According to the International Renewable Energy Agency (IRENA), it can take up to 83 kWh of renewable electricity to generate 1kg of green hydrogen. In comparison, 1kg of gray hydrogen requires 40-55 kWh of electricity.  

Kobe Lin, a product manager at Asia Hydrogen Energy, says Taiwan might be better off exploring other methods of hydrogen collection. “Waste hydrogen is abundant in Taiwan,” he says. “There are many factories where there is a big flow of this production byproduct.” Lin adds that his company has decided to prioritize the development of waste hydrogen recycling machines over green hydrogen production for this very reason. 

The Tung Hsiao Power Plant in Miaoli began grid-connected trial runs of its energy efficient hydrogen gas turbines in January.

Another obstacle relates to limited profitability. IRENA estimates that the cost of producing green hydrogen is two or even three times higher than that of gray hydrogen. The risk of significant energy price hikes decreasing the competitiveness of Taiwan’s industries is an issue that has been raised by AmCham’s Energy Committee in the 2023 Taiwan White Paper

Taiwan’s limited supply of renewable energy also threatens the viability of green hydrogen as a clean energy source. In 2022, Taiwan’s industrial sector consumed a substantial 56.1% of all electricity produced, only 8.3% of which came from renewable sources, according to the EA.  

Additionally, renewable energy resources are disproportionately acquired by large multinational companies. This imbalance creates challenges for small and medium-sized enterprises (SMEs) in achieving their green energy objectives. 

In response to these concerns, the MOEA in October announced that Taipower will allocate renewable energy specifically for SMEs. Taipower will establish a renewable energy bidding platform, offering batches ranging from 10,000 kWh to 50,000 kWh, available for one, three, or five-year periods. While the platform is a positive step toward more equitable distribution, addressing the scarcity of renewable energy resources will require additional efforts, including incentivizing innovation and further developing renewable technology infrastructure. 

The economic dilemma 

Taiwan is not the only economy exploring green hydrogen as a part of its decarbonization strategy. The EU and the United States are also investigating its potential, although its feasibility varies across these economies. 

In 2021, the largest portion of EU emissions came from energy generation at 24%, while domestic transportation came second at 21%. The energy breakdown for the United States followed a similar pattern, with energy generation accounting for 28% and transportation for 25%.  

Michael Liebreich warns against blind optimism
of green hydrogen’s potential.

In Taiwan, carbon emissions numbers differ drastically. With a substantial 71% originating from the energy sector in 2021, transportation accounted for only 13% of emissions. Furthermore, while Europe produces approximately 40% of its energy domestically, Taiwan imports around 98% of its energy.  

“Taiwan is a very small island,” says the EA’s Lee. “While the U.S. and Europe focus on transportation, we are very focused on power generation. For the energy sector, the rapid transition of energy production to cheap renewable energy is a priority. Given the increased cost of green hydrogen, it may not be the optimal solution for pursuing this strategy.” 

Despite the differing market conditions, the status of green hydrogen in the EU may offer key takeaways for Taiwan. European analysts are raising concerns similar to those of Taiwanese business leaders regarding green hydrogen’s economic viability, energy efficiency, and resource usage.  

The idyllic reports on green hydrogen’s potential to decarbonize everything is dangerous and could potentially lead to an “economic bubble,” noted clean energy expert Michael Liebreich at the World Hydrogen Congress in October. Emphasizing the considerable renewable energy requirements for green hydrogen production, Liebreich highlighted the competition it faces from more cost-effective alternatives. Green hydrogen might only be a viable option in a limited number of industries, such as the steel sector, where it wouldn’t rely as heavily on subsidies, he said. 

As for the United States, legislative initiatives such as the Inflation Reduction Act (IRA) and the Infrastructure and Investment Jobs Act (IIJA) have had significant impact on hydrogen and other renewable energy investments, notes Fukui Kazunari, decarbonization leader at GE Vernova.  

The IRA will provide US$370 billion in tax credits for companies with renewable energy systems over the next decade, while the IIJA includes the allocation of at least US$65 billion for grid and technological advancements. These efforts have set a precedent for legislative action that bolsters both environmental sustainability and economic growth, argues Fukui. He emphasizes the significance of similar policy developments in Asia, predicting that they will increase demand for green technologies and improve their economic feasibility. 

According to the EA’s Lee, the energy surplus required to begin implementing green hydrogen could be reached in Taiwan as early as 2030. Lee urges the private sector to pursue renewable energy and green infrastructure in addition to participating in existing energy bidding and carbon exchange platforms.  

“We will soon have that energy surplus,” he says. “But we cannot wait until that time to start developing the technology – we need to start developing now.”