How Hydrogen is Shaping the Future of Global Energy | Deeptech Review
A Deep Dive into Technological Advancements, Strategic Investments, Challenges and Opportunities in the Hydrogen Economy that are Driving a Global Shift to a New Era in Energy
Hydrogen production and usage are undergoing a significant transformation, driven by a growing need to transition towards more sustainable energy sources.
Globally, hydrogen consumption reached 95 million tons in 2022, with an annual increase of 3% according to the International Energy Agency (IEA). Although this growth is promising, it remains concentrated in traditional uses such as refining and the chemical industry, with less than 0.1% coming from new applications.
Goldman Sachs estimates that decarbonization and achieving net-zero emissions will require cumulative investments of $5 trillion, with the total potential market for hydrogen generation possibly reaching $1 trillion by 2050.
Yoshinori Kanehana, president of Kawasaki Heavy Industries and co-chair of the Hydrogen Council, emphasizes that despite the urgency driven by growing concerns for energy security, the on-the-ground deployment of hydrogen is not moving quickly enough and needs acceleration to realize its benefits.
"With the growing concerns around energy security, it is clear our economies need hydrogen. But on-the-ground deployment is not moving fast enough and needs to accelerate to realize the benefits of hydrogen” - Yoshinori Kanehana
Over 30 countries have already released official hydrogen strategies and plans, outlining consumption trends and infrastructural plans. These actions are a testament to the 'clean hydrogen revolution', an area where investors and governments are collaborating to finance and capitalize.
China has emerged as a leader in electrolyzer capacity, a key component in green hydrogen production, with installed capacity reaching over 200 MW in 2022. It is forecasted that this capacity will increase to 1.2 GW by the end of 2023, representing 30% of global capacity. This development is crucial for the transition to low-emission hydrogen and aligns with growing concerns over energy security and environmental sustainability. More details on this development can be found in the IEA's "Global Hydrogen Review 2023" report.
On the other side of the world, Europe and the United States are making significant strides. The European Union recently announced the creation of a European Hydrogen Bank with a budget of 3 billion euros, an initiative underscored by the statement from Commission President Ursula von der Leyen, emphasizing the need to move from a "niche hydrogen economy to one on a large scale". This is an important step in increasing investments in the sector and accelerating the development of the hydrogen market.
“We need to move our hydrogen economy from niche to scale.” - Ursula von der Leyen
At the same time, the Inflation Reduction Act in the United States and the REPowerEU program in Europe have given a significant boost to the hydrogen transition.
However, the hydrogen sector faces significant challenges, particularly in terms of production costs.
Currently, the estimated cost of producing renewable hydrogen is between $4.5 and $6.5 per kilogram. However, a reduction to $2.5-4.0 per kilogram is expected by 2030, attributed to advancements in electrolyzer technology and decreasing costs of renewable energies, as reported in the Hydrogen Council's "Hydrogen Insights 2023 December Update."
The Central Role of Hydrogen in the Global Energy Economy
Globally, hydrogen production is still predominantly reliant on fossil fuel-based technologies. In 2022, 70% of the energy required for hydrogen production was met using natural gas, and about 30% by coal, predominantly utilized in China. However, low-emission hydrogen production accounted for less than 1% of total hydrogen output in 2022, despite a 5% increase from 2021.
The regulatory landscape is evolving, with supportive measures such as tax credits for production and financial backing for hydrogen hubs in the United States, renewable hydrogen mandates in the Renewable Energy Directive (RED III) in Europe, and contracts for difference (CfD) in Japan. Nevertheless, regulatory uncertainties persist, impacting the effectiveness of these policies in the market.
Throughout 2023, the hydrogen sector has demonstrated significant developments, reflecting its growing importance in the global energy economy. A notable expansion in the pipeline of clean hydrogen projects has been observed, with over 1,400 initiatives announced. These projects collectively represent investments exceeding $570 billion USD anticipated up to 2030. This increase is a testament to the rising interest and commitment in the clean hydrogen field, with Europe standing out as a leader in investment volume, announcing over $190 billion USD, closely followed by North America and China. This trend underscores the increasingly strategic position of clean hydrogen in the global energy economy…