Hydrogen's expanding reach: A short status note

Although the use of hydrogen as a clean fuel is growing, it is still not up to par with what will be needed to contribute to achieving net zero emissions by 2050.

A quick summary

-Total hydrogen demand could grow as high as 105 Mt – compared with more than 200 Mt in the NZE scenario

-Low-carbon hydrogen production could reach more than 17 Mt – one-eighth of the production level required in the NZE Scenario

-Electrolysis capacity could rise to 90 GW – well below the nearly 850 GW in the NZE Scenario

-Up to 6 million FCEVs could be deployed – 40% of the level of deployment in the NZE Scenario (15 million FCEVs)

Demand and supply

In 2020, there was a 90 Mt demand for hydrogen, almost all of which was produced from fossil fuels and used for industrial purposes, resulting in nearly 900 Mt of CO2 emissions. However, encouraging progress is being made. Electrolysers, which are required to produce hydrogen from electricity, have doubled in capacity globally over the last five years, with a mid-2021 target of just over 300 MW. By 2030, there could be about 350 projects under development that could increase global capacity to 54 GW. Forty more projects with a combined capacity of over 35 GW are still in the planning stages. The amount of hydrogen produced by electrolysers worldwide could surpass 8 million tonnes by 2030 if all those projects come to fruition.

Even though this is noteworthy, it is still far less than the 80 Mt needed by that year in the IEA Roadmap for the Global Energy Sector's pathway to net zero CO2 emissions by 2050.

Europe is at the forefront of the deployment of electrolyser capacity

With 40% of the world's installed capacity, Europe is at the forefront of the deployment of electrolyser capacity and is expected to maintain its position as the largest market in the near future due to the aggressive hydrogen policies of the United Kingdom and the European Union. According to plans, Australia may be able to catch up with Europe in a few years. Large-scale capacity deployment is also anticipated in Latin America and the Middle East, especially for export. Although it started slowly, the People's Republic of China ("China") is quickly announcing more projects, and the United States is raising the bar with its recently announced Hydrogen Earthshot.

Carbon capture, utilisation, and storage (CCUS) projects

Approximately sixteen carbon capture, utilisation, and storage (CCUS) projects are currently in operation, producing 0.7 million tonnes of hydrogen per year from fossil fuels. If completed, the 50 additional projects in development could push annual hydrogen production above 9 Mt by 2030. With over 80% of the world's capacity produced, Canada and the United States lead the world in the production of hydrogen from fossil fuels using CCUS, though the United Kingdom and the Netherlands are making a strong push to take the lead and contribute significantly to the projects that are currently in development.

Fuel cell electric vehicles (FCEVs)’s growth

There?are?a?lot?more?uses?for?hydrogen?than?are?currently?common. Even?though?this?still?only?makes?up?a?small?portion?of?the?demand?for?hydrogen?overall,?there?has?been?significant?recent?progress?in?spreading?its?use,?especially?in?transportation. The?cost?of?automotive?fuel?cells?has?decreased?by?70%?since?2008. With?the?help?of?Korea,?the?United?States,?China,?and?Japan,?there?were?over?43?000?FCEVs?on?the?road?by?mid- 2021,?more?than?six?times?as?many?as?there?were?in?2017.

Almost?all?FCEVs?in?2017?were?passenger?vehicles. Currently,?buses?and?trucks?make?up?one-fifth?of?all?vehicles,?suggesting?a?shift?to?the?long-distance?market?where?hydrogen?can?more?effectively?compete?with?electric?vehicles.

However, compared to the estimated 11 million electric vehicles currently on the road, the total number of FCEVs is still far lower. There are already a number of demonstration projects being developed for the use of hydrogen-based fuels in rail, shipping, and aviation; these projects should create new opportunities for the demand for hydrogen.

Decarbonisation status.

Although the majority of the technologies that can make a major contribution are still in their infancy, hydrogen is a crucial component of industry's decarbonisation. There are significant actions being taken. This year saw the start of the first pilot project in history to use low-carbon hydrogen to produce carbon-free steel in Sweden. At the end of 2021, a pilot project in Spain will begin using hydrogen derived from variable renewable sources to produce ammonia. Over the next two to three years, a number of projects with a capacity of tens of kilotonnes of hydrogen are anticipated to come online. Additionally, being developed are demonstration projects for the use of hydrogen in industrial processes like the production of glass, ceramics, and cement.

Investment Commitment

Governments must increase their goals and encourage the creation of demand.

At least USD 37 billion has been committed by nations that have adopted hydrogen strategies, and an additional USD 300 billion in private sector investment has been announced. However, in order to get the hydrogen industry on track for net zero emissions by 2050, USD 1200 billion must be invested in the supply and use of low-carbon hydrogen through 2030.

Cost gap

The?cost?difference?between?hydrogen?produced?from?unrestricted?fossil?fuels?and?low-carbon?hydrogen?is?a?major?obstacle. For?the?most?part?of?the?world?right?now,?the?least?expensive?option?is?to?produce?hydrogen?from?fossil?fuels. The?levelized?cost?of?producing?hydrogen?from?natural?gas?ranges?from?USD?0.5?to?USD?1.7?per?kilogramme?(kg),?depending?on?local?gas?prices. When?CO2?emissions?from?the?production?of?hydrogen?are?reduced?through?the?use?of?CCUS?technologies,?the?levelized?cost?of?production?rises?to?approximately?USD?1?to?USD?2?per?kg. Hydrogen?production?from?renewable?energy?costs?between?$3?and?$8?per?kilogramme.

Scope for cost reduction

There is a great deal of room for cost reduction in production through increased deployment and technological innovation. The IEA's Net Zero Emissions by 2050 Scenario (NZE Scenario) illustrates this potential. In regions with excellent renewable resource availability, hydrogen from renewable sources can reach as low as USD 1.3 per kg by 2030; this is comparable to the cost of hydrogen from natural gas with CCUS. Longer-term costs of hydrogen from renewable electricity can be as low as USD 1 per kg (range USD 1.0-3.0 per kg) in the NZE Scenario, which means that even in some regions without CCUS, hydrogen from solar PV is cost-competitive with hydrogen from natural gas.