The fifty shades of hydrogen that embrace white, turquoise, yellow, and even pink, do little to simplify how we can use our actual minds to build our possible worlds. Most hydrogen is produced using fossil fuels. This is known as grey hydrogen. Satisfying hydrogen’s potential as a decarbonisation tool will place hefty demands on the upscaling of clean hydrogen. This type of fuel is produced using renewables and is often described as green hydrogen. When produced with fossil fuels combined with measures to significantly lower emissions, such as carbon capture, utilization, and storage, it is classified as blue hydrogen.
The global demand for clean hydrogen could grow to approximately 660 million metric tons annually by 2050. Total planned production for green and blue hydrogen through 2030 has reached more than 26 million metric tons annually. The costs to produce clean hydrogen are expected to plummet rapidly over the next ten years. At a production cost of approximately $2 per kilogram, clean hydrogen could become cost competitive in applications across a range of industries.
As a complement to other technologies, including renewable power and biofuels, hydrogen has the potential to decarbonise a variety of industries including steelmaking, ammonia synthesis, fertilizer production, heavy-duty and long-range mobility vehicles, synthetic fuels for maritime shipping, and aviation, and flexible power generation.
Hydrogen can play a critical role in our Post-Corona world. By 2050, clean hydrogen can help to abate seven gigatons of CO2 emissions annually. This is about twenty per cent of human-driven emissions if the world remains on its current global-warming trajectory.
Climate Protection Contracts with industrialists and manufacturers can go a long way to support the transition towards cleaner production during the switch to hydrogen. The aim is to effectively develop a green industry along the value chain that is marketable. Energy-intensive industries can be targeted to benefit from subside contracts if they reduce emissions. This means that any demonstrable ability to reduce emissions in their production process can qualify them for frontloaded investment and annual funding.
Carbon Contracts for Difference, shift energy sources such as coal, oil and natural gas to hydrogen. Companies that request the lowest amount of financial assistance, while saving the largest amount of greenhouse gases on the lowest energy consumption, will become prime beneficiaries. In a McKinsey October 25th, 2022 Report on hydrogen’s role in a net-zero future, it is stated that as of May 2022, over six hundred and eighty large-scale hydrogen projects have been announced globally.
These projects will play a major role in meeting decarbonisation objectives, with widespread usage across industrial applications, transport, and power grids. Of great interest is the announcement of Hydrogen Export Hubs. These Hydrogen Export Hubs have been announced in Oceania, Africa, the Middle East, and Latin America. The plan is for these Hydrogen Hubs to feed the growing demand in Europe and Asia.
While the hydrogen momentum is building globally, a noteworthy investment gap persists for it to fully contribute to the decarbonisation and climate change agenda. Realising a pathway to net zero requires additional direct investments of $460 billion by 2030. Like the investment needed to bridge the infrastructure gap for 5G connectivity, the investment gap for hydrogen is also complex. For hydrogen the gap can be portioned into three main work streams: 1) production, 2) transmission, distribution, and storage, and 3) end-use applications.
On the production segment, clean-hydrogen production has the largest amount of announced capital injection, however, it is the work stream with the biggest investment requirements. The investment gap at this time is roughly $150 billion through 2030. The transmission, distribution, and storage work stream remains a critical part of the value chain. This segment is critical to enabling access to cost-competitive hydrogen supplies. Here the task is to connect those regions with the lowest production costs to demand hubs by building refuelling infrastructure for vehicles, or building pipelines to supply industrial plants.
The investment gap stands at about $165 billion. The last work stream is meeting the demand in hydrogen’s various end-use applications, including steel production and the mobility gap in transport. This requires additional investments of about $145 billion. In 2021, global crude steel production, peaked at 1,951 million tonnes (Mt). All over the world, steel is produced either by using an electric arc furnace utilizing scrap, or a blast furnace that uses coke, scrap, and iron ore.
Both methods traditionally use fossil fuels, and in 2019 produced about 3.6 Gt of carbon dioxide emissions. Decarbonising steel requires new methods of production. Green steel uses green hydrogen. Hydrogen offers a viable route to decarbonise the iron and steel sector. But this will not be without many challenges to achieve scale at a competitive cost. One alternative is the green steel method.
This method uses hydrogen to reduce the iron pellets into sponge iron which can then be processed to form steel. This process is done at high temperatures but below the melting point of iron, saving energy costs. New end-use applications of Hydrogen in steel production will require about $35 billion for outlays like new plants. However, steel is one of the most advanced segments among announced investments.
