The worldwide hydrogen industry is predicted to more than double in size from less than 100 million tons now to 223 million tons in 2050.
Hydrogen with a low carbon footprint will both substitute existing fossil-fuel-intensive demand and open up new markets. With a fast rising pipeline of hydrogen projects, the critical concerns at the moment are: how large can the market truly become and where are the hottest opportunities?
We analyze the supply and demand dynamics for low carbon hydrogen in our Hydrogen strategic planning overview, highlighting important demand possibilities – as well as supply dangers that must be addressed. Complete the form to receive a complimentary excerpt, or continue reading for an introduction.
Demand for hydrogen: exponential increase and the increasing importance of power
Global demand for low-carbon hydrogen will climb from less than 1 million tons now to 223 million tons by 2050. Energy security and commitments to net zero energy use will stimulate demand in a variety of sectors, including power, steel, shipping, and aviation. At the moment, all eyes are on ammonia as the most promising industrial hydrogen user, accounting for 48% of demand by 2025.
Due of ammonia’s adaptability, it has gained substantial policy backing. It is now the largest consumer of hydrogen, can be used as a hydrogen carrier and shipping fuel, and can be co-fired in coal-fired power plants to help decarbonize the energy industry. The latter is particularly crucial in markets such as APAC, given the region’s traditional reliance on fossil fuels and practical limits on alternate energy sources.
By 2036, power demand will supersede ammonia as the dominant sector of demand through 2050, accounting for about a third of overall demand. Hydrogen co-fired with natural gas will accelerate in Europe after 2030, bringing total energy demand to 63 Mt by 2050.
Supply of hydrogen: a new wave of project announcements
To date, a hydrogen capacity of 50 Mtpa has been declared. We anticipate that the entire pipeline capacity will reach around 80 Mtpa in 2022.
Green hydrogen currently dominates the pipeline, with Australia leading the way in terms of green hydrogen supply, owing to the optimum circumstances for solar and wind energy harvesting. After 2030, however, supply rapidly ramps up globally – China is on track to overtake the United States as the world’s leading supplier by the late 2040s. The Middle East, North Africa, Canada, Chile, and Brazil all emerge significant hydrogen exporters as a result of their access to inexpensive renewable energy.
Persistent risks to the size and timing of hydrogen supply and demand
The pipeline of unrisked hydrogen projects indicates the possibility of an oversupply for the next 10-15 years, until demand matures sufficiently. However, mixing (and holding) excess volumes in natural gas infrastructure may provide some project developers with a safety net, albeit a low-value one. Blending up to 20% has been demonstrated in controlled circumstances; however, going above that level remains unknown. Midstream oil and gas companies, on the other hand, are using gas infrastructure in pilot projects as part of their energy transition strategies.
A more robust policy environment is required to stabilize hydrogen demand across many sectors. Due to the volatility of the natural gas market as a result of the ongoing Russia/Ukraine conflict, blue hydrogen projects in Europe face significant uncertainty.
Green hydrogen costs continue to fall, presenting an investment opportunity worth at least US$600 billion
Green hydrogen, which is produced by electrolyzing water with renewable energy, accounts for a negligible portion of today’s global energy market. However, cost savings might be a game changer.
As manufacturing scales and becomes more automated, electrolyser capex will decline by 35–65 percent over the next decade, enabling green hydrogen to be available for less than US$2/kg in the majority of countries by 2040. Chile and Brazil are the market leaders at less than US$1/kg, owing to their high load factors and access to inexpensive solar and wind energy.
However, significant expenditures are necessary to support predicted growth until 2050. Developers will need to invest approximately US$100 billion by 2030 and an additional US$500 billion by 2050 to support supply expansion.
In a nutshell, the hydrogen market opportunity is enormous — and expanding.
