Hydrogen

Renewable (often referred to as green) hydrogen is rapidly emerging as a key enabling technology with significant potential to decarbonise various sectors, in line with global efforts to meet net zero emission targets. Renewable hydrogen is hydrogen produced using renewable energy sources ⁱ via electrolysis, a process that splits water molecules into hydrogen and oxygen. The hydrogen can be stored ⁱⁱ , transported, or used on-site as a clean and flexible fuel for a wide range of applications. Interest has grown in using renewable hydrogen as a means to reduce emissions in hard-to-abate sectors such as heavy industry.

The potential uses of renewable hydrogen are diverse, ranging from fuel for long-haul trucking and shipping, to feedstock for industrial processes such as steel and cement production, to serving as a carrier for electricity generation. ¹ However, renewable hydrogen faces several key challenges that hinder its rapid upscaling. These include high conversion losses (with 20-30% of the energy lost through electrolysis), high upfront production costs and the need for significant investments in infrastructure such as pipelines and storage facilities. ² Nevertheless, governments and industries are increasingly recognising the potential of renewable hydrogen and committing large resources to its development. ³

Renewable Hydrogen Production Facilities

Currently, the global demand for hydrogen is met almost entirely (around 95%) with hydrogen produced from fossil fuels. ⁴ In 2022, despite the slowing global economy, worldwide hydrogen production capacity exceeded an estimated 100 million tonnes, up from 94 million tonnes in 2021 and 91 million tonnes in 2019. Renewable hydrogen production, however, totalled only 109 kilotonnes in 2022, although this was a 44% increase from the 2021 level (35 kilotonnes). ⁵

Enabling the growth in hydrogen production was the rapid scale-up of electrolysis plants to 510 MW in 2021, an increase of 210 MW, or 70%, compared to 2020. ⁶ Electrolyser manufacturing capacity doubled between 2017 and 2022 to nearly 8 GW, as successful pilot and demonstration projects advanced to commercial-scale projects. ⁷ The average size of new electrolysers in 2021 was 5 MW, but this could reach 260 MW in 2025 and in the GW-scale by 2030. ⁸

In 2022, more than 112 million tonnes of new low-carbon hydrogen capacity was announced, mainly in the United States, Denmark, Egypt, Canada and Portugal. ⁹ In total, more than 393 deals related to hydrogen were closed, up from 277 deals in 2021, showing an upward trend in low-carbon hydrogen market development. ¹⁰ Australia had the largest number of announced renewable hydrogen plants worldwide as of 2022; due to its abundant solar and wind resources, the country is expected to see some of the lowest levelised costs for producing renewable hydrogen by 2050. ¹¹

In 2022, higher costs for key elements of renewable hydrogen projects resulted in part from global supply chain issues (related to geopolitical instability in Europe) and from rising global demand for solar PV and electrolysers. ¹² At this early development stage of the clean hydrogen industry globally, costs of renewable hydrogen production vary depending on the scale and size of the project as well as on how nearby the production is to where the hydrogen will be used. In 2022, hydrogen produced through electrolysis using renewable power cost an estimated USD 5-10 per kilogram. ¹³

Hydrogen strategies are being developed and implemented worldwide, with leading players in Asia, North America, Australia and the EU. ¹⁴ (See Figure 21.) Each region has its unique approach to hydrogen deployment, depending on factors such as national energy policies, natural resources and infrastructure.

Japan was the first country globally to formulate a national hydrogen strategy, in 2017, as part of its ambition to become the world's first “hydrogen society” by adopting green hydrogen across all sectors. ¹⁵ A key pillar in the strategy is developing long-term supply agreements to import hydrogen from overseas, given Japan's shortage of the natural resources necessary to deploy wind and solar energy at scale. Despite its ambitious and visionary plan, Japan has performed far below its goal of increasing uptake of hydrogen fuel cells and fuel cell vehicles, and the hydrogen stations built across the country have seen little use. ¹⁶ As of early 2023, Japan faced challenges in scaling up hydrogen production and use due to high costs and lack of infrastructure. ¹⁷

China was the largest producer of hydrogen in 2022, at around 25 million tonnes, and is exploring the production and use of lower-emission hydrogen to help meet energy needs and spur industrial development while also addressing climate concerns. ¹⁸ The Chinese government has laid out a medium- and long-term development plan for hydrogen (2021-2035), with the goals of bringing 50,000 fuel cell electric vehicles on the road by 2025; producing green hydrogen using renewables to reach 100,000 to 200,000 tonnes annually by 2025; and using clean hydrogen in energy storage, electricity generation and industry. ¹⁹

FIGURE 21.

Hydrogen Strategies and Roadmaps in Selected Countries, as of End-2022

In India, the prime minister has stated that renewable hydrogen could enable a “quantum leap” towards energy independence for the country by 2047. ²⁰ In 2021, India announced a National Hydrogen Energy Mission to develop a roadmap for using hydrogen as an energy source; the aims are to create a global hub for the manufacturing of hydrogen technologies; to facilitate demand creation in industry (such as fertilisers, steel and petrochemicals); and to demonstrate the use of hydrogen in transport applications. ²¹

In 2020, the European Commission adopted its overarching “hydrogen strategy for a climate-neutral Europe”. ²² The strategy aims to support the deployment of clean hydrogen in various sectors, including industry, transport, and power generation, as part of EU efforts to achieve climate neutrality by 2050. ²³ A key aspect of the EU strategy is leveraging partnerships and collaboration at the regional and global levels, as illustrated in 2022-2023 through the Mediterranean hydrogen pipeline project and the Japan-EU partnership for the exchange of information and research. ²⁴ In 2023, the EU (with 28%) and Japan (24%) were the global leaders in patent filings related to hydrogen. ²⁵

Germany's National Hydrogen Strategy intends to expand the role of hydrogen to decrease national dependence on coal. ²⁶ The government plans to invest USD 7.5 billion to achieve a hydrogen production capacity of 5 GW by 2030 and another 5 GW during 2035-2040, allowing exemption from the green power surcharge (EEG levy); it will also leverage partnerships with 31 potential net exporters and across the EU through a USD 2.1 billion fund to establish international trade partnerships. ²⁷ In 2022-2023, Germany signed a landmark agreement with Denmark, the largest deal of its kind to date, to build a 1 GW electrolysis plant in Denmark that will produce green hydrogen using offshore wind power, at a total project cost of USD 32.6 billion. ²⁸

In 2020, France announced its strategy for the development of decarbonised hydrogen, aiming to invest USD 7.5 billion in green hydrogen production and infrastructure, with the goal of reducing greenhouse gas emissions 6 million tonnes by 2030. ²⁹ Given the contribution of nuclear power plants to France's energy mix, the country has been pushing for the EU to recognise low-carbon hydrogen produced from nuclear power in its renewable energy rules; however, some EU Member States worry that this would undermine efforts to rapidly scale up wind and solar. ³⁰

Spain released a strategy in 2020 that provides a vision for developing a favourable environment for the supply and demand of renewable hydrogen. ³¹ Key milestones of the strategy are commissioning 300-600 MW of electrolysers by 2024 and 4 GW by 2030, and reducing 4.6 million tonnes of CO₂ emissions, through mobilising USD 9.6 billion of investments. ³² In February 2022, four grant programmes totalling USD 267 million were deployed to address innovation in the hydrogen value chain. This included USD 108 million for large electrolysers, USD 86 million for piloting fuel cell electric vehicles, USD 43 million for industrial and experimental research, and USD 32 million for capacity building. Spain is expected to become a key player in hydrogen economy in the short- and medium-term, considering the country's industry investment, collaboration with Mediterranean countries and ample solar resource for producing green hydrogen. ³³

In North America, the United States released its draft National Clean Hydrogen Strategy Roadmap in late 2022. The plan sets out three key priorities: targeting strategic, high-impact uses of hydrogen; reducing the cost of clean hydrogen to USD 1 per kilogram by 2031; and deploying at least four regional clean hydrogen hubs through an unprecedented USD 7 billion in funding. ³⁴ The United States is the world's second biggest producer and consumer of hydrogen after China, accounting for 13% of global demand. ³⁵ The Infrastructure Investment and Jobs Act of 2021 contained a USD 9.5 billion budget to boost clean hydrogen development, and the subsequent Hydrogen Earthshot programme, through its “111 goal”, aims to cut the cost of clean hydrogen to USD 1 per 1 kilogram in 1 decade. ³⁶

Australia released its green hydrogen strategy in 2019, laying out a comprehensive plan to position the country as a major global player in the hydrogen industry by 2030. The strategy aims to develop a clean, innovative, safe and competitive hydrogen industry that delivers significant economic, social, and environmental benefits, with a set of ambitious targets. Gigawatt-scale project ambition is on the rise in Australia, with 11 GW-scale hydrogen projects in the pipeline in 2022 and 9 more announced (either new or existing projects). ³⁷ The Australian government is providing USD 526 million (AUS 800 million) towards the establishment of eight hydrogen hubs through the Regional Hydrogen Hubs programme and other commitments, including nine feasibility studies to support potential future hydrogen hubs. ³⁸

Brazil published a resolution in 2022 establishing the National Hydrogen Program (PNH2), which aims to promote the development of a competitive hydrogen market in the country. ³⁹ The programme seeks to encourage the production, distribution and use of hydrogen as a clean energy source, with a focus on renewable hydrogen. The renewable hydrogen segment in Brazil started to grow in 2022 with the installation of the country's first industrial-scale renewable hydrogen production plant, completed in May by Unigel. ⁴⁰ The system includes three 20 MW electrolysers supplied by Thyssenkrupp Nucera, with a second phase expected to expand the project's capacity beyond 100 MW. ⁴¹

Chile's national strategy was released in 2020 and has three main strategic pillars: commissioning 5 GW of electrolysis by 2025, ensuring the most competitively priced green hydrogen in the world by 2030 and becoming among the world's top exporter of green hydrogen by 2040. ⁴² The Haru Oni project, led by the company Highly Innovative Fuels, was successfully commissioned in 2022 and entails building a hydrogen-based fuel production plant in Magallanes, South Chile. ⁴³ The project will produce hydrogen, e-methanol and e-petrol powered by 3.4 MW wind turbines. ⁴⁴ Expected annual production is 350 tonnes of crude methanol, 130,000 litres of petrol and 16 tonnes of carbon-neutral liquefied gas. ⁴⁵

Hydrogen Trade Routes

As the global demand for green hydrogen continues to rise, an expanding network of hydrogen trade routes, plans and agreements is taking shape, fostering international collaboration and highlighting key importers and exporters. ⁴⁶ Main importing regions, such as Europe, Japan, and the Republic of Korea, are driven by ambitious climate goals, industrial requirements, and limited domestic renewable energy sources to meet their green hydrogen needs. On the other hand, countries with abundant renewable energy potential – such as Australia, Chile (See Snapshot: Chile), and countries in the Middle East and North Africa – are emerging as potential key exporters, aiming to capitalise on the growing hydrogen market. ⁴⁷

Snapshot.CHILE

A Hidden Hydrogen Champion is Awakening

A notable player in the emerging global hydrogen trade is Chile, which is focusing on public-private partnerships as a key mechanism to accelerate the country's energy transition. Chile has signed several international agreements with foreign countries to strengthen its hydrogen industry. In 2021, Chile signed a joint agreement with Germany with the aim of enhancing co-operation in green hydrogen project development. The two countries will exchange experience and knowledge through the creation of a working group, and will also establish a regulatory framework. A further aim is to develop low-carbon certification systems.

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A Hidden Hydrogen Champion Is Awakening

A notable player in the emerging global hydrogen trade is Chile, which is focusing on public-private partnerships as a key mechanism to accelerate the country's energy transition. Chile has signed several international agreements with foreign countries to strengthen its hydrogen industry. In 2021, Chile signed a joint agreement with Germany with the aim of enhancing co-operation in green hydrogen project development. The two countries will exchange experience and knowledge through the creation of a working group, and will also establish a regulatory framework. A further aim is to develop low-carbon certification systems.

A joint agreement between Chile and the Netherlands aims to establish green hydrogen import-export corridors. It also seeks to align the investment agenda and to improve the collaboration of private companies. In addition, Chile signed a memorandum of understanding with Belgium to enhance green hydrogen production in co-operation with the ports of Antwerp and Zeebrugge, which aim to become the main hubs for hydrogen imports to Europe. In Asia, Chile signed a memorandum of understanding with the Republic of Korea to expand co-operation in the low-carbon hydrogen sector and to exchange technologies for producing, storing, transporting and using clean hydrogen.

Source: See endnote 47 for this section.