In some industries, including oil refining, ammonia production, and methanol production, hydrogen is already widely used.
But if hydrogen were to support the world’s energy transition and help tackle greenhouse gas emissions, it would need dozens of billions of US dollars of investment every year to overcome the barriers it faces now. These are the challenges for building the necessary infrastructure to create a true global hydrogen economy, to producing hydrogen cost-effectively from renewable sources and with zero emissions.
In a nutshell, hydrogen has great potential but it needs to tackle the scale and source challenges to become the really green fuel of the future, S&P Global Platts’ Jeffrey McDonald and Andrew Moore write.
The world’s hydrogen demand has more than tripled since 1975, the International Energy Agency (IEA) has estimated. But nearly all of the hydrogen is made from fossil fuels, predominantly natural gas, and hydrogen production emits CO2 every year equivalent to the CO2 emissions of the United Kingdom and Indonesia combined.
That’s why scientists call this type of hydrogen produced from fossil fuels ‘grey’ hydrogen; its production is not zero emission.
Globally, natural gas is now the main source of hydrogen production—it accounts for three quarters of the world’s annual hydrogen production, according to the IEA.
In the U.S.—which produces nearly one-seventh of the global supply—95 percent of the hydrogen is currently produced from natural gas. That’s not only because natural gas is abundant in the U.S.—hydrogen production from natural gas is currently a lot cheaper than from electrolysis.
The so-called ‘green hydrogen’ produced from renewable energy sources via electrolysis has been a promising concept, but scaling up the zero-emission hydrogen production has been a challenge.
According to the IEA, “larger electrolyser projects are needed to demonstrate accelerated scale-up.”
Production of hydrogen from low-carbon sources is costly right now, while the development of hydrogen infrastructure, such as refueling stations for fuel cell cars, is slow and hampers widespread adoption, the IEA said in its ‘The Future of Hydrogen’ report this year.
Moreover, the challenge to replacing fossil fuels with zero-emission sources for hydrogen production also looks significant right now.
To overcome all these barriers, the world will need a lot of investment and a lot of coordination and cooperation between governments and industries across borders and continents.
According to the Hydrogen Council, a global CEO-level advisory body, achieving scale in the hydrogen economy will require investments of between US$20 billion and US$25 billion annually for a total of US$280 billion until 2030.
With long-term, stable-coordination, and incentive policies, “attracting these investments to scale the technology is feasible,” says the council, whose members include oil majors such as BP, Equinor, Shell, and Total, and carmakers including GM, Honda, Hyundai, and Toyota.
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Several major oil firms—such as Equinor, Shell, and Total—have included hydrogen and related research and applications in their alternative energy portfolios, but a meaningful large-scale hydrogen use with low or zero emissions in heavy industries—where emissions are the most and the hardest to cut—is years, if not decades, away.
BP says that ‘blue’ hydrogen, produced from natural gas with carbon capture and storage (CCS), is currently the lowest-cost source of low carbon hydrogen at scale and believes that this technology could be the key driver to the widespread use of hydrogen.
“‘Green’ hydrogen, produced using renewable energy with water electrolysis, will play an increasingly important role, particularly in parts of the world with high renewable energy potential. We recognize the need to demonstrate and scale both these technologies and are actively looking at opportunities,” BP’s group head of technology David Eyton says.
The development of hydrogen research and technology in the next few decades could make hydrogen a multi-billion industry in the United States alone, according to climate policy think tank Energy Innovation.
By 2050, the hydrogen industry in the U.S. could generate as much as US$170 billion in annual revenues and make combined profits of more than US$100 billion, if hydrogen demand as a vehicle fuel results in 5 percent hydrogen-powered vehicles on the road in 2050, and if hydrogen is made entirely from electrolysis.
