Heroic savior or overhyped distraction?  Hydrogen energy’s legacy is still in the making.

Opinions about hydrogen seem to change like the weather.  One moment, it is derided as a contributor to increased carbon emissions – albeit due to the still largely fossil-fuel-based production processes it depends on.  But the next, it is lauded as a vital catalyst in the net zero journey, helping to decarbonize many of the industries upon which we depend daily.

Where lies the truth?  And even if the environmental case can be made, can hydrogen realistically expand beyond the chemical and refining sectors where it is still largely confined to become a significant component of the global energy mix?

The subtle distinction hinges, perhaps, on the methods we use to generate our global hydrogen supplies.

Let’s start with the most harmful.

  • Steam Methane Reforming (SMR): involves reacting methane (natural gas) with steam to produce hydrogen and CO2 carbon monoxide.  Currently the most widely used method of production, SMR creates emits around 8-10 kg of CO2 per kg of hydrogen manufactured.
  • Coal Gasification: likewise produces hydrogen and CO2, but by reacting steam with coal instead of gas. Particularly energy intensive, coal gasification extracts an even heavier toll on the environment, some 14-15 kg of CO2 per kg of hydrogen.

Hydrogen produced using these methods is commonly known as ‘grey hydrogen’.

Yet, an optimal solution for truly clean hydrogen exists all around us – water.

  • Electrolysis: a process using electricity to split water into oxygen and hydrogen, results in emissions of just 1-2 kg of CO2 per kg of hydrogen produced. Its close technological cousin,
  • Photolysis: which uses only solar energy to split water, is entirely carbon-free.

Hydrogen created via electrolysis and photolysis is known as ‘green hydrogen’ – and it is this green hydrogen that forecasters and environmentalists envision as a mainstay of the future eco-friendly energy mix.

There are host of other variations to the hydrogen production process, too, producing a rainbow of options for producing hydrogen with differing emissions profiles.

Graph showing options for producing hydrogen

If the technology already exists for clean hydrogen production, why are we dragging our collective heels and persisting with grey hydrogen?  Cost is the culprit.

Currently, green hydrogen costs US$ 4-6 per kg of hydrogen produced – two or three times more than hydrogen produced via SMR or coal.[2]  As the world faces both an energy shortage and an economic contraction, hydrogen finds itself fighting for a place as a commercially viable and scalable alternative.

Harnessing the power of hydrogen

Growing demand for hydrogen, coupled with cleaner production methods, could see hydrogen assume a prominent role in a decarbonized economy.  This applies especially in sectors which have traditionally proven difficult to mitigate, such as haulage and heavy industry.

In the IEA’s Net Zero Scenario 2021-2050, hydrogen contributes 6% of all forecast mitigation measures, alongside other powerful strategies such as renewables, electrification and carbon capture[3].

Pie chart showing Cumulative emissions reduction by mitigation measure Demand for hydrogen is presently limited by factors such as disjointed international regulations and inadequate infrastructure.  However, if these roadblocks are cleared, the global appetite for hydrogen is anticipated to soar.  The clean hydrogen energy market is tipped to reach US$ 642 billion by 2030, US$ 980 billion by 2040, and US$ 1,048 billion by 2050.[4]

Heavy industry and long-distance haulage, which currently account for 0.1% of hydrogen use worldwide, could assume a disproportionate share of this surge in demand.  Indeed, by 2050 these decarbonization-resistant sectors are predicted to account for up to one-third of the global hydrogen market.[5]

Benefits are threefold:

  1. Cleaner air, in a world where some four to ten million deaths per year are attributed to ambient particulate pollution.[6]
  2. Greater energy security, because hydrogen can be produced anywhere, reducing dependence on geographically-tethered fossil fuels.
  3. Improved energy flexibility, with hydrogen proving an ideal long-term storage medium for fluctuating supplies of renewable energy.

Globally, legislative support appears to be advocating for a more hydrogen-powered future.  Country by country, we see a range of policies beginning to emerge that other nations could apply as templates for wider roll-out.

Private/public power play

Leading the way, China was busy constructing 750 MW of new electrolyzer capacity last year, a sharp rise from the cumulative 220 MW online in 2022.  And China is far from alone in its endeavors:

  • India introduced its National Green Hydrogen Mission in 2023, setting its sights on becoming the world’s top producer of electrolyzers and generating 5 Mt of renewable hydrogen by 2030.
  • In the UK, 2023 saw the first contracts awarded for hydrogen electrolysis projects, following the release of its official Low-Carbon Hydrogen Standard regulations the previous year.
  • In America, the Inflation Reduction Act (IRA) formalized financial incentives for producers of clean hydrogen among its US$ 369 billion green energy budget.
  • Meanwhile, the EU held inaugural auctions in 2023 for its European Hydrogen Bank projects. Spain, France and Germany have ambitious targets of 4-6.5GW of domestic hydrogen production by 2030.[7]

The private sector is likewise exhibiting international momentum behind hydrogen.[8]

UK-based Proton Motor Power Systems, a manufacturer of hydrogen fuel cells and electric hybrid systems, has recently introduced a cutting-edge 90-kilowatt power generating pack with applications for road, rail and shipping.  Elsewhere, South Korean natural gas company SK E&S has signed an agreement with Korea South-East Power to produce electricity using green hydrogen and ammonia.  And Japan’s Toshiba Energy Systems & Solutions Corp has announced a partnership with Swedish heavy-duty marine innovator Echandia to produce pure hydrogen fuel cell systems for use at sea.

These breakthroughs build on the back of other recent headline-grabbing initiatives.  In a notable transatlantic deal, French automaker Groupe Renault has agreed a joint venture with USA’s Plug Power Inc to promote hydrogen vehicle solutions throughout all of Europe’s transportation markets.

These pioneers, and others like them, are attempting to scale-up green hydrogen projects to consequential levels.  However, are there limits to hydrogen’s sustainability and can it genuinely make a significant contribution to a greener future?

Hydrogen hamstrung by cost and unproven CCUS

Hydrogen, unlike wind and solar power, has yet to ‘go mainstream’ – and there are several reasons why.[9]

We have noted already the extra expense incurred in making green rather than other forms of hydrogen.  But what about a hydrogen production facility merged with carbon capture, utilization and storage (CCUS) technology – so called ‘blue hydrogen’ – with emissions locked underground to safeguard the environment?

Here, costs per kilogram range from US$ 1.8 to US$ 4.7 – considerably more than the US$ 0.98 to US$ 2.93 of its grey equivalent.[10]

Not only is CCUS expensive, it is also unproven at any meaningful scale.

Environmental organizations including the IEA, the International Renewable Energy Agency (IRENA) and the Intergovernmental Panel on Climate Change (IPCC) have all produced long-term energy forecasts relying at least partly on rapid CCUS expansion to meet 1.5oC global temperature goals.  Could this faith be misplaced?

Shell’s Quest depot in Alberta, Canada, for example, is frequently lauded as a totem of CCUS’ potential.  However, less than half of the plant’s emissions are reportedly being trapped – nowhere near the 90% capture potential mooted by ardent CCUS advocates.  Including overall greenhouse gas emissions, it has been suggested the plant carries a carbon footprint equivalent to around 1.2 million petrol cars.[11]

Even once captured, the CO2 requires compressing into liquid form and conveying by road, rail or sea for injection into deep geological repositories – a process which carries its own carbon toll.

Some argue that captured carbon could be usefully deployed in industry rather than stored subsurface.  However, techniques for chemically converting CO2 into usable products such as plastics and building materials remain largely theoretical.

CCUS undoubtedly has its role to play.  It is, for instance, one of the only known methods for making sizable emission reductions in the cement industry, which alone accounts for almost 7% of global CO2 output.[12]  And despite its drawbacks, CCUS is managing to assert itself on the climate agenda, with 61 new CCUS facilities added to the project pipeline in 2022, bringing the total number in development worldwide to more than 150.

But CCUS still has some way to go before ‘blue hydrogen’ can justifiably be heralded as a magic solution for hydrogen’s economic and environmental shortcomings.

Spend much time peering beneath the surface, and other aspects of widespread hydrogen adoption begin to look shaky.

Hydrogen, inevitably, will require enormous investment to establish a sizable market presence.  By some estimates it will cost more than US$ 7 trillion (mostly on new pipelines and ammonia terminals) for hydrogen to meet even 5% of global energy demands by 2050.[13]

Adaption costs by end-users are similarly onerous.

For businesses, converting existing machinery to use hydrogen instead of methane will carry a hefty price-tag.  In the case of steel production, using hydrogen produced from renewables could raise costs by 35% to 70% compared to traditional carbon-intensive techniques.[14]

For road users, modifying automobiles to burn hydrogen rather than gasoline is not yet economically viable.  Purpose-built hydrogen fuel cell vehicles (FCEVs), however, continue to offer promise – at least for now.

Are hydrogen vehicles stuck in the slow lane?

The number of hydrogen-powered fuel-cell electric vehicles (FCEVs) cruising global highways is soaring, up 40% in 2022 compared to the previous year and recently crossing the 70,000 mark.[15]  This translates as 20,500 new FCEVs being sold in 2022, around three-quarters being cars – including those produced by Abdul Latif Jameel’s longstanding partner, Toyota, with its second generation Mirai.

Two-thirds of these new FCEV sales were recorded in South Korea, followed by the USA, China, Japan and Germany.  There are now more than a thousand hydrogen refueling stations around the world, predominantly in those same five countries.  That figure is set to grow further with vibrant public sector support.  The state of California, for example, is funding the development of 100 extra hydrogen refueling stations as part of its strategy to reach 1.6 million zero-emission vehicles by 2025.

Graph showing hydrogen fuel cell market

In financial terms, this flurry of showroom activity elevated the global FCEV market size to approximately US$ 1 billion in 2022.  Between now and 2032 the industry forecasts a CAGR of 52.9%, reaching a market value of around US$ 69.61 billion.[16]

Still, these latest sales figures are dwarfed by those of non-hydrogen electric or hybrid cars (EVs), which grew 50% year-on-year to more than 10 million in 2022.

Refueling speed is frequently cited as hydrogen’s major advantage over EVs, with a turnover time of a few minutes compared to 30-60 minutes and more for battery recharging.  However, battery-swapping is beginning to emerge as a trend in the EV freight market, with almost 2,000 ‘swap stations’ now operational in China and 12,000 swap-enabled trucks sold in 2022.[17]  The impact of battery-swapping on hydrogen’s viability, denying it of one of its defining assets, will only become clear in the coming years.

Hydrogen faces further fundamental quandaries of economics and physics.

Electrolyzing hydrogen from water via renewable energy consumes 30% of the potential energy in the splitting process.[18]  Factor in a further 26% loss of the remaining energy during transport to fuel depots, and almost half of hydrogen’s energy yield is squandered before it ever reaches market.  Contrastingly, electricity lost during transfer via cable to charging stations is a nominal 5%.  Producing hydrogen on-site is rarely viable because electrolysis plants cost millions of dollars per facility.

Hydrogen’s inherent inefficiency was seemingly behind the decision of Volkswagen’s Scania truck division (formerly one of the leading proponents of hydrogen-powered trucks) to focus primarily on battery electric variants from 2021 onwards.[19]

Tesla, meanwhile, is also keen to show that haulage is not the exclusive domain of diesel or hydrogen.  Its electric Tesla Semi truck, launched in late 2023, has a range of 500 miles and energy consumption of less than 2kWh per mile.[20]  Tesla is the kind of company with the financial resources to effectively deflate the hydrogen dream, targeting production of 50,000 Semi units annually from 2024 supported by a US$ 100 million charging network throughout the USA.[21]

Hope or hype? Why hydrogen merits honest analysis

Even if it is time to rein in the hyperbole on hydrogen, it is certainly not time to abandon the concept altogether.  Rather, we must accept that hydrogen’s success or failure may depend on tangential technologies.

For these, we might look to sudden, game-changing improvements in CCUS performance; or a significant escalation of renewable energy capacity dramatically lowering the cost of clean electrolysis.

Perhaps electrolyzers themselves present another beacon of hope.  Electrolyzer costs have fallen by 60% since 2010 and, according to IRENA analysis, could fall a further 40% in the short term and an additional 80% in the longer term.  Increased manufacturing capacity, greater standardization and associated economies of scale could eventually see green hydrogen costs fall below the critical US$ 2 per kg milestone.[22]

Image to show how electolyser scale-up drives down costs

These advances – and others are sure to follow – could be some of the reasons that several major automotive players have recently reconfirmed their commitment to hydrogen.

Hyundai, the global leader in terms of hydrogen vehicle sales, announced in January 2024, that its HTWO initiative will focus on the production, storage, transportation, and utilization of hydrogen in numerous areas across the Hyundai Group, including steel, construction, air mobility, marine, robotics and, most importantly, passenger cars.[23]  Similarly, Toyota has announced plans to establish the Hydrogen Factory Europe to coordinate the commercialization of hydrogen technology and systems on the continent, from development and production, through to sales and aftersales.[24]  The Hydrogen Factory will be responsible for producing fuel cell systems and supporting a widening group of commercial partnerships, in line with the company’s strategy to achieve carbon neutrality in Europe by 2040, 10 years ahead of Toyota’s global target.  BMW, among other automotive OEMs, has also thrown its support behind the long-term potential of hydrogen, confirming plans to roll out its iX-5 Hydrogen in 2024, one of three planned FCEVs to hit BMW dealerships in the next 12 months.[25]

These initiatives are undeniably positive, albeit tentative steps, in the development of hydrogen as a commercial scale energy source.  For in the fight against climate change, time is of the essence.  And with 2023 officially becoming the hottest year on record[26], now is not the time to put the brakes on hydrogen technology, or any other potential mitigation technology.

It is, however, time for an honest discussion about hydrogen’s potential for reshaping the future energy landscape, and the likelihood of it ever fully surmounting its reputation for over-promising and under-delivering.

[1] https://www.hydrogennewsletter.com/gh2-facts/

[2] https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2020/Nov/IRENA_Green_Hydrogen_breakthrough_2021.pdf

[3] https://www.iea.org/reports/net-zero-by-2050

[4] https://www2.deloitte.com/content/dam/Deloitte/global/Documents/gx-green-hydrogen-executive-summary.pdf

[5] https://www.iea.org/energy-system/low-emission-fuels/hydrogen#programmes

[6] https://www.bmj.com/content/383/bmj-2023-077784

[7] https://www.forbes.com/sites/ianpalmer/2023/05/30/hydrogen-is-ramping-up-in-the-energy-transition-but-it-may-be-oversold

[8] https://www.precedenceresearch.com/hydrogen-fuel-cell-vehicle-market

[9] https://www.forbes.com/sites/ianpalmer/2023/05/30/hydrogen-is-ramping-up-in-the-energy-transition-but-it-may-be-oversold

[10] https://about.bnef.com/blog/green-hydrogen-to-undercut-gray-sibling-by-end-of-decade/

[11] https://www.globalwitness.org/en/blog/problem-hydrogen/

[12] https://www.lse.ac.uk/granthaminstitute/explainers/what-is-carbon-capture-and-storage-and-what-role-can-it-play-in-tackling-climate-change/

[13] https://www.forbes.com/sites/ianpalmer/2023/05/30/hydrogen-is-ramping-up-in-the-energy-transition-but-it-may-be-oversold

[14] https://www.lse.ac.uk/granthaminstitute/explainers/what-is-carbon-capture-and-storage-and-what-role-can-it-play-in-tackling-climate-change/

[15] https://www.hydrogeninsight.com/transport/the-number-of-hydrogen-fuel-cell-vehicles-on-the-worlds-roads-grew-by-40-in-2022-says-iea-report/2-1-1444069

[16] https://www.precedenceresearch.com/hydrogen-fuel-cell-vehicle-market

[17] https://www.hydrogeninsight.com/transport/the-number-of-hydrogen-fuel-cell-vehicles-on-the-worlds-roads-grew-by-40-in-2022-says-iea-report/2-1-1444069

[18] https://www.forbes.com/sites/jamesmorris/2021/02/06/why-are-we-still-talking-about-hydrogen

[19] https://www.rechargenews.com/energy-transition/after-plotting-battery-electric-future-truck-maker-scania-hedges-bets-with-new-hydrogen-vehicles/2-1-1200800

[20] https://www.forbes.com/sites/qai/2022/12/08/how-powerful-is-teslas-new-semi-truck

[21] https://insideevs.com/news/672016/tesla-semi-volume-production-wil-not-start-until-late-2024/

[22] https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2020/Nov/IRENA_Green_Hydrogen_breakthrough_2021.pdf

[23] https://www.techradar.com/vehicle-tech/hybrid-electric-vehicles/bmw-honda-and-hyundai-all-still-think-hydrogen-cars-are-the-next-big-thing-heres-why

[24] https://newsroom.toyota.eu/toyota-hydrogen-factory-scaling-up-its-european-activities/

[25] https://hydrogen-central.com/bmw-says-goodbye-to-electric-cars-it-has-now-solved-the-problem-of-hydrogen-engines-mes/

[26] https://www.theguardian.com/us-news/2024/jan/03/2023-hottest-year-on-record-fossil-fuel-climate-crisis