Hydrogen’s Role In Achieving Net-Zero.

For more recent followers, or anyone wanting to brush up on key points of the rapidly evolving hydrogen economy, it’s sometimes good to recap on where we currently are with this unique source of energy helping solve the climate crisis.

Hydrogen is gaining momentum as key player in the climate solution, with approximately $10 billion worth of hydrogen projects being announced monthly.

Policy initiatives like the Inflation Reduction Act and the Green Deal Industrial Plan are further promoting hydrogen production and usage. Recent research from McKinsey forecasts a demand increase of four to six times by 2050. This is not surprising, as harnessing hydrogen’s potential is on track to reduce global emissions by up to 20 percent annually by 2050.

Hydrogen also serves as a flexible and long-term storage solution for power grids. Simultaneously, industry and transportation sectors hold exponential potential for reducing emissions through hydrogen utilisation, with a cumulative abatement capacity of 80 gigatons of CO2.

A large proportion of today’s hydrogen is being generated using fossil fuels. This grey hydrogen is primarily utilised in oil and gas refining, as well as ammonia production for fertiliser manufacturing. However, this is the reality of an energy transition, and the world knows that in order to fully utilise hydrogen’s potential as a decarbonisation solution, it is the production of ‘clean hydrogen’ on a larger scale that requires the lion’s share of private and governmental focus. Fortunately, clean hydrogen projects are where the growth is, within the landscape of those being announced each month.

Green hydrogen can be produced through electrolysis using renewable energy sources to power the electrolyser plants, avoiding the use of fossil fuels. It can be produced anywhere with wind or sun, and an electrolyser. Blue hydrogen is generated by combining fossil fuels with emission-reducing measures like carbon capture, utilisation, and storage.

Hydrogen is gaining momentum as key player in the climate solution, with approximately $10 billion worth of hydrogen projects being announced monthly.

Regardless of the production method, clean hydrogen is driving decarbonisation efforts across a broad variety of industries such as transport including aviation, long-haul trucking, maritime shipping, also industries such as refining, and steel manufacturing.

However, scaling clean hydrogen requires some key actions, and here we identify three of the main ones:

Firstly, production costs must decrease, enabling hydrogen to become cost-competitive with other fuel sources.

Keeping costs down can be achieved by producing hydrogen in regions with ample and affordable renewable energy resources, such as areas with consistent wind or abundant sunshine. Although renewable energy development has made significant progress in recent years, the availability of land could emerge as a potential constraint for deploying renewables, potentially limiting the choices for green hydrogen producers in terms of suitable locations.

Hydrogen is a unique and sustainable source of energy crucial for decarbonising sectors across the economy including transport, industry and heating. Pictured: City fossil fuel emission pollution

The construction of plants that combine renewable energy generation and green hydrogen production has experienced cost challenges due to factors such as increased material and labour expenses, as well as constrained supply chains.

Secondly, establishing infrastructure, especially for hydrogen transportation, is crucial. Pipelines are the most efficient method for transporting hydrogen, but the existing gas infrastructure needs to be either repurposed or expanded to accommodate hydrogen transportation.

Thirdly, it is of course investments that are essential for the advancement of the hydrogen solution. Investment is playing a critical role in various segments of the hydrogen value chain, including expanding electrolyser capacity and establishing hydrogen refuelling stations to support the adoption of hydrogen-powered transport; an example being the rapidly growing fleet of hydrogen buses already in operation in cities across the UK. Producers of clean hydrogen are mitigating investment risks on the commercial front by securing future demand through purchase agreements.

The Hydrogen Council, a group led by CEOs and comprising members from over 140 companies, has highlighted that achieving a net-zero pathway would necessitate as much as $700 billion in investments by 2030.

Pipelines are the most efficient method for transporting hydrogen, but the existing gas infrastructure needs to be either repurposed or expanded to accommodate hydrogen transportation.

Advancing in this direction necessitates collaboration among policymakers, industries, and investors. Policy makers can play a crucial role by providing ongoing support to the hydrogen economy through measures like production tax credits or by setting targets for hydrogen uptake.

These initiatives are enhancing investors’ roles in future hydrogen markets and hydrogen-based products. Industries are already contributing by expanding capacities, such as increasing the production of electrolysers, and fostering collaborations throughout the value-chain. Meanwhile investors are playing an ever-growing role in supporting the industry by structuring and financing new ventures, and further contribute by setting standards for evaluating hydrogen projects and managing associated risks effectively.

One this is certain, that as the energy transition progresses, hydrogen is becoming an increasingly important consideration for businesses and governments alike.

While there are inevitable challenges associated with scaling hydrogen, as with any nascent industry, there is an increasing abundance of significant opportunities that come with it.

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