How hydrogen could play a role in a decarbonised future
Companies already investing in
this opportunity
global hydrogen market's potential valuation by 2027
Fuel of the future or passing fad? Hydrogen is a fuel that creates enough energy to power a rocket but generates water when burned. Superficially, at least, hydrogen sounds like an attractive alternative fuel. With its ability to capture people’s imaginations and garner headlines, investment has flowed into R&D for hydrogen fuel, cars, and planes. Between 2022 and 2027, the market for green hydrogen is set to jump from $676 million to $7 billion.
Hydrogen is attracting interest from players both large and small. Airbus announced concept designs for several zero-emission, hydrogen-powered planes in 2020 and stated its intention to test a hydrogen engine on an A380 in 2026. ZeroAvia and Universal Hydrogen are also pursuing hydrogen-powered aircraft. Both have recently completed test flights with regional-sized planes and are hoping to enter the market by 2025.
When it comes to hydrogen, there are caveats around environmental impacts. Refining hydrogen requires electrolysis, which involves passing an electric current through a substance to effect a chemical change. As with all chemical reactions, you must put in more energy than you get out of the process. In the case of hydrogen, electrolysis is both energy intensive and inefficient, losing around 30% of the potential energy during the processing stage. Improving the efficiency of electrolysis is essential, and there has been a huge amount of innovation directed towards making electrolysers more efficient.
Platinum offers the lowest catalytic loss in terms of energy put in, but it is also very expensive, so a lot of research is focusing on cheaper catalysts. Industrialising the process would generate efficiencies, but it also requires substantial investment to achieve economies of scale.
To determine the environmental impacts of hydrogen production, you must pay attention to how energy is generated to undertake electrolysis. Currently, over 95% of the world’s hydrogen comes from coal (brown) and gas (grey) energy sources. Other sources include nuclear (pink), and renewable sources. Hydrogen generated via renewable sources is referred to as “green hydrogen”. “Blue hydrogen” refers to hydrogen generated from gas where carbon dioxide generated is captured and stored underground.
Currently, around 70% of production costs for green hydrogen are energy costs. The relative costs of hydrogen production will depend on your location. Because the US has abundant reserves of natural gas, hydrogen from natural gas costs around $1.50 per kilogram. By contrast, it costs around $5 per kilogram to produce “clean hydrogen”. US policymakers are looking to address this, however. The US Department of Energy wants to get the cost of clean hydrogen down to $1.00 per kilogram over the next decade to make it a more competitive fuel source.
Hydrogen fuel has several challenges to overcome, including efficiency of production, cost, transportation, safety, and storage. It is explosive and because hydrogen lacks density, huge volumes are required, making storage potentially challenging. Moreover, hydrogen is prone to leaks and hydrogen leakage risks have been identified along the entire value chain of hydrogen.
One way to overcome the challenges of transporting and storing hydrogen is to convert hydrogen into another fuel that is denser and easier to store and transport. This is known as the Power-to-X approach (also P2X and P2Y). Green ammonia is a popular option as it is easier to store and transport. The ammonia itself can also be used as a fuel source or converted back to hydrogen.
Again, caution should be exercised as convert hydrogen into ammonia it’s both expensive and energy intensive. Having said this, ammonia produced by renewable green hydrogen is becoming more competitive and is the closest to operating on an industrialised scale. With enough investment, it could reach industrial scale in 10 to 20 years, or sooner if the political will is there.
of the world’s hydrogen comes from coal (brown) and gas (grey) energy sources
Per kilogram to produce clean hydrogen
of production costs for green hydrogen are energy costs
Hydrogen-powered passenger vehicles have attracted interest but are not workable when the market is moving towards battery-powered cars. There is more potential, however, for hydrogen fuel cell vehicles for heavy goods vehicles, buses, shipping and aviation.
Captive fleets are especially suited to the early adoption of hydrogen fuel. In 2020, Hyundai delivered the first units of the hydrogen-powered "H2 Xcient" heavy goods vehicles. Cryogenic storage of hydrogen as a liquid offers double the energy density compared to compressed hydrogen and in the long-term would offer superior performance to batteries. Hydrogen also offers potential for shipping and aviation sectors or hydrogen-based domestic central heating.
But the biggest opportunities are in heavy industry. When sited in the right place (and outside the US, where gas is cheap), green hydrogen is starting to be competitive with grey hydrogen. Accordingly, the biggest potential for green hydrogen fuel is in hard-to-abate industries such as steel, which require vast amounts of energy. In Western Australia, a consortium of energy companies, led by BP, is building a site of solar panels and wind turbines to generate energy for green hydrogen. This green hydrogen will be used to power iron ore mining currently reliant on fossil fuels.
For hydrogen to truly help with decarbonisation, there must first be huge ramping up of renewables, after that it could play an important role in decarbonising hard-to-abate industries.
