Hydrogen is increasingly positioned as a cornerstone in the global transition toward decarbonization, particularly in achieving net-zero emissions by mid-century. Its versatility as a clean energy carrier, capable of decarbonizing sectors that are difficult to electrify, has prompted renewed interest in hydrogen production and demand. This technical write-up provides an overview of the current hydrogen production landscape, projections for future demand, and the challenges and opportunities associated with its adoption.

Current Landscape of Hydrogen Production

Fossil Fuel Dominance

As of 2022, the world produces approximately 95 million tonnes of hydrogen annually, with the vast majority coming from fossil fuels. Known as "grey hydrogen," this production method involves the use of natural gas (through steam methane reforming, or SMR) or coal (through gasification) as feedstocks. This results in significant carbon dioxide (CO2) emissions, making grey hydrogen a major contributor to global greenhouse gas (GHG) emissions. Roughly 6% of global natural gas and 2% of coal demand is attributed to hydrogen production.

Hydrogen has historically been utilized in industrial sectors, most notably:

• Ammonia production for fertilizers: Essential for global food security, ammonia synthesis consumes approximately 55% of all hydrogen produced.
• Oil refining: Hydrogen is used in refining processes to reduce sulfur content in fuels, accounting for about 25% of global production.

However, the increasing demand for hydrogen as a clean energy carrier necessitates a shift from grey hydrogen to more sustainable alternatives.

Low-Carbon Hydrogen Production

Efforts to decarbonize hydrogen production have led to the development of several low-carbon alternatives:

• Blue hydrogen: This refers to hydrogen produced from natural gas or coal with carbon capture, utilization, and storage (CCUS) technologies. While blue hydrogen significantly reduces CO2 emissions, its reliance on fossil fuels and challenges related to CCUS scalability limit its long-term sustainability.
• Green hydrogen: Produced through the electrolysis of water using renewable electricity (from solar, wind, or hydropower), green hydrogen is widely regarded as the most promising pathway for achieving zero-emission hydrogen production.

As of today, green hydrogen constitutes a very small fraction of total hydrogen production, primarily due to high costs associated with electrolyzers and the reliance on abundant, low-cost renewable energy. However, ongoing technological advancements and policy incentives are set to accelerate the adoption of green hydrogen in the coming decades.

Projected Growth and the Role of Renewable Hydrogen

Demand Projections

To meet global climate goals, hydrogen production needs to increase by more than fivefold, from 95 million tonnes in 2022 to 530 million tonnes by 2050. This increase is essential for satisfying an estimated 14% of global final energy demand, as projected in various net-zero emission scenarios.

Renewable hydrogen, particularly green hydrogen, will play a critical role in decarbonizing hard-to-abate sectors such as:

• Steel production: Hydrogen can be used in direct reduction processes to replace coal in steel manufacturing, reducing emissions in an industry responsible for around 7% of global CO2 emissions.
• Long-haul shipping: Hydrogen or its derivatives (e.g., ammonia) could replace heavy fuel oils in maritime transportation, offering a zero-emission alternative.
• Aviation: Hydrogen could be used to produce sustainable aviation fuels (SAFs), contributing to decarbonizing a sector that is challenging to electrify due to the high energy density required for flight.

Drivers of Future Hydrogen Demand

Several factors are expected to drive future hydrogen demand:

• Decarbonization goals: Many countries, particularly members of the G7, have committed to achieving net-zero emissions by 2050. These commitments necessitate the decarbonization of industries and sectors that are currently difficult to electrify directly, creating significant demand for hydrogen.
• Renewable energy potential: Green hydrogen offers a means to transport renewable energy from resource-rich regions (e.g., North Africa, Australia, the Middle East) to demand centers in Europe, Japan, and South Korea. Hydrogen acts as a bridge, enabling the global flow of renewable energy.
• Technological advancements: The cost of electrolysis, the primary technology for green hydrogen production, is decreasing due to improvements in electrolyzer efficiency and the scaling of production. These cost reductions, along with falling renewable energy costs, are making green hydrogen more competitive with fossil fuel-based alternatives.
• Policy support: Governments worldwide are developing hydrogen strategies and implementing policies to support hydrogen production. For example, the European Union has launched the European Hydrogen Bank to provide financial support, while the U.S. Inflation Reduction Act offers production-based tax credits for low-carbon hydrogen.

The Emergence of a Global Hydrogen Market

Hydrogen Trade and Transportation

The global hydrogen market is expected to evolve into a complex network of hydrogen production hubs and demand centers, driven by the uneven distribution of renewable energy resources and hydrogen demand. Hydrogen trade will be essential for transporting clean energy from regions with abundant renewable resources to regions with high energy demand but limited local supply.

International hydrogen trade will rely on different methods of transporting hydrogen, including:

• Pipelines: Pipelines offer a cost-effective solution for transporting hydrogen over short to medium distances. In regions like Europe, existing natural gas pipelines could be repurposed to carry hydrogen.
• Shipping: For intercontinental trade, hydrogen will likely be converted into hydrogen carriers such as ammonia, liquid hydrogen (LH2), liquid organic hydrogen carriers (LOHCs), or methanol. Each carrier has distinct characteristics in terms of energy efficiency, infrastructure requirements, and cost, and different carriers may dominate specific trade routes.

Strategic Use of Hydrogen

Given its current high cost and the significant investments required to scale up production, renewable hydrogen must be deployed strategically. Prioritizing its use in hard-to-abate sectors, such as steel, shipping, and aviation, will maximize its impact on decarbonization efforts. In sectors where electrification is more efficient or feasible (e.g., light-duty vehicles, residential heating), hydrogen may play a secondary role.

Key Considerations for the Future of Hydrogen

Sustainable Production Practices

Large-scale hydrogen production requires careful consideration of its environmental impacts. Green hydrogen, while emission-free during production, requires significant water resources for electrolysis. In regions facing water scarcity, large-scale green hydrogen production could strain local water supplies. Solutions such as desalination may be necessary in some cases, though this would add to production costs and energy consumption. Sustainable water management will be critical to ensuring the environmental viability of green hydrogen.

Land use is another concern, as renewable energy projects (e.g., solar and wind farms) necessary for green hydrogen production require large areas of land. Balancing the need for renewable energy expansion with land conservation and biodiversity preservation will be an ongoing challenge.

International Collaboration

Establishing a global hydrogen economy will require close collaboration between hydrogen-exporting and hydrogen-importing countries. Potential hydrogen exporters (e.g., Australia, Chile, Saudi Arabia) will need to develop partnerships with importers (e.g., Japan, South Korea, the EU) to build robust and equitable global hydrogen value chains. International standards for hydrogen production, transportation, and certification will also need to be developed to ensure that hydrogen trade is both economically viable and environmentally sustainable.

Policy and Regulation

Supportive policy frameworks and incentives are essential to accelerate hydrogen deployment. Governments must develop comprehensive hydrogen strategies that align with their broader decarbonization goals. This includes setting clear targets for hydrogen production and use, providing financial support for early-stage projects, and implementing regulations to ensure the sustainability of hydrogen production.

Carbon pricing mechanisms, such as carbon taxes or cap-and-trade systems, can also play a crucial role in making green hydrogen more competitive with fossil fuel-based alternatives.

Conclusion

The future of hydrogen is poised to transform the global energy landscape. As countries strive to meet their decarbonization goals, hydrogen will play a critical role in reducing emissions from hard-to-abate sectors such as industry, shipping, and aviation. The transition to a hydrogen-based economy will require significant investments in technology, infrastructure, and policy support, but the potential benefits in terms of reduced emissions and energy security are immense.

Renewable hydrogen, particularly green hydrogen, holds the key to unlocking a cleaner, more sustainable future. By addressing the challenges associated with production, transportation, and sustainability, and by fostering international collaboration, the world can harness the full potential of hydrogen as a central pillar of the global energy transition.