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Hydrogen's Role in Decarbonization: Overhyped or Underestimated?

Hydrogen’s Role in Decarbonization: Overhyped or Underestimated?

Anela DoksoBy Anela Dokso20/08/20242 Mins Read
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As global efforts to reduce carbon emissions intensify, hydrogen has been touted as a pivotal player in the transition to a cleaner energy future.

The International Energy Agency (IEA) has positioned hydrogen as a key component in achieving net-zero emissions by 2050, particularly for hard-to-decarbonize sectors like heavy industry and long-distance transport.

Green hydrogen, produced through electrolysis powered by renewable energy, is often hailed as the gold standard in clean energy. Yet, despite its potential, green hydrogen accounts for less than 1% of global hydrogen production, with most of the market dominated by carbon-intensive gray hydrogen. The high cost of production remains a significant barrier, and while proponents argue that costs will decrease as technology advances and renewable energy becomes cheaper, this optimism may overlook the economic realities of scaling up.

The global push for hydrogen has led to significant investments, with companies and governments alike pouring billions into hydrogen-related projects. For example, the U.S. government has allocated $7 billion to develop regional hydrogen hubs, while Australia’s government has committed AU$8 billion to grow its hydrogen industry. Despite these investments, the infrastructure required for large-scale hydrogen adoption—such as pipelines, storage facilities, and refueling stations—is still in its infancy. The time and capital needed to build this infrastructure could hinder the rapid deployment that hydrogen advocates envision.

Blue hydrogen, which captures and stores carbon emissions from the production of gray hydrogen, is often presented as a bridge technology on the path to green hydrogen. However, critics argue that blue hydrogen may simply prolong reliance on fossil fuels, delaying the transition to truly sustainable energy sources. Moreover, the effectiveness of carbon capture and storage (CCS) technologies is still under scrutiny, with concerns about their long-term viability and environmental impact.

For investors, the hydrogen market presents a high-risk, high-reward scenario. While the sector is projected to grow significantly, with the global green hydrogen market expected to reach $30.6 billion by 2030, the path to profitability is far from guaranteed. Most green hydrogen projects are still in the pre-commercial phase, and the market remains dominated by traditional applications in refining and industrial processes. Investors should be cautious, weighing the potential for long-term gains against the uncertainty surrounding hydrogen’s role in the energy transition.

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